COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
Name: __________________________ Date: _____________

1.
Baar Company is a manufacturing firm that uses job-order costing. The company's
inventory balances were as follows at the beginning and end of the year:
Beginning Balance Ending Balance
Raw materials.................................
$26,000
$20,000
Work in process .............................
$71,000
$53,000
Finished goods ...............................
$66,000
$81,000
The company applies overhead to jobs using a predetermined overhead rate based on machinehours. At the beginning of the year, the company estimated that it would work 44,000 machinehours and incur $176,000 in manufacturing overhead cost. The following transactions were
recorded for the year:
Raw materials were purchased, $459,000.
Raw materials were requisitioned for use in production, $465,000 ($431,000 direct and
$34,000 indirect).
The following employee costs were incurred: direct labor, $296,000; indirect labor, $63,000;
and administrative salaries, $157,000.
Selling costs, $134,000.
Factory utility costs, $14,000.
Depreciation for the year was $119,000 of which $114,000 is related to factory operations
and $5,000 is related to selling and administrative activities.
Manufacturing overhead was applied to jobs. The actual level of activity for the year was
47,000 machine-hours.
Sales for the year totaled $1,287,000
Required:
a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the overhead under- or overapplied? By how much?
c. Prepare an income statement for the year in good form. The company closes any under- or
overapplied overhead to Cost of Goods Sold.

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COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
2.
The Simkins Company uses a job order costing system. The following activities took
place during the month of May:
a. Raw materials purchased, $40,000.
b. Raw materials (all direct) used in production, $35,000.
c. Salaries and wages cost incurred:
Direct labor cost, $60,000.
Indirect labor cost, $30,000.
Sales salaries $25,000.
d. Factory utility costs incurred, $15,000.
e. Depreciation on factory equipment, $50,000.
f. Advertising expense incurred, $80,000.
g. Manufacturing overhead is applied at the predetermined rate of 150% of
direct labor cost.
h. Cost of Goods Manufactured for the month, $180,000.
i. Cost of Goods Sold for the month, $150,000.
Required:
Prepare journal entries to record the information given above. Key your entries by the letters a
through i.

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COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
3.
Hacken Company has a job-order costing system. The company applies manufacturing
overhead to jobs using a predetermined overhead rate based on direct labor cost. The information
below has been taken from the cost records of Hacken Company for the past year:
Direct materials used in production .....................................................
Total manufacturing costs charged to production during the year
(includes direct materials, direct labor, and applied factory
overhead) ..........................................................................................
Manufacturing overhead applied..........................................................
Selling and administrative expenses ....................................................
Inventories:
Direct materials, January 1................................................................
Direct materials, December 31..........................................................
Work in process, January 1 ...............................................................
Work in process, December 31 .........................................................
Finished goods, January 1.................................................................
Finished goods, December 31...........................................................

$1,250

$6,050
$2,800
$1,000
$130
$80
$250
$400
$300
$200

Required:
a. Compute the cost of direct materials purchased during the year.
b. Compute the predetermined overhead rate that was used during the past year.
c. Compute the Cost of Goods Manufactured for the past year.
d. Compute the Cost of Goods Sold for the past year.

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COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
4.
nchor Inc. uses the weighted-average method in its process costing system. The following
data concern the operations of the company's first processing department for a recent month.

Work in process, beginning:

Units in process...........................................................
Stage of completion with respect to materials ............
Stage of completion with respect to conversion .........
Costs in the beginning inventory:
Materials cost...........................................................
Conversion cost........................................................

$1,296
$2,416

Units started into production during the month .............

Units completed and transferred out ..............................

16,000
16,500

Costs added to production during the month:

Materials cost ..............................................................
Conversion cost...........................................................

$47,076
$497,213

Work in process, ending:

Units in process...........................................................
Stage of completion with respect to materials ............
Stage of completion with respect to conversion .........

300
60%
70%

800
60%
10%

Required:
Prepare a production report for the department using the weighted-average method.

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COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
5.
Dachuna Inc. uses the FIFO method in its process costing system. The following data
concern the operations of the company's first processing department for a recent month.

