Docstoc

The cost of goods manufactured l - DOC

Document Sample
The cost of goods manufactured l - DOC Powered By Docstoc
					                             814b6bd0-e6b6-40f6-a1e6-235b355ae219.doc. Page 1 of 6

Test No. 1. Accounting 2122, Summer 2006.                           Name: ____________________________
                                                                    Class Time: 9:45 or 11:30 (Circle one)
                                                                    Row in Class _____________________
Multiple Choice- 25 questions count 4 points each for a total of 100 Points.
Blacken the area in the circle containing the appropriate letter for each entry. Use a soft-lead pencil. Enter
last name first in the area for “NAME.” Enter student ID number in the area for “IDENTIFICATION
NUMBER.” Answer each question by marking the letter representing the best answer.
Chapter 1. Managerial Accounting and Business Organizations
1. The accountant for Local Corporation printed the following report for the
month of January for a division (Amounts in $1,000s)
                      Budgeted Actual
                       Amount Amount
    Revenues            $25,000    $21,000
    Expenses              20,000    22,000
    Net Income            $5,000 ($1,000)
In reviewing this report, management should give attention
 a. Primarily to revenues
 b. Primarily to expenses
 c. To both revenues and expenses

2. The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200
persons and prepared the following budget:
        Hotel room rental           $600
        Food                         500
        Entertainment                800
        Decorations                  300
        Totals                    $2,200
After all bills for the party were paid, the total came to $2,175. Details are $600 for hotel room rental; $475
for food; $900 for entertainment; and $200 for decorations. One hundred and ninety persons attended the
party. Under the principle of management by exception, which costs should receive attention
a. food b. entertainment          c. decorations        d. all of these costs
3. Arranging insurance coverage is a role for the:
 a. Controller
 b. Treasurer
 c. Equally for both of these executives

4. The Raleigh Company had inventories at the beginning and
   end of the year as follows ($000 omitted):
                                    1/1     12/31
      Raw materials                 $65       $55
      Work-in-process                96        90
      Finished goods                 50        55
      During the year the following costs were incurred ($000 omitted):
       Raw materials purchased          $400
       Direct-labor payroll               220
       Factory overhead                   330
Raleigh's cost of goods manufactured was ($000 omitted):
   a. $921          b. $961         c. $966          d. $981
                            814b6bd0-e6b6-40f6-a1e6-235b355ae219.doc. Page 2 of 6

Chapter 2. Cost Behavior and Cost-Volume-Profit Relationships
5. Relay Corp. manufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of
$750,000 and a fixed cost of $450,000. Based on Relay's predictions, 240,000 batons will be sold at the
regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 20%
discount off the regular price. By what amount would income before income taxes be increased or decreased
as a result of the special order?
a. $60,000 decrease b. $30,000 increase c. $90,000 increase d. $180,000increase
6. When fixed cost is $10,000, variable cost is $6 per unit, and selling price is $10 per unit, the break-even
point is
a. 1,000 units. b. 2,500 units     c. 5,000 units.    d. 10,000 units.
7. The following information pertains to Nova Co.'s cost-volume-profit relationships:
       Break-even point in units sold               500
       Variable costs per unit                   $ 500
       Total fixed costs                     $150,000
How much will be contributed to profit before income taxes by the 501st unit sold?
   a. $650         b. $300          c. $150           d. $0

8. Sticky Glue sells for $2.00 per tube and has related variable expenses of $1.50 per tube. Fixed expenses of
producing Sticky Glue are $100,000 per month. Sticky Glue is in the 40% income tax bracket. How many
tubes of Sticky Glue must be sold each month for the Sticky Glue Company to have a monthly income (after
income taxes) of $60,000?
   a. 400,000 b. 300,000 c. 200,000                     d. 135,000 e. 450,000

9. Dancer, Inc. sells product A for $5 per unit. Fixed costs are $210,000 and variable costs are 60% of the
selling price. What would be the amount of sales if Dancer is to realize a profit of 10% of sales?
    a. $700,000 b. $525,000 c. $472,500 d. $420,000

