ACCT 346 Week 4 Midterm - 3

1. (TCO 1) Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for (Points : 4)

2. (TCO 1) Which of the following costs does not change when the level of business activity changes? (Points : 4)

3. (TCO 1) A retailer purchased some trendy clothes that have gone out of style and must be marked down to 40% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? (Points : 4)

4. (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 fixed cost per unit? (Points : 4)

5. (TCO 1) Which of the following costs is not part of manufacturing overhead? (Points : 4)

6. (TCO 1) Product costs (Points : 4)

7. (TCO 1) If the balance in the Finished Goods Inventory account increased by $30,000 during the period and the cost of goods manufactured was $220,000, how much is cost of goods sold? (Points : 4)

8. (TCO 2) BCS Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for August follows.

9. (TCO 2) During 2011, Magus Company applied overhead using a job-order costing system at a rate of $12 per direct labor hours. Estimated direct labor hours for the year were 150,000, and estimated overhead for the year was $1,800,000. Actual direct labor hours for 2011 were 140,000, and actual overhead was $1,700,000.

What is the amount of under- or overapplied overhead for the year? (Points : 4)

10. (TCO 3) Which of the following describes the differences between job-order and process costing? (Points : 4)

11. (TCO 3) Caliente Company uses process costing. At the beginning of the month, there were 3,000 units in process, 70% complete with respect to material and 60% complete with respect to conversion costs. 20,000 units were started during the month and 20,000 units were completed. The units in ending Work In Process Inventory were 90% complete with respect to material and 30% complete with respect to conversion costs. How many equivalent units will be used in calculating the cost per unit for materials? (Points : 4)

12. (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

Calculate the cost per equivalent unit for conversion costs. (Points : 4)

13. (TCO 4) Clearance Depot has total monthly costs of $8,000 when 2,500 units are produced and $12,400 when 5,000 units are produced. Which is the estimated total monthly fixed cost? (Points : 4)

14. (TCO 4) The three elements of the profit margin are (Points : 4)

15. (TCO 4) Allen Company sells homework machines for $100 each. Variable costs per unit are $75 and total fixed costs are $62,000. Allen is considering the purchase of new equipment that would increase fixed costs to $84,000 but decrease the variable costs per unit to $60. At that level, Allen Company expects to sell 3,000 units next year. Which is Allen’s break-even point in units if it purchases the new equipment? (Points : 4)

16. (TCO 4) The president of Jackson Corporation will not receive a bonus next year unless the company’s profits are at least $435,000. Jackson sells a single product at a price of $27 per unit. If variable costs are $12 per unit and fixed costs total $150,000, which amount of sales must Jackson generate in order for the president to receive a bonus? (Points : 4)

17. (TCO 5) Which of the following is treated differently in full costing than in variable costing? (Points : 4)

18. (TCO 5) Which of the following items appears on a variable costing income statement but not on a full costing income statement? (Points : 4)

19. (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?

20. (TCO 6) Costs may be allocated to (Points : 4)

21. (TCO 5) An allocation base (Points : 4)

22. (TCO 6) Sierra Company allocates the estimated $200,000 of its accounting department costs to its production and sales departments, because the accounting department supports the other two departments, particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows.

23. (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? (Points : 4)

24. (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?

25. (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

26. (TCO 3) Describe a process costing system, including the types of companies that commonly use this system. How can process costing information be used in incremental analysis? (Points : 20)

27. (TCO 7) Computer Boutique sells computer equipment and home office furniture. Currently, the furniture product line takes up approximately 50% of the company's retail floor space. The president of Computer Boutique is trying to decide whether the company should continue offering furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated fixed costs are assigned based on relative sales

28. (TCO 4) Savadyne Inc. produces flash drives. The selling price is $8 per drive. The variable cost of production is $2.40 per unit, and the fixed cost per month is $3,600.
(a) Calculate the contribution margin associated with each flash drive.
(b) In August, the company sold 200 more flash drives than planned. What is the expected effect on profit of selling the additional drives?
(c) Calculate the contribution margin ratio associated with one flash drive.

(d) In October, the company had sales that were $2,400 higher than planned. What is the expected effect on profit related to the additional sales? (Points : 25)