BACC3115-Cost Accounting

Midterm Exam Practice Set-Spring 2016

Name________________________
Part I-Multiple Choice Questions (12 points-2 points each):
1) Which of the following information is required by a company's manager while preparing a
manufacturing overhead costs budget?
A) estimated incentives to be paid to marketing personnel
B) estimated expense for office supplies
C) rent expense for lease of office building
D) estimated expense for maintenance of factory building

2) Sales of Blistre Autos are 350,000, variable cost is 200,000, fixed cost is 75,000, tax rate is 20%. Calculate
the operating leverage of the company.
A) 1.00 time C) 2.50 times
B) 1.50 times D) 2.00 times

3) Which of the following increases (are debited to) the Work-in-Process Control account?
A) actual plant insurance costs
B) customer services costs
C) marketing expenses
D) direct manufacturing labor costs

4) The variable overhead spending variance measures the difference between ________, multiplied by the
actual quantity of variable overhead cost-allocation base used.
A) the standard variable overhead cost rate and the budgeted variable overhead cost rate
B) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit
C) the actual variable overhead cost per unit and the budgeted fixed overhead cost per unit
D) the actual quantity per unit and the budgeted quantity per unit

5) A distinct feature of the FIFO process-costing method is that the ________.

A) work done on beginning inventory before the current period is blended with the work done during the
current period in the calculation of equivalent units
B) work done on ending inventory is kept separate from the work done during the current period in the
calculation of equivalent units and is usually not included in the calculation
C) FIFO process-costing method is only minimally different from the weighted-average process-costing
method
D) work done on beginning inventory before the current period is kept separate from the work done
during the current period in the calculation of equivalent units

6) Maize Plastics manufactures and sells 50 bottles per day. Fixed costs are $30,000 and the variable costs
for manufacturing 50 bottles are $10,000. Each bottle is sold for $1,000. How would the daily profit be
affected if the daily volume of sales drop by 10%?
A) profits are reduced by $1,000 C) profits are reduced by $4,000
B) profits are reduced by $5,000 D) profits are reduced by $6,000

Midterm Exam Practice Set Spring 2016 1|Page

7) An unfavorable price variance for direct materials might indicate ________.
A) that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory
methods
B) congestion due to scheduling problems
C) that the purchasing manager skillfully negotiated a better purchase price
D) that the market had an unexpected oversupply of those materials

8) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of
cost allocation base?
A) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost
pool ÷ Budgeted total quantity of cost allocation base
B) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead
cost pool ÷ Budgeted total quantity of cost allocation base
C) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost
pool ÷ Actual total quantity of cost allocation base
D) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead
cost pool ÷ Actual total quantity of cost allocation base

9) A major advantage of using the FIFO process-costing method is that ________.

A) FIFO makes the unit cost calculations simpler
B) in contrast with the weighted-average method, FIFO is considered GAAP
C) FIFO provides managers with information about changes in the costs per unit from one period to the
next
D) in the period of rising prices, it leads to lower operating income and lower tax payments, saving the
company cash and increasing the company's value

10) How many units would have to be sold to yield a target operating income of $23,000, assuming
variable costs are $25 per unit, total fixed costs are $2,000, and the unit selling price is $30?
A) 5,000 units C) 4,800 units
B) 5,200 units D) 4,400 units

11) While calculating the costs of products and services, a standard costing system ________.
A) allocates overhead costs on the basis of the actual overhead-cost rates
B) uses standard costs to determine the cost of products
C) does not keep track of overhead cost
D) traces direct costs to output by multiplying the standard prices or rates by the actual quantities

12) Which of the following items will be same for a flexible budget and a master budget?
A) total variable cost
B) total fixed costs
C) total contribution margin
D) total revenues

Midterm Exam Practice Set Spring 2016 2|Page

Part II-Problems (76 points-as noted)
Problem One (20 points)
Pet Products Company uses an automated process to manufacture its pet replica products. For June, the
company had the following activities:

Beginning work in process inventory 4,500 items, 1/4 complete

Units placed in production 15,500 units
Units completed 17,500 units
Ending work in process inventory 2,500 items, 3/4 complete

Cost of beginning work in process $5,250

Direct material costs, current $15,500
Conversion costs, current $36,500

Direct materials are placed into production at the beginning of the process and conversion costs are
incurred evenly throughout the process.

Required:
(a) Compute the equivalent units for both material and conversion costs using the FIFO method.

(b) Compute the cost per equivalent unit.

(c) Assign the costs to the units completed and transferred out

(d) Assign the costs to the ending inventory of work in process.

Midterm Exam Practice Set Spring 2016 3|Page

Problem Two (16 points)
Perry Company has provided the following information:

Month Budgeted Sales

March $200,000
April 212,000
May 204,000
June 218,000
July 210,000

In addition, the gross profit rate is 30% and the desired inventory level is 30% of next month's cost of
sales.

Required:
Prepare a purchases budget for April through June.

Midterm Exam Practice Set Spring 2016 4|Page

Problem Three (20 points)
Wilson's Winter Woolens manufactures jackets and other wool clothing. A certain designed ski parka
requires the following:

Direct materials standard 2 square yards at $13.50 per yard

Direct manufacturing labor standard 1.5 hours at $20.00 per hour

During the third quarter, the company made 1,500 parkas and used 3,150 square yards of fabric costing
$39,375. Direct labor totaled 2,100 hours for $45,150.

Required:
a. Compute the direct materials price and efficiency variances for the quarter.

b. Compute the direct manufacturing labor price and efficiency variances for the quarter.

Midterm Exam Practice Set Spring 2016 5|Page

Problem Four (20 points)
Neon Company manufactured 2,500 units during April with a total overhead budget of $55,000.
However, while manufacturing the 2,500 units the microcomputer that contained the month's cost
information broke down. With the computer out of commission, the accountant has been unable to
complete the variance analysis report. The information missing from the report is lettered in the following
set of data:

Variable overhead:
Standard cost per unit: 1.2 labor hour at $10 per hour
Actual costs: $26,250 for 2,250 hours
Flexible budget: a
Total flexible-budget variance: b
Variable overhead spending variance: c
Variable overhead efficiency variance: d

Fixed overhead:
Budgeted costs: e
Actual costs: f
Flexible-budget variance: $200 favorable

Required:
Compute the missing elements in the report represented by the lettered items.

Midterm Exam Practice Set Spring 2016 6|Page