Work in process, beginning:

Units in process................................................................
500
Stage of completion with respect to materials .................
60%
Stage of completion with respect to conversion ..............
70%
Costs in the beginning inventory:
Materials cost................................................................
$1,020
Conversion cost.............................................................
$8,925
Units started into production during the month ..................
10,000
Units completed and transferred out ...................................
9,600
Costs added to production during the month:
Materials cost ................................................................... $31,488
Conversion cost................................................................ $259,548
Work in process, ending:
Units in process................................................................
900
Stage of completion with respect to materials .................
60%
Stage of completion with respect to conversion ..............
90%
Required:
Prepare a production report for the department using the FIFO method.

6.
Rapid Delivery, Inc., operates a parcel delivery service across the nation. The company
keeps detailed records relating to operating costs of trucks, and has found that if a truck is driven
150,000 miles per year the average operating cost is 10 cents per mile. This cost increases to 11
cents per mile if a truck is driven only 100,000 miles per year.
Assume that all of the activity levels mentioned in this problem are within the relevant range.
Required:
a. Using the high-low method, derive the cost formula for truck operating costs.
b. Using the cost formula you derived above, what total cost would you expect the company to
incur in connection with the truck if it is driven 130,000 miles in a year?

Page 5

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
7.
Arlo's T-shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities
cost. Arlo's sells the T-shirt for $14.50 each. Management has prepared the following estimated
cost information for next month:
At 8,000 At 10,000
T-shirts T-shirts
T-shirt cost ......................... $48,000 $60,000
Rent cost............................. $3,600
$3,600
Utilities cost ....................... $6,800
$8,300
Assume that all of the activity levels mentioned in this problem are within the relevant range.
Required:
a. Calculate what Arlo's should expect for total variable cost if 9,000 T-shirts are sold next
month.
b. Prepare Arlo's contribution approach income statement for a monthly sales volume level of
10,000 T-shirts.

8.
Baker Company has a product that sells for $20 per unit. The variable expenses are $12
per unit, and fixed expenses total $30,000 per year.
Required:
a. What is the total contribution margin at the break-even point?
b. What is the contribution margin ratio for the product?
c. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would
net operating income be expected to increase?
d. The marketing manager wants to increase advertising by $6,000 per year. How many
additional units would have to be sold to increase overall net operating income by $2,000?

Page 6

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
9.
Zoran Corporation manufactures and sells a single product; cordless telephones. Zoran is
considering upgrading its current manufacturing facilities with more modern equipment.
Relevant cost data under the current facility and the upgraded facility is provided below:

Current Upgraded
Manufacturing costs:
Direct materials cost per unit .................
Direct labor cost per unit........................
Variable overhead cost per unit .............
Fixed overhead cost in total ...................
Selling and administrative expenses:
Variable expense per unit .......................
Fixed expense in total ............................

$20.00
$18.00
$34.00
$43,000

$20.00
$10.00
$24.00
$160,000

$5.00
$12,000

$5.00
$12,000

Under either system, Zoran will sell the cordless phones for $125 per phone.
Required:
a. What is the break-even point (in number of phones) of each option?
b. At what level of sales (in number of phones) will it start being more profitable for Zoran to
have the upgraded facilities?

Page 7

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
10.
Legaz Company, which has only one product, has provided the following data concerning
its most recent month of operations:
Selling price ..........................................................

$120

Units in beginning inventory.................................

Units produced ......................................................
Units sold ..............................................................
Units in ending inventory......................................

100
3,900
3,600
400

Variable costs per unit:

Direct materials ..................................................
Direct labor ........................................................
Variable manufacturing overhead ......................
Variable selling and administrative ...................

$31
$54
$5
$8

Fixed costs:
Fixed manufacturing overhead...........................
Fixed selling and administrative ........................

$54,600
$21,600

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 contribution format and the variable
costing method.
d. Prepare an income statement for the month using the absorption costing method.
e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Page 8

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
11.
Magnani Company, which has only one product, has provided the following data
concerning its most recent month of operations:

Selling price ..........................................................

$97

Units in beginning inventory.................................

Units produced ......................................................
Units sold ..............................................................
Units in ending inventory......................................

0
6,600
6,200
400

Variable costs per unit:

Direct materials ..................................................
Direct labor ........................................................
Variable manufacturing overhead ......................
Variable selling and administrative ...................

$40
$10
$4
$9

Fixed costs:
Fixed manufacturing overhead...........................
Fixed selling and administrative ........................