10. Zarlin Co. is considering an expansion program based on the following data:
  Expected sales         $1,000,000
  Variable costs            700,000
  Fixed expenses            120,000
What is the amount of break-even sales?
   a.   $400,000 b.     $420,000 c. $390,000            d.   $300,000

11. The following information pertains to Sisk Co.:
    Sales (25,000 units)                          $500,000
    Direct materials and direct labor               150,000
    Factory overhead:
    Variable                                         20,000
    Fixed                                            35,000
    Selling and administrative expenses:
    Variable                                           5,000
    Fixed                                            30,000
Your computation should include materials costs, labor costs, overhead and selling and administration
expenses. Sisk's break-even point in number of units is
a. 4,924      b. 5,000     c. 6,250   d. 9,286
                            814b6bd0-e6b6-40f6-a1e6-235b355ae219.doc. Page 3 of 6


Use the following data for the next three questions:
    Unit selling price                                            $50
    Variable costs per unit
             Direct materials                                   12
             Direct labor                                        5
             Variable manufacturing overhead                     4
    Variable selling and administrative expense                  5
    Total fixed costs per year                               $240,000
    Estimated sales volume for the year                     12,000 units
    (All production is sold i.e. no ending inventories.)

12. The break-even volume in units is:
a. 6,000 b. 7,500 c. 10,000 d. 12,000 e. none of the above.

13. If the estimated sales volume is achieved, the net income to be realized will be
a. $48,000 b. $240,000 c. $150,000 d. $120,000 e. none of these.

14. The volume in terms of sales dollars needed to yield a net income of $120,000
is:
a. $750,000 b. $625,000 c. $500,000 d. $480,000. e. none of these.

15. On January 1, 2004, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues
were unchanged. How did this increase affect Lake's budgeted break-even point and budgeted margin of
safety?
        Budgeted                                  Budgeted
       break-even point                         margin of safety
a.      Increase                                  Decrease
b.      Decrease                                  Decrease
c.      Decrease                                  Increase
d.      Increase                                  Increase

16. A club will budget its costs for a dance.
     The admission price will be set based on the plan for 100 persons to attend.
     Band cost is fixed and expected to be $500.
     They plan a flexible menu that will result in food cost which is variable at $10 per person.
     They set the ticket price for admission equal to expected cost.
     One hundred and eighteen people actually attend.
     The predictions of fixed and variable costs shown above were accurate.
    What is the overall profit for the dance?
   a.   $0         b.   $40         c. $50             d.   $90
                            814b6bd0-e6b6-40f6-a1e6-235b355ae219.doc. Page 4 of 6

Chapter 3. Measurement of Cost Behavior
17. The Charlotte Medical Center has the following costs for December for its facilities maintenance
department. These are the costs for 4,000 patient days. Fixed costs are identified in the last column.

                                                  December
   Monthly Cost- 4,000 patient days                Amount
   Supervisor's salary and benefits               $ 4,000.00 Fixed
   Hourly wages and benefits                      $ 14,000.00
   Equipment depreciation and rental              $ 6,000.00 Fixed
   Equipment repairs                              $ 5,000.00
   Cleaning supplies                               $ 9,000.00
   Total facilities maintenance costs             $ 38,000.00
With flu season coming, Charlotte expects to have 5,000 patient days in January.
What will be the total cost for facilities maintenance in January?
   a.   $40,000     b.   $45,000    c. $47,500        d.   $50,000

18. Your CEO has asked for information about the cost behavior of manufacturing support costs.
  She wants to know how much support cost is fixed and how much is variable.
  The following data are the only records available:

        Month                      Machine Hours             Support Costs
        May                            1,000                    $10,000
        June                           1,300                     12,000
        July                           1,100                     10,800
        August                         1,250                     11,700
        September                      2,000                     15,500
What is the amount of fixed cost for this company each month, using the High-Low method?
   a.   $0          b.   $4,000     c. $4,200         d.   $4,500

