YESHIVA UNIVERSITY

Sy Syms School of Business

EXAM I (VERSION BOSTON)

ACC 2403 MURGIE KRISHNAN

COST ACCOUNTING I SPRING 2008

Name: I.D.#: ______________

Notes:
1. It is very important to write your name very legibly in PRINT. Unless your
exam is very neat and legible, you will not get partial credit.

2. Any act of cheating, or helping to cheat, will result immediately in

an overall course grade of F.

3. Discipline during the exam is very important.

4. The last page of this exam contains a formula sheet, an exact copy of
the formula sheet distributed earlier.

1
I (15 points) Schedules of Cost of Goods Manufactured and Sold
Evans Inc., had the following activities during 2007:

Direct materials:
Beginning inventory $ 40,000
Purchases 123,200
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Depreciation of office equipment 123,600
Marketing and distribution costs 30,000
Beginning work-in-process inventory 1,600
Ending work-in-process inventory 8,000
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000
Sales Revenue 300,000

Required:

a. Prepare a Schedule of Cost of Goods Manufactured (9 points) and

Sold (3 points) for Evans Inc in proper form, and an Income
Statement (3 points), for 2007. (Proper labeling is important to
get partial credit.)

Answer:

2
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II (10 Points) Job Costing Basics

Hill Manufacturing uses departmental cost driver rates to apply

manufacturing overhead costs to products. Manufacturing overhead costs are
applied on the basis of machine-hours in the Machining Department and
on the basis of direct labor cost in the Assembly Department. At the
beginning of 20X5, the following estimates were provided for the coming
year:

Machining Assembly
Direct labor-hours 10,000 dlh 90,000 dlh
Machine-hours 100,000 mh 5,000 mh
Direct labor cost $ 80,000 $720,000
Manufacturing overhead costs $250,000 $360,000

The accounting records of the company show the following data for Job
#845 still incomplete:

Machining Assembly
Direct labor-hours 50 dlh 120 dlh
Machine-hours 170 mh 10 mh
Direct material cost $2,700 $1,600
Direct labor cost $ 400 $ 900
Manufacturing overhead costs $450 $400

Required:
a. Compute the manufacturing overhead allocation rate for each
department.

b. Compute the total balance in Work-in-Process for Job #845 to

date.

Answer:

4
III (40 points) Process Costing System

Dutch Cheese is a manufacturer using two direct materials, DM1 and DM2,
besides incurring conversion costs. DM1 is added at the start of the process;
DM2, at the end of the process. Conversion costs are added evenly through
the process. Inspection is at the end of the process. Spoilage beyond 1000
units is considered abnormal. The information for March is as follows:

Beginning work in process 10,000 units

Units started 20,000 units
Units completed 25,000 units
Ending work in process 2,000 units

Beginning work-in-process DM1 $ 6,000

Beginning work-in-process DM2 $ 1,000
Beginning work-in-process conversion $ 2,600

DM1 added during month $20,000

DM2 added during month $14,000
Conversion costs added during month $24,200

Beginning work in process was half complete. Ending work in process

was 60% complete.

Required:
Assume the FIFO method. Prepare (a) (6 points) a process time line
(b) (30 points) neatly labeled schedules showing computations of
equivalent units, cost per equivalent unit, and assignment of
costs. (c) (4 points) Provide the journal entry for the units completed
during the month.

5
Answer:
PRODUCTION COST WORKSHEET

Equivalent units’ computation

Cost per equivalent unit

Assignment of costs

6
(IV) (30 points) Cost-Volume-Profit Analysis

Bob’s Textile Company sells shirts for men and boys. The average selling
price and variable cost for each product are as follows:

Men’s Boys'
Unit Selling Price $30 $20
Contribution margin ratio 20% 40%

Common fixed costs are $30,000.

Required:

(a) (15 points) What is the breakeven point in units, for each type of
shirt, assuming the sales mix is 3:1 in favor of men's shirts?
(b) (3 points) What is the operating income, assuming the sales mix is 3:1 in
favor of men's shirts, and sales total 10,000 shirts?
(c) (3 points) If fixed costs increase to $50,000, and other parameters stay
the same, by how much should the unit variable cost of Mens’ Shirts
change, for the firm to still make the same operating income as in (b)
above.
(d) (2 points) Compute the operating leverage (for the original data) when
sales total 10,000 shirts.
(e) (2 points) What is the margin of safety (in units) in (b) above.
(f) (5 points) If the tax rate is 30%, what is the (a) (2 points) breakeven
point (b) (3 points) quantity needed to achieve a target net income of
$2000?

7
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 ACC 2403 Cost Accounting – Formula Sheet

Direct Materials (DM):

DM Used = Beginning Inventory (DM) + Purchases (DM) – Ending Inventory (DM)

Manufacturing Costs Incurred = DM used + Direct labor (DL) + Manufacturing

Overhead (also known as Indirect Manufacturing Costs)

Cost of Goods Manufactured (COGM):

COGM = Beg Work-in-Process (WIP) + Manufacturing Costs Incurred – Ending WIP

Cost of Goods Sold (COGS):

COGS = Beg Inventory of Finished Goods (FG) + COGM – Ending Inventory of FG

Prime Costs = DM + DL
Conversion Costs = DL + manufacturing overhead

When overheads are allocated using a predetermined rate:

WIP Control (“cost of a job”) = DM used + DL + Allocated Manufacturing Overhead

Budgeted Rate = Budgeted Total Cost/Budgeted Total Value of Allocation Base

Allocated Cost = Budgeted Rate x Actual Value of Allocation Base

Equivalent units’ computations:

For weighted average – all costs incurred to date are aggregated;
FIFO – only costs incurred in the current period are counted.

Operating income: Let π = operating income, p = unit selling price, v = unit

variable cost, Q = total output quantity (units), F = fixed cost, then
p−v
π = ( p − v) * Q − F and π =( ) *( pQ) − F
p

Margin of safety (units) = budgeted or actual sales (units) – breakeven sales

(units)

Margin of safety percentage = (margin of safety in dollars) / (budgeted or

actual revenues)

Degree of operating leverage = total contribution margin/ operating income