$184,800
$12,400

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 contribution format and the variable
costing method.
d. Prepare an income statement for the month using the absorption costing method.
e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Page 9

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
12.
The Fraley Company, a merchandising firm, has planned the following sales for the next
four months:
Total budgeted sales ..........

March
April
May
June
$50,000 $70,000 $90,000 $60,000

Sales are made 40% for cash and 60% on account. From experience, the company
has learned that a months sales on account are collected according to the following
pattern:
Month of sale ........................................................
First month following month of sale.....................
Second month following month of sale ................
Uncollectible .........................................................

70%
20%
8%
2%

The company requires a minimum cash balance of $4,000 to start a month.

Required:
a. Compute the budgeted cash receipts for June.
b. Assume the following budgeted data for June:

Purchases.....................................................
Selling and administrative expenses ...........
Depreciation ................................................
Equipment purchases...................................
Cash balance, beginning of June .................

$52,000
$10,000
$8,000
$15,000
$6,000

Using this data, along with your answer to part (1) above, prepare a cash budget in good form
for June. Clearly show any borrowing needed during the month. The company can borrow in
any dollar amount, but will not pay any interest until the following month.

13.
The standards for product K17 call for 5.0 meters of a raw material that costs $19.10 per
meter. Last month, 2,700 meters of the raw material were purchased for $51,435. The actual
output of the month was 460 units of product K17. A total of 2,500 meters of the raw material
were used to produce this output.
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?

Page 10

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
14.

The following direct labor standards have been established for product N30A:
Standard direct labor-hours................ 3.3 hours per unit of N30A
Standard direct labor wage rate.......... $10.50 per hour

The following data pertain to the most recent months operations during which
400 units of product N30A were made:
Actual direct labor-hours worked ........ 1,100
Actual direct labor wages paid............. $11,385

Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
c. Prepare a journal entry to record direct labor costs during the month, including the direct labor
variances.

15.
Deschamp Corporation's variable manufacturing overhead is applied on the basis of
direct labor-hours. The company has established the following variable manufacturing overhead
standards for product O28H:
Standard direct labor-hours..................................... 2.5 hours per unit of O28H
Standard variable manufacturing overhead rate ..... $7.70 per hour
The following data pertain to the most recent months operations during which
2,160 units of product O28H were made:
Actual direct labor-hours worked ...................................
Actual variable manufacturing overhead incurred..........

5,200
$44,980

Required:
a. What was the variable overhead spending variance for the month?
b. What was the variable overhead efficiency variance for the month?
16.
During the most recent month at Luinstra Corporation, queue time was 4.5 days,
inspection time was 0.8 day, process time was 1.9 days, wait time was 5.1 days, and move time
was 0.7 day.
Required:
a. Compute the throughput time.
b. Compute the manufacturing cycle efficiency (MCE).
c. What percentage of the production time is spent in non-value-added activities?
d. Compute the delivery cycle time.

Page 11

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
17.
Layt Clock Company has developed the following flexible budget for its overhead costs.
Manufacturing overhead at Layt is applied to production on the basis of standard machine-hours:

Clocks produced...................
Variable overhead cost .........
Fixed overhead cost .............

Machine Hours
21,600
24,000
26,400
18,000
20,000
22,000
$127,440 $141,600 $155,760
$171,072 $171,072 $171,072

Layt was expecting to produce 22,000 clocks last year. The actual results for the
year were as follows:
Number of clocks produced ..........
Machine-hours incurred ................
Variable overhead cost ..................
Fixed overhead cost ......................

21,500
24,940
$145,899
$170,540

Required:
Compute all four manufacturing overhead variances for Layt.

18.
Iden Company makes two products from a common input. Joint processing costs up to
the split-off point total $64,800 a year. The company allocates these costs to the joint products on
the basis of their total sales values at the split-off point. Each product may be sold at the split-off
point or processed further. Data concerning these products appear below:

Allocated joint processing costs............

Sales value at split-off point..................
Costs of further processing....................
Sales value after further processing ......

Product X Product Y
Total
$32,400
$32,400 $64,800
$36,000
$36,000 $72,000
$20,300
$14,300 $34,600
$55,400
$53,000 $108,400

Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the splitoff point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the splitoff point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the
split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at
the split-off point?

