ACCT 505 Midterm

Keller Graduate School of ManagementACCT 505 Midterm1. Question
: (TCO A) The variable portion
of advertising costs is a

Conversion YES… Period NO.
Conversion YES …. Period YES.
Conversion NO…. Period YES.
Conversion NO…. Period NO.
Instructor Explanation: Chapter 2

Points Received: 0 of 6
Comments:

2. Question : (TCO A) A cost
incurred in the past that is not relevant to any current decision is classified
as a(n)

period cost.
incremental cost.
opportunity cost.
None of the above
Instructor Explanation: Chapter 2

Points Received: 6 of 6
Comments:

3. Question : (TCO A) Depreciation of office buildings and office
equipment is also known as

variable costs.
conversion costs.
product costs.
period costs.
Instructor Explanation: Chapter 2

Points Received: 6 of 6
Comments:

4. Question : (TCO A) When the
activity level is expected to increase within the relevant range, what effects
would be anticipated with respect to each of the following?

Fixed costs per unit increase and variable costs per unit increase.
Fixed costs per unit decrease 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.
Instructor Explanation: Chapter 5

Points Received: 6 of 6
Comments:

5. Question : (TCO F) 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

understate the predetermined overhead rate.
overstate the predetermined overhead rate.
have no effect on the predetermined overhead
rate.
This cannot be determined from the
information given.
Instructor Explanation: Chapter 3

Points Received: 6 of 6
Comments:

6. Question : (TCO F) Which of the following statements about the
process-costing system is incorrect?

In a process-costing system, each processing department has a work-in-process
account.
In a process-costing system, equivalent units
are separately computed for materials and for conversion costs.
In a process-costing system, overhead can be
under- or overapplied just as in job-order costing.
In a process-costing system, materials costs
are traced to units of products.
Instructor Explanation: Chapter 4

Points Received: 6 of 6
Comments:

7. Question : (TCO F) The FIFO
method only provides a major advantage over the weighted-average method in that

the calculation of equivalent
units is less complex under the FIFO method.
the FIFO method treats units in the beginning
inventory as if they were started and completed during the current period.
the FIFO method provides measurements of work
done during the current period.
the weighted-average method ignores units in
the beginning and ending work-in-process inventories.
Instructor Explanation: Chapter 4

Points Received: 6 of 6
Comments:

8. Question : (TCO B) The
contribution margin equals

sales – expenses.
sales – cost of goods sold.
sales – variable costs.
sales – fixed costs.
Instructor Explanation: Chapter 6

Points Received: 6 of 6
Comments:

9. Question : (TCO B) To obtain
the break-even point in terms of dollar sales, total fixed expenses are divided
by which of the following?

Variable expense per unit
Variable expense per unit/Selling price per
unit
Fixed expense per unit
(Selling price per unit – Variable expense
per unit) /Selling price per unit.
Instructor Explanation: Chapter 6

Points Received: 6 of 6
Comments:

10. Question : (TCO E) In an income statement prepared using the variable
costing method, fixed manufacturing overhead would

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.
Instructor Explanation: Chapter 7

Points Received: 6 of 6
Comments:

1. Question : (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
$210
Manufacturing overhead $220
Administrative expenses $180
Selling expenses $140
Raw materials inventory, beginning $70
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
Required: Prepare a Schedule of Cost of Goods Manufactured
statement in the text box below.

2. Question : (TCO F) The Illinois 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 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%
The department started 475,000 units into production during
the month and transferred 480,000 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.

3. Question : (TCO B) A cement manufacturer has supplied the following
data:
Tons of cement produced and sold 220,000
Sales revenue
$924,000
Variable manufacturing expense $297,000
Fixed manufacturing expense
$280,000
Variable selling and admin expense $165,000
Fixed selling and admin expense $82,000
Net operating income
$100,000
Required:
a. Calculate the company’s unit contribution margin.
b. Calculate the company’s unit contribution ratio.
c. If the company increases its unit sales volume by 5%
without increasing its fixed expenses, what would the company’s net operating
income be?

4. Question : (TCO E) The Dean Company produces and sells a single
product. The following data refer to the year just completed:
Selling price
$450

Units in beginning Inventory 0
Units produced 25,000
Units sold 22,000

Variable costs per unit:
Direct materials
$ 200
Direct labor
$ 50
Variable manufacturing overhead $ 30
Variable selling and admin
$ 15

Fixed Costs:
Fixed manufacturing overhead
$ 275,000
Fixed selling and admin
$ 230,000
Assume that direct labor is a variable cost.
Required:
a. Compute the cost of a single unit of product under both
the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption
costing.
c. Prepare an income statement for the year using variable
costing.