Week 4 Midterm
1. Question : (TCO 1) Which of the following is not a difference between financial accounting and managerial accounting?
Student Answer: Financial accounting is primarily concerned with reporting the past, whereas managerial accounting is more concerned with the future.
Managerial accounting uses more nonmonetary information than is used in financial accounting.
Managerial accounting is primarily concerned with providing information for external users, whereas financial accounting is concerned with internal users.
Financial accounting must follow GAAP, whereas managerial accounting is not required to follow GAAP.
Question 2. Question : (TCO 1) Variable cost per unit
Student Answer: increases when the number of units produced increases.
does not change when the number of units produced increases.
decreases when the number of units produced increases.
decreases when the number of units produced decreases.
Question 3. Question : (TCO 1) You own a car and are trying to decide whether or not to trade it in and buy a new car. Which of the following costs is an opportunity cost in this situation?
Student Answer: The trip to Cancun that you will not be able to take if you buy the car
The cost of the car you are trading in
The cost of your books for this term
The cost of your car insurance last year
Question 4. Question : (TCO 1) Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation, $800; and other fixed costs, $600. Each steak dinner sells for $14.00 each. Which is the budgeted total variable cost?
Student Answer: $5,200
Question 5. Question : (TCO 1) Which of the following costs is not part of manufacturing overhead?
Student Answer: Electricity for the factory
Depreciation of factory equipment
Salaries for the production supervisors
Health insurance for sales staff
Question 6. Question : (TCO 1) Which of the following is not a period cost?
Student Answer: Advertising costs
Accounting staff salaries
Depreciation of accounting office equipment
Question 7. Question : (TCO 1) At December 31, 2010, WDT Inc. has a balance in the Work in Process Inventory account of $62,000. At January 1, 2010, the balance was $55,000. Current manufacturing costs for the year are $292,000, and cost of goods sold is $284,000. How much is cost of goods manufactured?
Student Answer: $292,000
Question 8. Question : (TCO 2) BCS Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for August follows.
Overhead cost $174,000 $171,000
Direct labor hours 5,800 5,900
Direct labor cost $87,000 $89,975
How much overhead should be applied in total during August?
Student Answer: 177,000
Question 9. Question : (TCO 2) Citrus Company incurred manufacturing overhead costs of $300,000. Total overhead applied to jobs was $306,000. What was the amount of overapplied or underapplied overhead?
Student Answer: $7,000 overapplied
Question 10. Question : (TCO 3) Companies in which of the following industries would not be likely to use process costing?
Student Answer: Cereals
Auto body repairs
Question 11. Question : (TCO 3) The blending department began the period with 45,000 units. During the period, the department received another 30,000 units from the prior department and completed 60,000 units during the period. The remaining units were 75% complete. How much are equivalent units in the blending department’s Work In Process Inventory at the end of the period?
Student Answer: 30,000
Question 12. Question : (TCO 3) Ranger Glass Company manufactures glass for French doors. At the start of May, 2,000 units were in process. During May, 11,000 units were completed and 3,000 units were in process at the end of May. These in-process units were 90% complete with respect to material and 50% complete with respect to conversion costs. Other information is as follows.
Work in process, May 1:
Direct material $36,000
Conversion costs $45,000
Costs incurred during May:
Direct material $186,000
Conversion costs $255,000
How much is the cost per equivalent unit for direct materials?
Student Answer: $24.00
Question 13. Question : (TCO 4) Duradyne Inc. has total costs of $18,000 when 2,000 units are produced and $26,000 when 5,200 units are produced. During March, 4,000 units were produced and sold for $8 each. Which is the variable cost per unit?
Student Answer: $2.50
Question 14. Question : (TCO 4) Which of the following will have no effect on the break-even point in units?
Student Answer: The selling price increasing
The variable cost per unit increasing
The sales volume increasing
Total fixed costs increase
Question 15. Question : (TCO 4) Werth Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 units at a price of $20 per unit. How much is the break-even point in units?
Student Answer: 48,000
Question 16. Question : (TCO 4) Paula Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, which is Paula’s margin of safety?