Page 12

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
19.
Adamyan Co. manufactures and sells medals for winners of athletic and other events. Its
manufacturing plant has the capacity to produce 15,000 medals each month; current monthly
production is 12,750 medals. The company normally charges $120 per medal. Cost data for the
current level of production are shown below:
Variable costs:
Direct materials ......................................
Direct labor ............................................
Selling and administrative......................
Fixed costs:
Manufacturing........................................
Selling and administrative......................

$624,750
$306,000
$15,300
$506,175
$123,675

The company has just received a special one-time order for 700 medals at $83 each. For this
particular order, no variable selling and administrative costs would be incurred. This order would
also have no effect on fixed costs.
Required:
Should the company accept this special order? Why?

Page 13

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
20.
Aladili Company is a manufacturing firm that uses job-order costing. At the beginning of
the year, the company's inventory balances were as follows:

Raw materials................................
Work in process ............................
Finished goods ..............................

$36,000
$41,000
$104,000

The company applies overhead to jobs using a predetermined overhead rate based on machinehours. At the beginning of the year, the company estimated that it would work 21,000 machinehours and incur $210,000 in manufacturing overhead cost. The following transactions were
recorded for the year:
a. Raw materials were purchased, $346,000.
b. Raw materials were requisitioned for use in production, $338,000 ($302,000 direct and
$36,000 indirect).
c. The following employee costs were incurred: direct labor, $360,000; indirect labor, $68,000;
and administrative salaries, $111,000.
d. Selling costs, $153,000.
e. Factory utility costs, $29,000.
f. Depreciation for the year was $102,000 of which $93,000 is related to factory operations and
$9,000 is related to selling and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was
19,000 machine-hours.
h. The cost of goods manufactured for the year was $870,000.
i. Sales for the year totaled $1,221,000 and the costs on the job cost sheets of the goods that were
sold totaled $855,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume
that all transactions with employees, customers, and suppliers were conducted in cash.

Use the following to answer questions 21-24:

Marrell is employed on the assembly line of a manufacturing company where she assembles a
component part for one of the company's products. She is paid $16 per hour for regular time and
time and a half for all work in excess of 40 hours per week.

Page 14

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
21.
Marrell works 45 hours during a week in which there was no idle time. The allocation of
Marrell's wages for the week as between direct labor cost and manufacturing overhead cost
would be:

A)
B)
C)
D)

Manufacturing
Direct Labor
Overhead
$760
$0
$720
$40
$640
$80
$610
$40
A) Item A
B) Item B
C) Item C
D) Item D

22.
Marrell works 50 hours in a given week but is idle for 4 hours during the week due to
equipment breakdowns. The allocation of Marrell's wages for the week as between direct labor
cost and manufacturing overhead cost would be:

A)
B)
C)
D)

Direct Labor
$816
$800
$736
$640
A) Item A
B) Item B
C) Item C
D) Item D

Manufacturing
Overhead
$64
$80
$144
$160

Page 15

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
23.
Marrell's employer offers fringe benefits that cost the company $4 for each hour of
employee time (either regular or overtime). During a given week, Marrell works 48 hours but is
idle for 3 hours due to material shortages. The company treats all fringe benefits as part of
manufacturing overhead. The allocation of Marrell's wages for the week between the direct labor
cost and manufacturing overhead would be:

A)
B)
C)
D)

Manufacturing
Direct Labor
Overhead
$960
$64
$768
$256
$720
$304
$640
$320
A) Item A
B) Item B
C) Item C
D) Item D

24.
Marrell's employer offers fringe benefits that cost the company $4 for each hour of
employee time (either regular or overtime). During a given week, Marrell works 48 hours but is
idle for 3 hours due to material shortages. The company treats all fringe benefits relating to direct
labor as added direct labor cost. The allocation of Marrell's wages for the week between direct
labor cost and manufacturing overhead would be:

A)
B)
C)
D)

Direct Labor
$832
$900
$912
$960
A) Item A
B) Item B
C) Item C
D) Item D

Manufacturing
Overhead
$128
$124
$112
$64

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COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
Answer Key

Page 17

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
1.

a. Schedule of cost of goods manufactured

Estimated total manufacturing overhead (a)...................
Estimated total machine-hours (b) .................................
Predetermined overhead rate (a) (b)............................

$176,000
44,000
$4.00

Actual total machine-hours (a) .......................................

