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ACCT 505 Managerial Accounting Week 4 Mid Term

Exam Complete Answer
ACCT-505 Managerial Accounting_Week4_Mid Term_Exam_Complete A+ Answer
Set 1
1. Question : (TCO A) Wages paid to an assembly line worker in a factory are a
: Prime Cost YES..Conversion Cost NO.
Prime Cost YES..Conversion Cost YES.
Prime Cost NO.Conversion Cost NO.
Prime Cost NO..Conversion Cost YES.
2. Question : (TCO A) A cost incurred in the past that is not relevant to any current
decision is classified as a(n)
: period cost.
incremental cost.
opportunity cost.
None of the above
3. Question : (TCO A) Depreciation of office buildings and office equipment is also
known as
: variable costs.
conversion costs.
product costs.
period costs.
4. Question : (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?
: Fixed costs per unit increase and variable costs per unit increase.
Fixed costs per unit decrease and variable costs per unit do not change.
Fixed costs per unit do not change and variable costs per unit do not change.
Fixed costs per unit do not change and variable costs per unit increase.

5. Question : (TCO F) Which of the following statements is true?

I. Overhead application may be made slowly as a job is worked on.
II. Overhead application may be made in a single application at the time of completion
of the job.
III. Overhead application should be made to any job not completed at year end in order
to properly value the work in process inventory.
: Only statement I is true.
Only statement II is true.
Both statements I and II are true.
Statements I, II, and III are all true.
6. Question : (TCO F) A job-order cost system is employed in those situations where
: many different products, jobs, or batches of production are being produced each
period.
manufacturing involves a single, homogeneous product that flows evenly through the
production process on a continuous basis.
the product moves from department to department before being completed.
the unit cost of production is computed by dividing the total production costs by the
number of units produced.
7. Question : (TCO F) The FIFO method only provides a major advantage over the
weighted-average method in that
: the calculation of equivalent units is less complex under the FIFO method.
the FIFO method treats units in the beginning inventory as if they were started and
completed during the current period.
the FIFO method provides measurements of work done during the current period.
the weighted-average method ignores units in the beginning and ending work-in-process
inventories.
8. Question : (TCO B) The contribution margin ratio always decreases when the
: break-even point increases.
break-even point decreases.
variable expenses as a percentage of net sales increase.
variable expenses as a percentage of net sales decrease.
9. Question : (TCO B) Which of the following would not affect the break-even point?
: Number of units sold
Variable expense per unit

Total fixed expenses

Selling price per unit
10. Question : (TCO E) In an income statement prepared using the variable costing
method, variable selling and administrative expenses would
: 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.
1. Question : (TCO A) The following data (in thousands of dollars) have been taken
from the accounting records of Larop Corporation for the just-completed year:
Sales $910
Purchases of raw materials $225
Direct labor.. $245
Manufacturing overhead. $265
Administrative expenses. $150
Selling expenses. $140
Raw materials inventory, beginning. $15
Raw materials inventory, ending.. $45
Work-in-process inventory, beginning $20
Work-in-process inventory, ending. $55
Finished goods inventory, beginning.. $100
Finished goods inventory, ending $135
Required: Prepare a Schedule of Cost of Goods Manufactured in the text box below.
2. Question : (TCO F) The Illinois Company manufactures a product that goes through
three processing departments. Information relating to activity in the first department
during June is given below.
Percentage Completed
Units Materials Conversion
Work in process, June 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%
The department started 475,000 units into production during the month and
transferred 480,000 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.
3. Question : (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 companys unit contribution margin.
b. Calculate the companys unit contribution ratio.
c. If the company increases its unit sales volume by 5% without increasing its fixed
expenses, what would the companys net operating income be?
4. Question : (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 oroduced 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 companys variable costs per unit and total fixed
costs have been constant from month to month.
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.
Set 2
1.(TCO A) Wages paid to an assembly line worker in a factory are a (Points : 6)
( ) Prime Cost YES..Conversion Cost NO.
( ) Prime Cost YES..Conversion Cost YES.
( ) Prime Cost NO.Conversion Cost NO.
( ) Prime Cost NO..Conversion Cost YES.
Question 2. The costs of staffing and operating the accounting department at Central
Hospital would be considered by the Department of Surgery to be (Points : 6)
( ) direct costs.
( ) sunk costs.
( ) incremental costs.
( ) None of the above

3. Question : (TCO A) Property taxes on a companys factory building would be

classified as a(n):
sunk cost
opportunity cost
period cost
variable cost
manufacturing cost
Question 4. 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 costs per unit increase and variable costs per unit increase.
( ) Fixed costs per unit decrease and variable costs per unit do not change.
( ) Fixed costs per unit do not change and variable costs per unit do not change.
( ) Fixed costs per unit do not change and variable costs per unit increase.
5. Question : (TCO F) Which of the following statements is true?
I. Overhead application may be made slowly as a job is worked on.
II. Overhead application may be made in a single application at the time of completion
of the job.
III. Overhead application should be made to any job not completed at year-end in order
to properly value the work in process inventory.
Only statement I is true
Only statement II is true
Both statements I and II are true
Statements I, II, and III are all true
Question 6. 6. (TCO F) A job-order cost system is employed in those situations where
(Points : 6)
( ) many different products, jobs, or batches of production are being produced each
period.
( ) manufacturing involves a single, homogeneous product that flows evenly through the
production process on a continuous basis.
( ) the product moves from department to department before being completed.
( ) the unit cost of production is computed by dividing the total production costs by the
number of units produced.
Question 7. 7. (TCO F) Equivalent units for a process costing system using the FIFO
method would be equal to (Points : 6)
( ) units completed during the period, plus equivalent units in the ending work-inprocess inventory.
( ) units started and completed during the period, plus equivalent units in the ending
work-in-process inventory.
( ) units completed during the period and transferred out.
( ) units started and completed during the period, plus equivalent units in the ending
work-in-process inventory, plus work needed to complete units in the beginning workin-process inventory.

Question 8. 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 decrease.
( ) variable expenses as a percentage of net sales increase.
9. Question : (TCO B) Which of the following would not affect the break-even point?
( ) number of units sold
variable expense per unit
total fixed expenses
selling price per unit
Question 10. 10. (TCO E) Under variable costing (Points : 6)
( ) net operating income will tend to move up and down in response to changes in levels
of production.
( ) inventory costs will be lower than under absorption costing.
( ) net operating income will tend to vary inversely with production changes.
( ) net operating income will always be higher than under absorption costing.
Page 2
Question 1. 1. (TCO A) The following data (in thousands of dollars) have been taken
from the accounting records of Larden Corporation for the just-completed year.
Sales $950
Purchases of raw materials $170
Direct labor $210
Manufacturing overhead $220
Administrative expenses $180
Selling expenses $140
Raw materials inventory, beginning $70
Raw materials inventory, ending $80
Work-in-process inventory, beginning $30
Work-in-process inventory, ending $20
Finished goods inventory, beginning $100
Finished goods inventory, ending $70
Required: Prepare a Schedule of Cost of Goods Manufactured statement in the text box
below.
(Points : 15)
Question 2. 2. (TCO F) The Illinois Company manufactures a product that goes through
three processing departments. Information relating to activity in the first department
during June is given below.
Percentage Completed
Units Materials Conversion
Work in process, June 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%
The department started 475,000 units into production during the month and
transferred 480,000 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.
3. Question : (TCO B) Drake Companys income statement for the most recent year
appears below:
Sales (45,000 units) $1,350,000
Less: Variable expenses 750,000
Contribution margin 600,000
Less: Fixed expenses 375,000
Net operating income $225,000
Required:
a. calculate the unit contribution margin
b. calculate the break-even point in dollars
Question 4. 4. (TCO E) The Dean Company produces and sells a single product. The
following data refer to the year just completed:
Selling price $450
Units in beginning Inventory 0
Units produced 25,000
Units sold 22,000
Variable costs per unit:
Direct materials $ 200
Direct labor $ 50
Variable manufacturing overhead $ 30
Variable selling and admin $ 15
Fixed Costs:
Fixed manufacturing overhead $ 275,000
Fixed selling and admin $ 230,000
Assume that direct labor is a variable cost.
Required:
a. Compute the cost of a single unit of product under both the absorption costing and
variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
(Points : 30)

ACCT 505 Managerial Accounting Week 4 Mid Term

Exam Complete Answer