Midterm wk 4

1. Question : (TCO A) Wages paid to an assembly line worker in a factory are a:

Student Answer: Prime Cost YES.....Conversion Cost NO Prime Cost YES.....Conversion Cost YES Prime Cost NO....Conversion Cost NO Prime Cost NO.....Conversion Cost YES Instructor Explanation: Chapter 2

Points Received: 6 of 6 Comments:

2. Question : (TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n):

Student Answer: period cost. incremental cost. opportunity cost. none of the above. Instructor Explanation: Chapter 2

Points Received: 6 of 6 Comments:

3. Question : (TCO A) Property taxes on a company's factory building would be classified as a(n):

Student Answer: sunk cost opportunity cost period cost variable cost manufacturing cost Instructor Explanation: Chapter 2

Points Received: 0 of 6 Comments:

4. Question : (TCO A) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? Fixed Cost Per Unit Variable Cost Per Unit

Student Answer: Increase No Change Increase Increase decrease No Change No Change Increase Instructor Explanation: Chapter 5

Points Received: 0 of 6 Comments:

5. Question : (TCO F) Which of the following statements is true? I. Overhead application may be made slowly as a job is worked on. II. Overhead application may be made in a single application at the time of completion of the job. III. Overhead application should be made to any job not completed at year-end in order to properly value the work in process inventory.

Student Answer: Only statement I is true Only statement II is true Both statements I and II are true Statements I, II, and III are all true Instructor Explanation: Chapter 3

Points Received: 6 of 6 Comments:

6. Question : (TCO F) Which of the following statements about process costing system is incorrect?

Student Answer: In a process costing system, each processing department has a work in process account In a process costing system, equivalent units are separately computed for materials and for conversion costs In a process costing system, overhead can be under- or overapplied just as in job-order costing In a process costing system, materials costs are traced to units of products Instructor Explanation: Chapter 4

Points Received: 6 of 6 Comments:

7. Question : (TCO F) Equivalent units for a process costing system using the FIFO method would be equal to:

Student Answer: units completed during the period, plus equivalent units in the ending work in process inventory units started and completed during the period, plus equivalent units in the ending work in process inventory units completed during the period and transferred out units started and completed during the period, plus equivalent units in the ending work in process inventory, plus work needed to complete units in the beginning work in process inventory Instructor Explanation: Chapter 4

Points Received: 6 of 6 Comments:

8. Question : (TCO B) The contribution margin ratio always increases when the:

Student Answer: break-even point increases break-even point decreases variable expenses as a percentage of net sales decreases variable expenses as a percentage of net sales increases Instructor Explanation: Chapter 6

Points Received: 6 of 6 Comments:

9. Question : (TCO B) Which of the following would not affect the break-even point?

Student Answer: number of units sold variable expense per unit total fixed expenses selling price per unit Instructor Explanation: Chapter 6

Points Received: 0 of 6 Comments:

10. Question : (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would:

Student Answer: be used in the computation of the contribution margin be used in the computation of net operating income but not in the computation of the contribution margin be treated differently from variable manufacturing expenses not be used Instructor Explanation: Chapter 7

Points Received: 6 of 6

1. Question : (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larden Corporation for the just completed year. Sales $950 Purchases of raw materials $170 Direct labor $210 Manufacturing overhead $220 Administrative expenses $180 Selling expenses $140 Raw materials inventory, beginning $70 Raw materials inventory, ending $80 Work in process inventory, beginning $30 Work in process inventory, ending $20 Finished goods inventory, beginning $100 Finished goods inventory, ending $70 Required: Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.

Student Answer: Raw materials, inventory, beginning $70.00 add Purchases of Raw Materials 170.00 -------- Total goods available to manufacture 240.00 Less Raw Materials invty, end 80.00 -------- Raw materials used in production 160.00 Direct Labor 210.00 Manufacturing Overhead 220.00 ------- Total manufacturing cost 590.00 Add Work in Process invty. Beg 30.00 --------- 620.00 Less Work in process invty end 20.00 ------ Cost of goods manufactured 600.00 Instructor Explanation: Schedule of Cost of Goods Manufactured for the Larden Corp. Direct Materials: Beginning raw materials inventory $70 Add: purchases raw material 170 Raw materials available for use 240 Deduct ending raw materials 80 Raw materials used in production 160 Direct Labor 210 Manufacturing Overhead: 220 Total Manufacturing Costs 590 Add beginning work in process inventory 30 620 Deduct ending work in process inventory 20 Cost Of Goods Manufactured 600

Points Received: 15 of 15 Comments:

2. Question : (TCO F) The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completed Units Materials Conversion Work in process, June 1 150,000 75% 55% Work in process, Jun 30 145,000 85% 75% The department started 475,000 units into production during the month and transferred 480,000 completed units to the next department. REQUIRED: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.