Predetermined overhead rate (b) ....................................
Overhead applied (a) (b) .............................................

47,000
$4.00
$188,000

Direct materials:
Raw materials inventory, beginning............................
Add: purchases of raw materials .................................
Total raw materials available ......................................
Deduct: raw materials inventory, ending ....................
Raw materials used in production ..................................
Less: indirect materials...................................................
Direct materials ..............................................................
Direct labor.....................................................................
Manufacturing overhead applied....................................
Total manufacturing costs ..............................................
Add: Beginning work in process inventory....................
Deduct: Ending work in process inventory ....................
Cost of goods manufactured...........................................

$ 26,000
459,000
485,000
20,000
465,000
34,000
431,000
296,000
188,000
915,000
71,000
986,000
53,000
$933,000

b. Overhead under- or overapplied

Actual manufacturing overhead cost incurred:
Indirect materials.........................................................
Indirect labor ...............................................................
Factory utilities............................................................
Factory depreciation....................................................
Manufacturing overhead cost incurred...........................
Manufacturing overhead applied....................................
Underapplied overhead...................................................

$ 34,000
63,000
14,000
114,000
225,000
188,000
$ 37,000

c. Income Statement
Beginning finished goods inventory...............................
Cost of goods manufactured...........................................
Goods available for sale .................................................
Ending finished goods inventory....................................
Unadjusted cost of goods sold........................................
Add: underapplied overhead ..........................................
Adjusted cost of goods sold............................................
2.

Page 18

$ 66,000
933,000
999,000
81,000
918,000
37,000
$955,000

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
a. Raw materials inventory........................... 40,000
Accounts payable ...............................
40,000
b. Work in process ........................................ 35,000
Raw materials inventory.....................
35,000
c. Work in process ........................................ 60,000
Manufacturing overhead........................... 30,000
Sales salaries expense............................... 25,000
Wages and salaries payable ................
115,000
d. Manufacturing overhead........................... 15,000
Accounts payable ...............................
15,000
e. Manufacturing overhead........................... 50,000
Accumulated depreciation..................
50,000
f. Advertising expense ................................. 80,000
Accounts payable ...............................
80,000
g. Work in process ........................................ 90,000
Manufacturing overhead ....................
90,000
$60,000 150% = $90,000
h. Finished goods.......................................... 180,000
Work in process..................................
180,000
i. Cost of goods sold .................................... 150,000
Finished goods ...................................
150,000
3.
a. Cost of raw materials used in production........................................
Less decrease in the raw materials inventory during the year
($130 - $80 = $50) .......................................................................
Cost of raw materials purchased during the year ............................

50
$1,200

b. Total manufacturing costs ...............................................................

Less: Direct materials used in production .......................................
Less: Manufacturing overhead applied ...........................................
Direct labor cost incurred ................................................................

$6,050
1,250
2,800
$2,000

$1,250

Predetermined overhead rate = Manufacturing overhead cost Direct labor

cost = $2,800 $2,000 =140% of direct labor cost
c. Total manufacturing costs ...............................................................
Add: Work in process inventory, January 1 ....................................
Deduct: Work in process inventory, December 31 .........................
Cost of goods manufactured............................................................
d. Finished goods inventory, January 1 ...............................................
Add: Cost of goods manufactured...................................................
Cost of goods available for sale ......................................................
Deduct: Finished goods inventory, December 31 ...........................
Cost of goods sold ...........................................................................
4.

Page 19

$6,050
250
6,300
400
$5,900
$ 300
5,900
6,200
200
$6,000

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
Quantity schedule and equivalent units
Quantity
Schedule
Units to be accounted for:
Work in process, beginning ............
Started into production....................
Total units accounted for....................

800
16,000
16,800
Equivalent Units
Materials Conversion

Units accounted for as follows:

Transferred to next department .......
Work in process, ending .................
Total units ..........................................

16,500
300
16,800

16,500
180
16,680

16,500
210
16,710

Costs per equivalent unit

Total Cost
Cost to be accounted for:
Work in process, beginning ............
Cost added during the month ..........
Total cost (a) ......................................
Equivalent units (above) (b)...............
Cost per EU, (a) (b).........................
Cost per whole unit

$ 3,712
544,289
$548,001

Materials Conversion
$ 1,296
47,076
$48,372

$ 2,416
497,213
$499,629

16,680
$2.900

16,710
$29.900

$32.800

Cost reconciliation
Total
Cost
Cost accounted for as follows:
Transferred out ................................
Work in process, ending:
Materials ......................................
Conversion ...................................
Total work in process, ending .........
Total cost ............................................
5.

