ACCT505 Week 4 Midterm (ABC and Budgeting-Midterm)

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1. (TCO A)  Direct material cost is a part of:(Points : 6)

2. (TCO A)  A cost incurred in the past that is not relevant to any current decision is classified as a(n): (Points : 6)

3. (TCO A) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): (Points : 6)

4. (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?

5. (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: (Points : 6)

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

7. (TCO F) The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: (Points : 6)

8. (TCO B) The contribution margin ratio always increases when the:(Points : 6)

9. (TCO B)  The unit sales needed to attain the target profit is found by: (Points : 6)

10. (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would: (Points : 6)

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The following data (in thousands of dollars) have been taken from the accounting records of Larklin Corporation for the just completed year.

1.       (TCO A).

|  Sales |  $820 |   |  Purchases of raw materials |  $195 |   |  Direct labor |  $170 |   |  Manufacturing overhead |  $250 |   |  Administrative expenses |  $180 |   |  Selling expenses |  $140 |   |  Raw materials inventory, beginning |  $80 |   |  Raw materials inventory, ending |  $35 |   |  Work in process inventory, beginning |  $65 |   |  Work in process inventory, ending |  $30 |   |  Finished goods inventory, beginning |  $130 |   |  Finished goods inventory, ending |  $165 |

Required: Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.(Points : 15)

2. (TCO F) The Indiana Company manufactures a product that goes through three processing departments.  Information relating to activity in the first department during June is given below:                                                                             Percent completed

Units              Materials            Conversion

Work in process, June 1              70,000               65%                  45%

Work in process, Jun 30              60,000               75%                  65%

The department started 290,000 units into production during the month and transferred 300,000 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 B) A tile manufacturer has supplied the following data:

Boxes of tile produced and sold                                      625,000

Sales revenue                                                               $2,975,000

Variable manufacturing expense                                    $1,720,000

Fixed manufacturing expense                                         $790,000

Variable selling and admin expense                                $152,000

Fixed selling and admin expense                                    $133,000

Net operating income                                                    $180,000Required:

a. Calculate the company’s unit contribution marginb.

Calculate the company’s unit contribution ratioc. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company’s net operating income be? (Points : 25)

4. | (TCO E) Lehne 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 | | 3000 | Units sold | | 3500 |

Units in ending Inventory | | 100 | | | | Variable Costs per unit: | | | Direct materials | |  $           15 | Direct labor | |  $           50 | Variable manufacturing overhead | |  $             8 | Variable selling and admin | |  $           12 |

| | | Fixed Costs: | | | Fixed manufacturing overhead | |  $      75,000 | Fixed selling and admin | |  $      20,000 |

The company produces the same number of units every month, although the sales in units vary from month to month. The company’s variable costs per unit and total fixed costs have been constant from month to month.Required:

a. What is the unit product cost for the month under variable costing?

b. What is the unit product cost for the month under absorption costing?

c. Prepare an income statement for the month using the variable costing method.

d. Prepare an income statement for the month using the absorption costing method.