Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is 1)
used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is
applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each
unit sells for $9,000.
A) $2,500 B) $65,000 C) $75,000 D) $80,000
Answer: C
Explanation: A)
B)
C) $3,000 + $2,000 + (($2,000/20) × $25) = $7,500
Profit earned on 50 units = ($9,000 − $7,500) × 50 units = $75,000
D)
Comment:
2) In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the 2)
________ allocated to a job.
A) direct materials B) manufacturing overhead costs
C) direct labor D) total costs
Answer: B
Explanation: A)
B)
C)
D)
Comment:
Answer the following questions using the information below:
For 2014, Bakers Manufacturing uses machine-hours as the only overhead cost-allocation base. The direct cost rate is $3.00
per unit. The selling price of the product is $20.00. The estimated manufacturing overhead costs are $240,000 and estimated
40,000 machine hours. The actual manufacturing overhead costs are $300,000 and actual machine hours are 50,000.
3) Using job costing, the 2014 actual indirect-cost rate is ________. 3)
A) $5.80 per machine-hour B) $6.75 per machine-hour
C) $6.00 per machine-hour D) $6.50 per machine-hour
Answer: C
Explanation: A)
B)
C) $300,000 / 50,000 mh = $6.00
D)
Comment:
1
4) What is the profit margin earned if each unit requires two machine-hours? 4)
A) 66.67% B) 58.73% C) 33.33% D) 53.33%
Answer: C
Explanation: A)
B)
C) $20 − $3.00 − ($6.00 × 2) = $5; $5/$15 = 33.33%
D)
Comment:
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
5) What is the difference between an actual cost system and a normal cost system?
Answer: An actual cost system is one that traces direct costs to a cost object by using the actual direct -cost rates
times the actual quantities of direct-cost inputs, and allocates indirect costs based on the actual indirect
cost rates times the actual quantities of the cost-allocation bases. A normal cost system is one that traces
direct costs to a cost object by using the actual direct-cost rates times the actual quantities of direct-cost
inputs, and allocates indirect costs based on the budgeted indirect cost rates times the actual quantities
of the cost-allocation bases. Both systems trace direct costs to jobs the same way. An actual cost system
traces indirect costs to jobs using actual indirect cost rates, but a normal cost system uses budgeted
indirect cost rates to trace indirect costs to jobs.
Comment:
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
6) Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed 6)
as follows:
T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00 $29.00
Direct material $ 2.00 $ 5.00
Direct labor $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
Operating profit $ 3.50 $ 6.80
What is the projected decline in operating income if the direct materials costs of T-Shirts increase
to $3.50 per unit and direct labor costs of Sweatshirts increase to $13.00 per unit?
A) $473,000 B) $90,000 C) $203,000 D) $293,000
Answer: D
Explanation: A)
B)
C)
D) (60,000 × $1.50) + (35,000 × $5.80) = $293,000
Comment:
2
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
7) Christy Enterprises reports the year-end information from 2015 as follows: 7)
Sales (100,000 units) $500,000
Less: Cost of goods sold 300,000
Gross profit 200,000
Operating expenses (includes $20,000 of Depreciation) 120,000
Net income $ 80,000
Christy is developing the 2016 budget. In 2016 the company would like to increase selling
prices by 10%, and as a result expects a decrease in sales volume of 5%. Cost of goods sold
as a percentage of sales is expected to increase to 62%. Other than depreciation, all
operating costs are variable.
Required:
Prepare a budgeted income statement for 2016.
Answer: Christy Enterprises
Budgeted Income Statement
For the Year 2016
Sales (95,000 × $5.50) $522,500
Cost of goods sold (2016 sales × 62%) 323,950
Gross profit 198,550
Less: Operating expenses [($1.00 × 95,000] + $20,000) 115,000
Net income $ 83,550
Explanation:
Comment:
3
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Answer the following questions using the information below:
Kramer Enterprises reports year-end information from 2015 as follows:
Sales (160,000 units) $960,000
Cost of goods sold 640,000
Gross margin 320,000
Operating expenses 260,000
Operating income $60,000
Kramer is developing the 2016 budget. In 2016 the company would like to increase selling prices by 12.5%, and as a result
expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of
goods sold is a variable cost and that operating expenses are a fixed cost.
8) What is budgeted sales for 2016? 8)
A) $873,600 B) $1,080,000 C) $982,800 D) $1,000,000
Answer: C
Explanation: A)
B)
C) Budgeted sales = $960,000 × 1.125 × 0.91 = $982,800
D)
Comment:
Answer the following questions using the information below:
Domose Inc. planned to use $150 of material per unit but actually used $147 of material per unit, and planned to make 1,100
units but actually made 900 units.
9) The flexible-budget amount for materials is ________. 9)
A) $132,300 B) $161,700 C) $165,000 D) $135,000
Answer: D
Explanation: A)
B)
C)
D) 900 units × $150 = $135,000
Comment:
10) The flexible-budget variance for materials is ________. 10)
A) $2,700 favorable B) $3,300 unfavorable
C) $3,300 favorable D) $2,700 unfavorable
Answer: A
Explanation: A) ($147 − $150) × 900 = $2,700 F
B)
C)
D)
Comment:
4
11) Which of the following cost drivers would NOT be appropriate for the customer services activity 11)
of the value chain?
A) hours spent servicing products
B) number of service calls
C) number of engineering hours by research and development staff
D) number of service call workers
Answer: C
Explanation: A)
B)
C)
D)
Comment:
12) When analysing costs, accountants should think of variable costs on a ________ basis and fixed 12)
costs on a ________ basis.
