Acc505 Managerial Accounting Week 4 : ABC and Budgeting - Midterm (December 2012)

Acc505 Managerial Accounting
Week 4 : ABC and Budgeting - Midterm (Dec 2012)

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1. (TCO A) Direct material cost is a part of:(Points : 6)
Conversion Cost YES.... Prime Cost NO
Conversion Cost NO.... Prime Cost YES
Conversion Cost YES.... Prime Cost YES
Conversion Cost NO.... Prime Cost NO

2. (TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n): (Points : 6)
period cost.
incremental cost.
opportunity cost.
none of the above.

3. (TCO A) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): (Points : 6)
period cost
direct material cost
indirect manufacturing cost
direct labor cost
none of the above

4. (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? (Points : 6)
Fixed Cost Per Unit Variable Cost Per Unit
Increase No Change
Increase Increase
decrease No Change
No Change Increase

5. (TCO F) Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company included in direct labor cost a portion of indirect labor. The effect of this misclassification will be to: (Points : 6)
understate the predetermined overhead rate
overstate the predetermined overhead rate
have no effect on the predetermined overhead rate
cannot be determined from the information given

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

7. (TCO F) The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: (Points : 6)
can be used under any cost flow assumption
does not require the use of predetermined overhead rates
keeps costs in the beginning inventory separate from current period costs
does not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production

8. (TCO B) The contribution margin ratio always increases when the:(Points : 6)
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

9. (TCO B) The unit sales needed to attain the target profit is found by: (Points : 6)
dividing fixed costs by the contribution margin.
adding variable expenses to fixed expenses and dividing the total by the contribution margin.
adding target profit to the fixed expenses and then dividing the total by the unit contribution margin.
adding target profit to the fixed expenses and then dividing the total by the contribution margin.

10. (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would: (Points : 6)
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

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1. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larklin Corporation for the just completed year.
Sales $820
Purchases of raw materials $195
Direct labor $170
Manufacturing overhead $250
Administrative expenses $180
Selling expenses $140
Raw materials inventory, beginning $80
Raw materials inventory, ending $35
Work in process inventory, beginning $65
Work in process inventory, ending $30
Finished goods inventory, beginning $130
Finished goods inventory, ending $165

Required:
Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.(Points : 15)

2. (TCO F) The Indiana 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 70,000 65% 45%
Work in process, Jun 30 60,000 75% 65%
The department started 290,000 units into production during the month and transferred 300,000 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.(Points : 20)

3. (TCO B) A tile manufacturer has supplied the following data:
Boxes of tile produced and sold 625,000
Sales revenue $2,975,000
Variable manufacturing expense $1,720,000
Fixed manufacturing expense $790,000
Variable selling and admin expense $152,000
Fixed selling and admin expense $133,000
Net operating income $180,000

Required:
a. Calculate the company's unit contribution margin
b. Calculate the company's unit contribution ratio
c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be? (Points : 25)

4. (TCO E) Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling Price $ 125
Units in beginning Inventory 600
Units Produced 3000
Units sold 3500
Units in ending Inventory 100

Variable Costs per unit:
Direct materials $ 15
Direct labor $ 50
Variable manufacturing overhead $ 8
Variable selling and admin $ 12

Fixed Costs:
Fixed manufacturing overhead $ 75,000
Fixed selling and admin $ 20,000
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. (Points : 30)

Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the variable costing method.
d. Prepare an income statement for the month using the absorption costing method.
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