Student Answer: $468,140
Question 17. Question : (TCO 5) Which of the following is treated differently in full costing than in variable costing?
Student Answer: Direct materials
Fixed manufacturing overhead
Variable manufacturing overhead
Question 18. Question : (TCO 5) Variable costing income is a function of
Student Answer: units sold only.
units produced only.
both units sold and units produced.
neither units sold nor units produced.
Question 19. Question : (TCO 5) Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are as follows.
Direct material per unit: $20
Direct labor per unit: 12
Variable manufacturing overhead per unit: 10
Fixed manufacturing overhead per year: $148,500
In addition, the company has fixed selling and administrative costs of $150,000 per year.
During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is cost of goods sold, using full costing?
Student Answer: $1,359,000
Question 20. Question : (TCO 6) Which of the following is not a reason why companies allocate costs?
Student Answer: To calculate the full cost of products for financial reporting purposes
To discourage managers from using external suppliers
To reduce the frivolous use of company resources
To provide information needed by managers to make appropriate decisions
Question 21. Question : (TCO 6) The overriding concern in forming a cost pool is to ensure that
Student Answer: there are no variable costs in the cost pool.
the total amount in the cost pool is less than the direct costs for the product.
only costs that have been budgeted are included in the cost pool.
the costs in the pool are homogeneous or similar.
Question 22. Question : (TCO 6) AC Consulting Company has purchased a new $18,038 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments, because those are the only departments that will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. Each department has estimated the number of copies that will be made over the life of the copier.
Information Tech: 425,000
If cost allocations are computed to four significant digits and the purchasing department makes 58,000 copies this year, how much overhead will be allocated to purchasing?
Student Answer: $4,185
Question 23. Question : (TCO 7) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision?
Student Answer: The selling price of the completed units
The costs incurred to process the units to this point
The selling price of the partially completed units
The costs that will be incurred to finish the units
Question 24. Question : (TCO 7) BigByte Company has 12 obsolete computers that are carried in inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300. Alternatively, the computers could be sold as is for $9,000. Which is the net advantage or disadvantage of reworking the computers?
Student Answer: $6,300 advantage
Question 25. Question : (TCO 7) YXZ Company’s market for the Model 55 has changed significantly, and YXZ has had to drop the price per unit from $275 to $135. There are some units in the Work In Process Inventory that have costs of $160 per unit associated with them. YXZ could sell these units in their current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be sold for $135 each.
When the incremental revenues and expenses are analyzed, which is the financial impact?
Student Answer: $25 per-unit profit if the units are completed
$125 per-unit profit if the units are completed
$65 per-unit loss if the units are completed
$150 per-unit loss if the units are completed
Question 26. Question : (TCO 3) Why is it necessary to use equivalent units in a process costing system?
Question 27. Question : (TCO 7) Maxley Markets Company sells logo sports merchandise and does custom embroidery. It is trying to decide whether or not to continue embroidery. The following information is available for the segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if the embroidery was dropped.
Embroidery Apparel Sales
Sales $120,000 $420,000
Variable Costs $90,000 $220,000
Contribution Margin $30,000 $200,000
Direct Fixed Costs $18,000 $70,000
Allocated Common Fixed Costs $20,000 $70,000
Net Income ($ 8,000) $ 60,000
(a) What would be the impact on profits if embroidery was dropped?
(b) Assume that if embroidery was dropped, apparel sales would increase 20%. What is the impact on contribution margin?
(c) Give an example of a cost that is not differential or relevant in this analysis.
Question 28. Question : (TCO 4) The following monthly data are available for RedEx, which produces only one product that it sells for $84 each. Its unit variable costs are $28, and its total fixed expenses are $64,960. Sales during April totaled 1,600 units.
(a) How much is the break-even point in sales dollars for RedEx?
(b) How many units must RedEx sell in order to earn a profit of $24,640?
(c) A new employee suggests that RedEx sponsor a company softball team as a form of advertising. The cost to sponsor the team is $1,792. How many more units must be sold to cover this additional cost?