Equivalent Units
Materials Conversion

$541,200

16,500

522
6,279
6,801
$548,001

180

Page 20

16,500

210

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
Quantity Schedule and Equivalent Units
Quantity
Schedule
Units to be accounted for:
Work in process, beginning .................
500
Started into production.........................
10,000
Total units to be accounted for ................
10,500
Equivalent Units
Materials Conversion
Units accounted for as follows:
Transferred out:
From the beginning inventory...........
Started and completed.......................
Work in process, ending ......................
Total units accounted for.........................

500
9,100
900
10,500

200
9,100
540
9,840

150
9,100
810
10,060

Costs per Equivalent Unit

Total
Cost
Cost to be accounted for:
Work in process, beginning ................. $ 9,945
Cost added during the month (a).......... 291,036
Total cost to be accounted for ................. $300,981
Equivalent units (above) (b)....................
Cost per EU, (a) (b)..............................
Cost per whole unit ................................. $29.000

Materials Conversion

$31,488

$259,548

9,840
$3.200

10,060
$25.800

Cost Reconciliation
Total
Cost
Cost accounted for as follows:
Transferred out:
From the beginning inventory:
Cost in the beginning inventory..... $ 9,945
Cost to complete these units:
Materials .....................................
640
Conversion..................................
3,870
Total cost from beginning inventory.
14,455
Units started and completed.............. 263,900
Total cost transferred out ..................... 278,355
Work in process, ending:
Materials ...........................................
1,728
Conversion ........................................
20,898
Total work in process, ending ..............
22,626
Total cost accounted for .......................... $300,981
6.

Page 21

Equivalent Units
Materials Conversion

200
150
9,100

9,100

540
810

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
a
Miles
Cost
High level 150,000 (150,000 miles $.10 =) $15,000
Low level 100,000 (100,000 miles $.11 =) 11,000
Change
50,000
$ 4,000
$4,000 50,000 miles = $0.08 per mile variable cost
Total cost at high level ....................................................
Less variable element: 150,000 miles $0.08................
Fixed element ..................................................................

$15,000
12,000
$ 3,000

Cost formula: $3,000 plus $0.08 per mile or

Y = $3,000 + $0.08X
b.
Variable cost: 130,000 miles $0.08 per mile ...............
Fixed cost ........................................................................
Total cost .........................................................................

$10,400
3,000
$13,400

7.
a

T-shirt {[($60,000 - $48,000)/2,000] 9,000} ....................

Utilities cost {[($8,300 - $6,800)/2,000] 9,000} ..............
Total variable cost ................................................................

$54,000
$6,750
$60,750

b
Arlos T-Shirt Shop
Contribution Approach Income Statement
Monthly Sales Volume of 10,000 T-Shirts
Sales ($14.50 10,000) ...................................
$145,000
Less variable expenses:
T-shirt cost .................................................... $60,000
67,500
Utilities cost ($0.75 10,000) ...................... 7,500
Contribution margin .........................................
77,500
Less fixed expenses..........................................
Rent cost........................................................ 3,600
Utilities cost ($8,300 - $7,500) .....................
800
4,400
Net operating income .......................................
$ 73,100
8.
a. At the break-even, the total contribution margin equals total fixed expenses. Therefore,
the total contribution margin would be $30,000.

Page 22

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
b. Contribution margin ratio =Unit contribution margin Selling price
= ($20 - $12) $20 = 40%
c. Increase in sales ......................................
CM ratio..................................................
Increase in net operating income ............

$20,000
40%
$8,000

d. Increase in advertising expenses .................. $6,000

Desired increase in net operating income.....
2,000
Total required contribution margin .............. $8,000
Contribution margin per unit.....................
$8
Required unit sales .......................................
1,000
9.
a.
Current:
($43,000 + $12,000) ($125 $20 $18 $34 $5) = 1,146 phones (rounded)
Upgraded:
($160,000 + $12,000) ($125 $20 $10 $24 $5) = 2,606 phones (rounded)
b. CM per phone on current system: $125 $20 $18 $34 $5 = $48
CM per phone on upgraded system: $125 $20 $10 $24 $5 = $66

$48Q $55,000 = $66Q $172,000

$117,000 = $18Q
Q = 6,500 phones

Page 23

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
10.
a. & b. Unit product costs

Variable costing:
Direct materials......................................
Direct labor ............................................
Variable manufacturing overhead ..........
Unit product cost....................................