Student Answer: Percent Complete Units Materials Conversion Beginning work in process 150000 0.75 0.55 Units started into production 475000 "Units completed during June and transferred to the next department" 325000 Ending work in process 145000 0.85 0.75 Materials Conversion Units transferred to the next dept 325000 325000 Ending work in process Materials 145000x85% complete 123250 Conversion 145000x75% complete 108750 Equivalent units of production 448250 433750 Instructor Explanation: Equivalent Units Materials Conversion Units transferred to the next department 480,000 480,000 Ending Work in process: Materials 145000 x 85% 123,250 Conversion 145000 x 75% 108,750 Equivalent units of production 603,250 588,750

Points Received: 15 of 20 Comments:

3. Question : (TCO B) Drake Company's income statement for the most recent year appears below: Sales (45,000 units) $1,350,000 Less: Variable expenses 750,000 Contribution margin 600,000 Less: Fixed expenses 375,000 Net operating income $225,000 Required: a. calculate the unit contribution margin b. calculate the break-even point in dollars

Student Answer: The Unit Contribution Margin (C) is Unit Revenue (Price, P) minus Unit Variable Cost (V): C = P − V Price: $1350000 divided by 45,000 units =- $30 price per unit Variable cost per unit $750,000/45000= 16.67 Unit contribution margin: $13.33 b. Break even point in dollars Break-even Point in Sales $ = Total Fixed Expenses ÷ Contribution Margin Ratio Total Fixed Expenses:$375000 Contribution Margin Ratio = $600,000/$1350000=.44 Break even point in dollars =$843,750 Instructor Explanation: a. Total CM / total units = $600,000 /45,000 units = $1.33 per unit b. Breakeven = FC / CM per unit = $375,000 /$1.33 = 281,955 units x $30 per unit* = $8,458,650 * Sales at $1,350,000 /45,000units = $30 per unit

Points Received: 25 of 25 Comments:

4. Question : (TCO E) The Dean Company produces and sells a single product. The following data refer to the year just completed: Selling Price $450 Units in beginning Inventory 0 Units Produced 25000 Units sold 22000 Variable Costs per unit: Direct materials $ 200 Direct labor $ 50 Variable manufacturing overhead $ 30 Variable selling and admin $ 15 Fixed Costs: Fixed manufacturing overhead $ 275,000 Fixed selling and admin $ 230,000 Assume that direct labor is a variable cost. Required: a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

Student Answer: DM 200 DL 50 Var OH 30 Variable cost per unit 280 Direct Materials 200 Direct Labor 50 Variable Manufacturing Overhead 30 Fixed manufacturing overhead $275000/25000 11 Cost of single unit of product using absorption costing 291 Instructor Explanation: a and b: Variable costing: Direct materials $ 200 Direct labor $ 50 Variable manufacturing overhead $ 30 $ 280 Absorption costing: Direct materials $ 200 Direct labor $ 50 Variable manufacturing overhead $ 30 Fixed manufacturing overhead $ 11 (275,000 / 25,000) $ 291 c: Absorption costing income statement: Sales $ 9,900,000 Less cost of goods sold (22,000 x $291.00) $ 6,402,000 Gross margin $ 3,498,000 Selling and administrative expenses: Variable selling and admin $ 330,000 Fixed selling and admin $ 230,000 $ 560,000 $ 2,938,000 d: Variable costing income statement: Sales $ 9,900,000 Less variable expenses: Product costs (22,000 x $280) $ 6,160,000 Variable selling and admin $ 330,000 $ 6,490,000 Contribution margin $ 3,410,000 Less fixed expenses: Fixed manufacturing overhead $ 275,000 Fixed selling and admin $ 230,000 $ 505,000 $ 2,905,000

Points Received: 30 of 30 Comments:

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