ACCT 505 Midterm exam 1.(TCO A) Wages paid to an assembly line worker in a factory are a (Points : 6) Prime Cost YES…..Conversion Cost YES. Prime Cost YES…..Conversion Cost NO. Prime Cost NO….Conversion Cost NO. Prime Cost NO…..Conversion Cost YES. 2.(TCO A) The costs of staffing and operating the accounting department at Central Hospital would be considered by the department of surgery to be (Points : 6) indirect costs. sunk costs. incremental costs. direct costs. 3.(TCO A) Property taxes on a company’s factory building would be classified as a(n) (Points : 6) variable cost. opportunity cost. period cost. product cost. 4.(TCO C) 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 decrease and variable costs per unit do not change. Fixed costs per unit increase 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.(TCO B) Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company included in direct labor cost a portion of indirect labor. The effect of this misclassification will be to (Points : 6) overstate the predetermined overhead rate. understate the predetermined overhead rate. have no effect on the predetermined overhead rate. This cannot be determined from the information given. 6 (TCO B) A job-order cost system is employed in those situations when (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. 7 (TCO B) The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method (Points : 6) can be used under any cost-flow assumption. does not require the use of predetermined overhead rates. keeps costs in the beginning inventory separate from current period costs. does not consider the degree of completion of units in the beginning work-in-process inventory when computing equivalent units of production. 8 (TCO C) The contribution margin ratio always decreases when the (Points : 6) fixed expenses increase. fixed expenses decrease. variable expenses as a percentage of net sales increase. variable expenses as a percentage of net sales decrease. 9 (TCO C) Which of the following would not affect the break-even point? (Points : 6) Variable expense per unit Number of units sold Total fixed expenses Selling price per unit 10 (TCO D) In an income statement prepared using the variable costing method, fixed manufacturing overhead would (Points : 6) not be used. 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 the same as variable manufacturing overhead. Page 2 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 $225 Manufacturing overhead $220 Administrative expenses $180 Selling expenses $140 Raw materials inventory, beginning $90 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 Prepare a Schedule of Cost of Goods Manufactured statement in the text box below. (Points : 15) 2 (TCO B) The Florida 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 1 160,000 65% 45% Work in process, Jun 30 130,000 75% 65% The department started 650,000 units into production during the month and transferred 680,000 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. (Points : 20) 3. (TCO C) Drake Company’s 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: Calculate the unit contribution margin. Calculate the the break-even point in dollars. If the company desires a net operating income of $290,000, how many units must it sell? (Points : 25) a. Calculate the unit contribution margin. b. Calculate the break-even point in dollars. c. If the company desires a net operating income of $290,000, how many units must it sell? 4 (TCO D) Lincoln 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 produced 3,000 Units sold 3,500 Units in ending inventory 100 Variable costs per unit: Direct materials $27 Direct labor $18 Variable manufacturing overhead $10 Variable selling and admin $12 Fixed costs: Fixed manufacturing overhead $75,000 Fixed selling and admin $30,000 Required: What is the unit product cost for the month under variable costing? What is the unit product cost for the month under absorption costing? Prepare an income statement for the month using the variable costing method. Prepare an income statement for the month using the absorption costing method. (Points : 30)
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