$31
54
5
$90

Absorption costing:
Direct materials......................................
Direct labor ............................................
Variable manufacturing overhead ..........
Fixed manufacturing overhead...............
Unit product cost....................................

$ 31
54
5
14
$104

c. & d. Income statements

Variable costing income statement
Sales .............................................................
Less variable expenses:
Variable cost of goods sold:
Beginning inventory...............................
Add variable manufacturing costs .........
Goods available for sale.........................
Less ending inventory............................
Variable cost of goods sold .......................
Variable selling and administrative ..........
Contribution margin .....................................
Less fixed expenses:
Fixed manufacturing overhead..................
Fixed selling and administrative ...............
Net operating income ...................................
Absorption costing income statement
Sales .............................................................
Cost of goods sold:
Beginning inventory..................................
Add cost of goods manufactured ..............
Goods available for sale............................
Less ending inventory ...............................
Gross margin ................................................
Less selling and administrative expenses:
Variable selling and administrative ..........
Fixed selling and administrative ...............
Net operating income ...................................
11.

$432,000

$ 9,000
351,000
360,000
36,000
324,000
28,800

54,600
21,600

352,800
79,200

76,200
$ 3,000

$432,000
$ 10,400
405,600
416,000
41,600

28,800
21,600

Page 24

374,400
57,600

50,400
$ 7,200

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
a. & b. Unit product costs
Variable costing:
Direct materials......................................
Direct labor ............................................
Variable manufacturing overhead ..........
Unit product cost....................................

$40
10
4
$54

Absorption costing:
Direct materials......................................
Direct labor ............................................
Variable manufacturing overhead ..........
Fixed manufacturing overhead...............
Unit product cost....................................

$40
10
4
28
$82

c. & d. Income statements

Variable costing income statement
Sales .............................................................
Less variable expenses:
Variable cost of goods sold:
Beginning inventory...............................
Add variable manufacturing costs .........
Goods available for sale.........................
Less ending inventory............................
Variable cost of goods sold .......................
Variable selling and administrative ..........
Contribution margin .....................................
Less fixed expenses:
Fixed manufacturing overhead..................
Fixed selling and administrative ...............
Net operating income ...................................
Absorption costing income statement
Sales .............................................................
Cost of goods sold:
Beginning inventory..................................
Add cost of goods manufactured ..............
Goods available for sale............................
Less ending inventory ...............................
Gross margin ................................................
Less selling and administrative expenses:
Variable selling and administrative ..........
Fixed selling and administrative ...............
Net operating income ...................................
12.

$601,400

$
0
356,400
356,400
21,600
334,800
55,800

184,800
12,400

390,600
210,800

197,200
$13,600

$601,400
$
0
541,200
541,200
32,800

55,800
12,400

Page 25

508,400
93,000

68,200
$24,800

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
a.

Cash sales, June: $60,000 40% ................ $24,000

Collections on account:
June: $60,000 60% 70% .................... 25,200
May: $90,000 60% 20% .................... 10,800
April: $70,000 60% 8% .....................
3,360
Total cash receipts ....................................... $63,360

b.

Cash balance, beginning............................. $ 6,000

Add cash receipts from sales......................
63,360
Total cash available ....................................
69,360
Less disbursements:
Purchases.................................................
52,000
Selling and administrative.......................
10,000
Equipment purchases ..............................
15,000
Total disbursements ...................................
77,000
Deficiency of cash......................................
(7,640)
Financing:
Borrowing ...............................................
11,640
Repayments.............................................
0
Interest.....................................................
0
Total financing ...........................................
11,640
Cash balance, ending.................................. $ 4,000
13.
a. Materials price variance = (AQ AP) (AQ SP)
= $51,435 (2,700 $19.10) = $135 F
b. Materials quantity variance = SP(AQ SQ*)
= $19.10(2,500 2,300) = $3,820 U
*SQ = Standard quantity per unit Actual output
= 5.0 460 = 2,300
14.
a. Labor rate variance = (AH AR) (AH SR)
= $11,385 (1,100 $10.50) = $165 F
b. Labor efficiency variance = SR(AH SH*)
= $10.50 (1,100 1,320) = $2,310 F
*SH = Standard hours per unit Actual output
= 3.3 400 = 1,320

Page 26

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
c. Journal entries to record the direct labor costs:

Work In Process
Labor Rate Variance
Labor Efficiency Variance
Wages Payable (or Cash)

13,860
165
2,310
11,385

15.
a. Variable overhead spending variance = (AH AR) (AH SR)
= $44,980 (5,200 $7.70) = $4,940 U
b. Variable overhead efficiency variance = SR(AH SH*)
= $7.70(5,200 5,400) = $1,540 F
*SH = Standard hours per unit Actual output
= 2.5 2,160 = 5,400
16.
a. Throughput time
= Process time + Inspection time + Move time + Queue time
= 1.9 days + 0.8 days + 0.7 days + 4.5 days = 7.9 days
b. MCE = Value-added time (Process time) Throughput time
= 1.9 days 7.9 days = 0.24
c. Percentage of time spent on non-value-added activities
= 100% MCE% = 100% 24% = 76%
d. Delivery cycle time = Wait time + Throughput time
= 5.1 days + 7.9 days = 13.0 days
17.

Page 27

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
Variable Overhead Spending Variance = (AH AR) - (AH SR)
= $145,899 - [($155,760/26,400) 24,940] = $1,247 F
Variable Overhead Efficiency Varianc e = (AH SR) - (SH SR)
= [24,940 ($155,760/26,400)] - [21,500 (26,400/22,000)
($155,760/26,400)] = $5,074 F
Fixed Overhead Budget Variance =
Actual fixed overhead cost - Budgeted fixed overhead cost
= $170,540 - $171,072 = $532F
Fixed Overhead Volume Variance =
Fixed portion of the predetermined overhead rate (Denominator hours
Standard hours allowed)
= $171,072 - [($171,072/26,400) 21,500 (26,400/22,000)] = $3,888 U
18.
a. & b.

Sales value after further processing ..........

Costs of further processing........................
Benefit of further processing.....................
Less: Sales value at split-off point ............
Net advantage (disadvantage) ...................
c. & d.
Minimum selling price at split-off ..............

Product X Product Y
$55,400
$53,000
20,300
14,300
35,100
38,700
36,000
36,000
$ (900)
$ 2,700

$35,100

$38,700

19.
Only the direct materials and direct labor costs are relevant in this decision. To make the
decision, we must compute the average direct materials and direct labor cost per unit.
Direct materials ............................................................... $624,750
Direct labor......................................................................
306,000
Total ................................................................................ $930,750
Current monthly production............................................
12,750
Average direct materials and direct labor cost per unit...
$73
Since price on the special order is $83 per medal and the relevant cost is only $73, the company
would earn a profit of $10 per medal. Therefore, the special order should be accepted.

Page 28

COST ACC UMULATION & CONTROL COMPREHENSIVE EXAM

QUESTION BANK
20.
a. Raw Materials Inventory ....................................
Cash...........................................................
b. Work in Process Inventory .................................
Manufacturing Overhead....................................
Raw Materials Inventory...........................
c. Work in Process Inventory .................................
Manufacturing Overhead....................................
Administrative Salary Expense ..........................
Cash...........................................................
d. Selling Expenses.................................................
Cash...........................................................
e. Manufacturing Overhead....................................
Cash...........................................................
f. Manufacturing Overhead....................................
Depreciation Expense.........................................
Accumulated Depreciation........................
g. Work in Process..................................................
Manufacturing Overhead ..........................
h. Finished Goods...................................................
Work in Process ........................................
i. Cash ....................................................................
Sales ..........................................................
Cost of Goods Sold.............................................
Finished Goods .........................................
j. Cost of Goods Sold.............................................
Manufacturing Overhead ..........................
21.
B
22.
C
23.
C
24.
B

Page 29

346,000
346,000
302,000
36,000
338,000
360,000
68,000
111,000
539,000
153,000
153,000
29,000
29,000
93,000
9,000
102,000
190,000
190,000
870,000
870,000
1,221,000
1,221,000
855,000
855,000
36,000
36,000