---------------------------
The accountant has prepared a flexible budget for the company at the 80% and 100% of capacity levels.
Please use this data for answering the next two questions.
   Production level – Percentage of capacity              80%           100%          70%
   Production level – Units of output                  1,600 Units    2,000 Units  1,400 Units
   Direct labor hours                                          800          1,000
   Direct labor costs                                       $9,600       $12,000
   Foreman's salary                                         $3,000        $3,000
   Indirect labor                                           $2,800        $3,000
19. How much of the indirect labor cost is a fixed cost?
a. $0 b. $1,200 c. $1,500 d. $2,000 e. $2,500
20. How much is the budgeted indirect labor for production at 70% of capacity.
a. $2,400 b. $2,550 c. $2,700 d. $2,850 e. Some other amount
21. Company B had total factory overhead of $80,000 and total direct labor of $60,000. Using the factory
overhead rate, how much factory overhead would be allocated to goods in process at the end of the period,
which are estimated to contain $12,000 of direct labor?
a. $45,000       b. $16,000      c. $11,250        d. $9,000
                             814b6bd0-e6b6-40f6-a1e6-235b355ae219.doc. Page 5 of 6

------------------------
Chapter 4. Cost Management Systems & Activity Based Costing

The following information for the Charlotte Corporation should be used for the next three questions.
The top section of the table covers all production of the company. The bottom section covers 3 jobs.
  Overhead item                Cost Driver                     Budgeted Cost                   Bud. Level
  Direct Materials                                               $300,000
  Direct Labor Cost                                              $80,000
  Activities - Overhead                                         Budget Cost                                 Cost
  Engineering                  Engineering hours                 $50,000                         1,000
  Machine setup                Number of Setups                  $20,000                          200
  Material handling            No. of material moves             $80,000                         8,000
  Inspection                   Number of inspections             $130,000                        6,500
  Total Overhead                                                 $280,000
  Information for 3 Jobs        Job No. 1                        Job No. 2                     Job No. 3
  Direct Materials               $5,000                          $12,000                        $8,000
  Direct Labor                   $2,000                           $7,000                        $4,000
  Overhead - Details below
  Units Completed                100                               50                             200
  Overhead Computations        Activity Cost           Total     Activity      Cost    Total   Activity
  Engineering hours                10                               50                            10
  No. of setups                     1         100                   2            100               3
  No. of material moves            30          10                   10            10              50
  No. of inspections               20          20                   10            20              30

22. If the company applies overhead items above based on direct labor cost for a job, the overhead cost
assigned to Job 1 would be:
a. $2,800 b. $5,600 c. $5,800 d. $7,000 e. Some other amount
23. If the company uses activity-based costing, how much overhead cost should be assigned to Job 1?
a. $1,300 b. $1,400 c. $1,500 d. $5,600
24. If the company uses activity-based costing, compute the cost of each unit in Job 2.
a. $340 b. $350 c. 440 d. $520
                            814b6bd0-e6b6-40f6-a1e6-235b355ae219.doc. Page 6 of 6

-----------------
Charlotte Company uses a job order cost system.
The following transactions were completed in January, 2005, which was its first month of operations:
(a) Purchased and received direct materials and supplies costing $18,000.
(b) Materials and supplies were requisitioned as follows:
          Job no. 1                         $1,800
          Job no. 2                          4,000
          Job no. 3                          1,000        $6,800
          Indirect Materials (Supplies)                   $1,000
(c) Factory payroll was distributed as follows:
          DIRECT LABOR:
          Job no. 1 (200 hours)             $2,000
          Job no. 2 (300 hours)              3,000
          Job no. 3 (400 hours)              4,000        $9,000
          INDIRECT LABOR                                  $2,000
(d) Indirect manufacturing costs are applied on the basis of direct labor hours.
The budget for 2005 included 6,000 direct labor hours and a total overhead budget of $36,000.
Overhead is applied based on direct labor hours worked.
(e) Other manufacturing overhead costs were incurred, but not mentioned in this problem.

        Materials               Work-in-Process                Finished Goods                 Cost of Sales




     Various Accts              Overhead Control              Overhead Applied                       Sales




       Job No. 1                    Job No. 2                     Job No. 3




25. Job No. 2 was completed in January. The other jobs are still in process at the end of January.
What is the balance in Work in Process at the end of January?
a. $4,800 b. $4,600 c. $10,800 d. $12,400 e. $13,600

				
DOCUMENT INFO