A) total; per-unit B) per-unit; total
C) total; total D) per-unit; per-unit
Answer: B
Explanation: A)
B)
C)
D)
Comment:
13) Which of the following costs is a variable cost? 13)
A) depreciation expense of airplane for airline
B) fuel for airplane for airline
C) rental expense for factory building for manufacturer of electronics
D) lease cost for factory machine for manufacturer of electronics
Answer: B
Explanation: A)
B)
C)
D)
Comment:
14) Walnut Corporation sells desks at £480 per desk. The variable costs associated with each desk are 14)
£372. Total fixed costs for the period are £456,840. The contribution margin per desk is ________.
A) £108 B) £51 C) £126 D) £195
Answer: A
Explanation: A)
B)
C)
D)
Comment:
5
15) Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of £1.2 million for its 15)
300-room hotel. Average daily room rents are £50 per room and average variable costs are £10 for
each room rented. It operates 365 days per year. If the hotel is completely full throughout the
year, what is net income for one year?
A) £3,180,000 B) £(1,188,000) C) £4,275,000 D) £5,475,000
Answer: A
Explanation: A)
B)
C)
D)
Comment:
16) Sizzling Company, a producer of electronic components, has the following information: 16)
Income tax rate 30%
Selling price per unit £5.00
Variable cost per unit £3.00
Total fixed costs £90,000.00
The break-even point in dollars is ________.
A) £180,000 B) £150,000 C) £225,000 D) £270,000
Answer: C
Explanation: A)
B)
C)
D)
Comment:
17) Assume the sales price is £34 per unit and the variable cost is £19 per unit. The break -even point is 17)
12,000 units. What are total fixed costs?
A) £530,000 B) £180,000 C) £190,000 D) £340,000
Answer: B
Explanation: A)
B)
C)
D)
Comment:
18) If the variable cost per unit increases, what is the effect on the break-even point? (Assume no 18)
other changes.)
A) The break-even point decreases. B) The break-even point remains the same.
C) The break-even point is zero. D) The break-even point increases.
Answer: D
Explanation: A)
B)
C)
D)
Comment:
6
19) Assume ZZZ Company has the following information available: 19)
Selling price per unit £100
Variable cost per unit £45
Fixed costs per year £420,000
Expected sales per year (units) 20,000
If fixed costs increase £200,000, what is the expected operating income?
A) £1,380,000 B) £280,000 C) £680,000 D) £480,000
Answer: D
Explanation: A)
B)
C)
D)
Comment:
20) Key Company has a targeted sales volume of 62,300 units. Total fixed costs are £31,200. The 20)
contribution margin per unit is £1.20. What is targeted net income?
A) £37,440 B) £74,760 C) £31,200 D) £43,560
Answer: D
Explanation: A)
B)
C)
D)
Comment:
21) The following information is available for Company ZZ: 21)
Sales £1,000,000
Selling expenses variable 22,000
Selling expenses fixed 33,000
Administrative expenses variable 30,000
Administrative expenses fixed 10,000
Cost of goods sold variable 400,000
Cost of goods sold fixed 100,000
If sales increase to £1,500,000, what is operating income?
A) £548,000 B) £405,000 C) £500,000 D) £679,000
Answer: D
Explanation: A)
B)
C)
D)
Comment:
7
22) Company TTT has the following information available: 22)
Total fixed costs £84,000
Targeted after-tax net income £18,000
Contribution margin per unit £6.20
Tax rate 40%
How many units must be sold to achieve the targeted after-tax net income?
A) 14,223 B) 17,853 C) 21,504 D) 18,387
Answer: D
Explanation: A)
B)
C)
D)
Comment:
TRUE/FALSE. Write ʹTʹ if the statement is true and ʹFʹ if the statement is false.
23) The raw material used in a product that can be easily traced to the product is generally classified as 23)
an indirect cost.
Answer: True False
Explanation: The raw material used in a product that can be easily traced to the product is generally
classified as a direct cost.
Comment:
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
24) In a manufacturing environment, an indirect cost such as ________ would usually be allocated to a 24)
cost object.
A) raw materials
B) labor of administrative secretaries
C) labor of employees who operate manufacturing equipment
D) utilities
Answer: B
Explanation: A)
B)
C)
D)
Comment:
8
Rupe Company has two departments: Machining and Assembly. The following estimates are for the coming year:
Machining Assembly
Direct labor hours 30,000 40,000
Machine hours 150,000 200,000
Manufacturing overhead costs $600,000 $800,000
25) A single predetermined manufacturing cost driver rate based on total plant direct labor hours is: 25)
A) $10 per direct labor hour. B) $40 per direct labor hour..
C) $ 4 per direct labor hour. D) $20 per direct labor hour.
Answer: D
Explanation: A)
B)
C)
D)
Comment:
For 2011, Steveʹs Plastics Manufacturing uses a normal job order costing system. The accounting records contain the
following information:
Estimated manufacturing overhead (overhead) costs $100,000
Actual manufacturing overhead costs $120,000
Estimated machine hours 20,000
Actual machine hours 25,000
The only cost driver is machine hours.
26) Using normal job order costing, the 2011 predetermined manufacturing overhead cost driver rate 26)
is:
A) $4.80 per machine hour. B) $4.00 per machine hour.
C) $6.00 per machine hour. D) $5.00 per machine hour.
Answer: D
Explanation: A)
B)
C)
D) $5.00 per machine hour = $100,000 / 20,000 estimated mh
Comment:
27) Using normal job order costing, the amount of manufacturing overhead costs allocated to jobs 27)
during 2011 is:
A) $150,000. B) $100,000. C) $120,000. D) $125,000.
Answer: D
Explanation: A)
B)
C)
D) $125,000 = $5.00 per machine hour × 25,000 actual mh
Comment:
