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ACCT 304 Final Exam 100% Correct Answers

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CTIVITY BASED COSTING


1.

If a predetermined overhead rate is not employed and the


volume of production is increased over the level planned, the
cost per unit would be expected to
A. Decrease for fixed costs and remain unchanged for variable
costs.
B.

1.

Remain unchanged for fixed costs and increase for variable


costs.

C.

Decrease for fixed costs and increase for variable costs.

D.

Increase for fixed costs and increase for variable costs.

If fixed costs decrease while variable cost per unit remains


constant, the contribution margin will be
A. Unchanged
C. Higher

B.

Lower

D.
Indeterminate

1.

The high-low method is criticized because it


A. is not a graphical method.
B.
C.

ignores much of the available data by concentrating on only


the extreme points.
D.

1.

is a mathematical method.

does not provide reasonable estimates.

[i].
The controller of Jema Company has requested a
quick estimate of the manufacturing supplies that it needs for the
month of July when the expected production are 470,000 units.
Below are the actual data from the prior three months of
operations.
Production in
Manufacturing
units
supplies
March

450,000

P723,060

April

540,000

853,560

May

480,000

766,560

Using these data and the high-low method, what is the


reasonable estimate of the cost of manufacturing supplies that
would be needed for July? (Assume that this activity is within the
relevant range.)

1.

A.

P 805,284

C.

P 755,196

B.

P1,188,756

D.

P 752,060

[ii].
Almond Company wishes to determine the fixed
portion of its maintenance expense (a semi-variable expense), as
measured against direct labor hours for the first Malayan three
months of the year. The inspection costs are fixed; however, the
adjustments necessitated by errors found during inspection
account for the variable portion of the maintenance costs.
Information for the first Malayan quarter is as follows:
Direct Labor
Maintenance
Hours
Costs
January

34,000

P61,000

February

31,000

58,500

March

34,000

61,000

What is the fixed portion of Almond Companys maintenance


expense, rounded to the nearest pesos?

1.

A.

P28,330

C.

P37,200

B.

P32,677

D.

P40,800

[iii]. If there were 30,000 pounds of raw material on hand


on January 1, 60,000 pounds are desired for inventory at
December 31, and 180,000 pounds are required for annual

production, how many pounds of raw material should be


purchased during the year?
A. 150,000 pounds
C. 120,000
pounds
B.

240,000 pounds

D.

210,000

pounds
1.

[iv]. The Avelina Company has the following historical


pattern on its credit sales.
70 percent collected in month of sale
15
10
4

percent collected in the first month after sale


percent collected in the second month after sale
percent collected in the third month after sale
2

percent uncollectible

The sales on open account have been budgeted for the last six
months of 2007 are shown below:
July
P 60,000
August
70,000

September
80,000
October
90,000
November
100,000
December
85,000

The estimated total cash collections during the fourth calendar


quarter from sales made on open account during the fourth
calendar quarter would be

1.

A.

P172,500

C.

P265,400

B.

P230,000

D.

P251,400

[v].
Harem Corporation consists of two divisions, Mining
and Builders. The Mining makes black steel, a product that can
be used in the product that the Builders division makes. Both
divisions are considered profit centers. The following data are
available concerning black steel and the two divisions:

Mining Builders
Average units produced

150,000

Average units sold


Variable mfg cost per unit
Variable finishing cost per
unit
Fixed divisional costs

150,000
P2
P5

P75,000 P125,000

The Mining Division can sell all of its output outside the company
for P4 per unit. The Builders Division can buy the black steel
from other firms for P4. The Builders Division sells its product for
P12.

What is the optimal transfer price in this case?

1.

A.

P2 per unit

C.

P7 per unit

B.

P4 per unit

D.

P9 per unit

The sequence that reflects increasing breadth of


responsibility is
A. cost center, investment center, profit center
B.

cost center, profit center, investment center

1.

C.

profit center, cost center, investment center

D.

investment center, cost center, profit center

In responsibility accounting the most relevant classification


of costs is
A. fixed and variable
C. discretionary
and committed
B.

1.

incremental and nonincremental


and noncontrollable

D.

controllable

If a firm operates at capacity, the transfer price should be


the:
A. external market price.
B.

C.

differential cost.

actual cost.

D.

standard

cost.
1.

The basic methods used in transfer pricing are


A. variable or full costs
C.
price or negotiated price
B.

dual prices

D.
above

1.

Market-based transfer prices are best for the

market

all of the

A.

B.

company when the selling division is operating below


capacity.

company when the selling division is operating at capacity.


C.

buying division if it is operating at capacity.


D.

buying division.

Assume that Steel Division has a product that can be sold either
to outside customers on an intermediate market or to Fabrication
Division of the same company for use in its production process.
The managers of the division are evaluated based on their
divisional profits.
Steel Division:
Capacity in
units
200,000
Number of units being sold on the intermediate
market
200,000
Selling price per unit on the intermediate
market

P90

Variables costs per unit (including P3 of avoidable selling


expense if sold internally)
70
Fixed costs per unit (based on
capacity)

13

Fabrication Division:
Number of units needed for
production
40,000
Purchase price per unit now being paid to an outside
supplier
P86
The appropriate transfer price should be:
A.

P90

C.

P70

B.

P87

D.

P86

Use the following data to answer questions 11 through 13.


N & R Company transfers a product from division N to division R.
Variable cost of this product is anticipated to be P40 a unit and
total fixed costs amount to P8,000. A total of 100 units are
anticipated to be produced. Actual cost, however, amounts to
P50 for variable costs. Fixed costs were same as budget.
However, actual output was twice as many.

1.

[vi]. Actual cost per unit amounts to


A. P90

C.

P115

B.

D.

P120

P92

1.

[vii]. The transfer price based on actual variable costs plus


130% markup amounts to
A. P90
C. P115
B.

P92

&am