BA 213

Midterm Exam
Worth 60 points

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1. Indicate whether each of the following costs of an airplane manufacturer would be classified as
direct materials cost, direct labor cost, or factory overhead costs: (Worth 5 points)

a. Controls for flight deck

b. Aircraft engines
c. Depreciation of welding equipment
d. Welding machinery lubricants
e. Salary of test pilot
f. Steel used in landing gear
g. Wages of assembly line worker
h. Tires

Answer:

A. Direct materials cost.

B. Direct materials cost.
C. Factory overhead cost.
D. Factory overhead cost.
E. Factory overhead cost.
F. Direct materials cost.
G. Direct labor cost.
H. Direct material cost.

2. Two items are omitted from each of the following three lists of cost of goods manufactured
statement data. Determine the amounts of the missing items, identifying them by letter. (Worth 8
points)

Work in process inventory, December 1 $2,000 $12,000 (e)

Total manufacturing costs incurred during December 14,000 (c) 70,000

Total manufacturing costs (a) $140,000 $76,000

Work in process inventory, December 31 3,000 30,000 (f)

Cost of goods manufactured (b) (d) $62,000

Answer:

A. $16,000
B. $13,000
C. $128,000
D. $110,000
E. $6,000
F. $14,000

3. Luke Company completed 60,000 units during the year at a cost of $900,000. The beginning
finished goods inventory was 10,000 units at $140,000.

Determine the cost of goods sold for 45,000 units, assuming a FIFO cost flow. (Worth 4 points)

Answer:

The cost of goods sold is $665,000 and the unit cost per unit is $15 each.

4. Please list, in order, the steps for preparing a cost of production report in a process cost system.
(Worth 4 points)

Answer:

1. Determine units to be assigned costs

2. Compute equivalent units of production
3. Compute cost per equivalent unit
4. Allocate costs to units transferred out and partially completed

5. Satin Skin Lotion Company consist of two departments, Blending and Filling. The Filling Department
received 480,000 ounces from the Blending Department. During the period, the Filling Department
completed 486,000 ounces, including 25,000 ounces of work in process at the beginning of the
period. The ending work in process inventory was 19,000 ounces.

How many ounces were started and completed during the period. (Worth 4 points)
 Answer:

486,000
-25,000
461,000 ounces started and completed in the period.

6. The Rolling Department of Atlas Steel Company had 4,150 tons in beginning work in process
inventory (40% complete). During the period, 83,580 tons were completed. The ending work in
process inventory was 6,770 tons (30% complete). (Worth 10 points)

a.) What are the total equivalent units for direct materials if materials are added at the beginning of
the process.

b.) What are the total equivalent units for conversion costs?

Answer:

A) 90,350

B) 85,611

7. The cost of direct materials transferred into the Filling Department of Stain Skin Lotion Company is
$216,000. The conversion cost for the period in the Filling Department is $47,325. The total
equivalent units for direct materials and conversion are 480,000 ounces and 473,250 ounces,
respectively. (Worth 4 points)

Determine the direct materials and conversion costs per equivalent unit.

Answer:

Direct material cost per equivalent units is 480,000

Conversion cost per equivalent units is 473,250

8. The manufacturing costs of Sign Enterprises for the first three months of the year are provided
below. (Worth 4 points)

Total Costs Production

 January $150,000 1,500 units
February 200,000 2,500
March 180,000 2,000

Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

Answer:

A. $50 per unit

B. $75,000

9. Carlin Company sells 14,000 units at $10 per unit. Variable costs are $9 per unit and fixed costs are
$5,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin and (c) income
from operations. (Worth 5 points)

Answer:

A. 10%
B. $1.00
C. $9,000

10. Grobe Inc. sells a product for $90 per unit. The variable cost is $75 per unit, while fixed costs are
$45,000.

Determine (a) break-even point in sales units and (b) the break-even point if the selling price were
decreased to $85 per unit. (Worth 4 points)

Answer:

A. 3,000 units
B. $4,500

11. Beets Company sells a product for $75 per unit. The variable cost is $65 per unit and fixed costs are
$100,000.

Determine (a) the break-even in sales units and (b) the break-even point in sales units if the
company desires a target profit of $50,000. (Worth 4 points)

Answer:

1. A) Break even in sales units is fixed cost/sale price-variable cost PU > 100,000/ 75-
65 =10,000 units
2. B) Break-even in sales (50,000) is target profit + fixed cost/ sales price-variable cost
PU > 50,000+100,000/75-65 = 15,000 units
12. Saik Co. reports the following data:

Sales $750,000
Variable Costs 300,000
Contribution Margin $450,000
Fixed costs 150,000
Income from Operations $300,000

Determine Saik Co.'s operating leverage. (Worth 2 points)

Answer:

Sailk Co. operating leverage is 450,000/300,000 =1.5

13. Rejeski Company has sales of $400,000, and the break-even point in sales dollars is $240,000.
Determine the Company's margin of safety as a percent of current sales. (Worth 2 points)

Answer:

Margin of safety as a percent of current sales is 40%