Professional Documents
Culture Documents
(Chapters 1 - 4)
Points
Approximate
Minutes
Multiple Choice.............................................
20
20
A - II
20
15
A - III
20
15
A - IV
25
20
A-V
Activity-Based Costing..................................
15
15
100
85
Problem
Topic
A-I
5
90
A-2
Cost of goods manufactured during a period is obtained by taking the total manufacturing
costs incurred during the period and adding and subtracting the following inventories:
a.
b.
c.
d.
Adding
Beginning finished goods inventory
Beginning work in process inventory
Beginning raw materials inventory
Beginning work in process inventory
Subtracting
Ending finished goods inventory
Ending finished goods inventory
Ending work in process inventory
Ending work in process inventory
2.
3.
4.
The cost assigned to the units transferred to finished goods during November was
a. $720,000.
b. $724,000.
c. $752,000.
d. $716,000.
6.
The cost assigned to the units in the ending work in process inventory on November 30
was
a. $144,000.
b. $84,000.
c. $64,000.
d. $116,000.
Comprehensive Examination A A - 3
7.
An appropriate cost driver for ordering and receiving materials cost is the
a. direct labor hours.
b. machine hours.
c. number of parts.
d. number of purchase orders.
8.
9.
10.
Assigning manufacturing costs to work in process results in credits to all of the following
accounts except
a. Factory Labor.
b. Manufacturing Overhead.
c. Raw Materials Inventory.
d. Work in Process Inventory.
A-4
Beginning of Year
$25,000
30,000
46,000
End of Year
$ 32,000
35,000
26,000
360,000
45,000
18,000
25,000
12,000
75,000
17,000
15,000
22,000
11,000
35,000
Instructions
Using the above information for Heedy Manufacturing Company, answer the following questions.
Support your answers with clearly identified computations.
1. What was the amount of direct materials used in production?
2. What were the total manufacturing costs incurred?
3. What was the cost of goods manufactured?
4. What was the cost of goods sold?
5. What was the amount of net income?
Comprehensive Examination A A - 5
Battle Manufacturing applies manufacturing overhead to jobs at an overhead rate of 70% of direct
labor cost. Job No. 429 is completed during the month.
Instructions
(a) Prepare summary journal entries to record the requisition slips, time tickets, the assignment
of manufacturing overhead to jobs, and the completion of Job No. 429. Show computations.
(b)
A-6
(c)
Determine the costs to be assigned to the units transferred out and ending work in process.
Cost Driver
Number of requisitions
Number of setups
Number of inspections
Total Cost
$28,000
18,000
20,000
Radiators
300
140
200
Gas Tanks
500
220
300
Total
800
360
500
Instructions
(a) Compute the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for June to the two products using activity-based
costing.
Comprehensive Examination A A - 7
d
d
a
a
a
6.
7.
8.
9.
10.
b
d
b
c
d
Problem A - II Solution
1. Direct materials
Raw materials inventory, Jan. 1........................................................................
Raw material purchases...................................................................................
Raw materials available for use........................................................................
Raw materials inventory, Dec. 31......................................................................
Direct materials used........................................................................................
2. Direct materials used.......................................................................
Direct labor......................................................................................
Manufacturing overhead
Factory supervisory salaries......................................................
Factory insurance......................................................................
Factory depreciation..................................................................
Indirect labor..............................................................................
Total manufacturing costs..........................................................
3. Work in process inventory, Jan. 1....................................................
Direct materials used.......................................................................
Direct labor......................................................................................
Manufacturing overhead..................................................................
Total work in process.......................................................................
Work in process inventory, Dec. 31.................................................
Cost of goods manufactured...........................................................
$ 46,000
75,000
121,000
26,000
$ 95,000
$ 95,000
45,000
$18,000
12,000
22,000
11,000
63,000
$203,000
$ 30,000
$95,000
45,000
63,000
203,000
233,000
35,000
$198,000
$ 25,000
198,000
223,000
32,000
$191,000
$345,000
268,000
$ 77,000
A-8
12,500
1,000
Time tickets
Work in Process Inventory......................................................
Manufacturing Overhead........................................................
Factory Labor.................................................................
16,000
1,500
Assignment of overhead
Work in Process Inventory ($16,000 70%)...........................
Manufacturing Overhead................................................
11,200
13,500
17,500
11,200
13,980
13,980
$ 5,500
39,700
45,200
13,980
$31,220
$10,500
11,200
$ 700
Problem A - IV Solution
(a)
Transferred out
Work in process, January 31
Total
*(8,000 + 27,000) 12,000
(b)
Physical Units
23,000*
12,000
35,000
Equivalent Units
Materials
Conversion Costs
23,000
23,000
12,000
2,400**
35,000
25,400
**(12,000 .20)
$4
5
$9
Comprehensive Examination A A - 9
(c)
$207,000
48,000
12,000
60,000
$267,000
Problem A - V Solution
(a) The overhead rates are:
Activity
Materials handling
Machine setups
Quality inspections
Total Cost
$28,000
18,000
20,000
Overhead Rate
$35
50
40
Radiators
Number
Cost
300
$10,500
140
7,000
200
8,000
$25,500
Gas Tanks
Number
Cost
500
$17,500
220
11,000
300
12,000
$40,500
200
400
$127.50
$101.25
Total Cost
$28,000
18,000
20,000
$66,000
COMPREHENSIVE EXAMINATION B
(Chapters 5 - 9)
Points
Approximate
Minutes
Multiple Choice.............................................
22
22
B - II
Cost-Volume-Profit.......................................
24
16
B - III
Transfer Pricing............................................
12
12
B - IV
Budgeting.....................................................
18
15
B-V
Contribution Margin......................................
14
10
B - VI
Incremental Analysis.....................................
10
10
100
85
Problem
Topic
B-I
Checking Work.............................................
5
90
B-2
Juniper, Inc. sells a single product with a contribution margin of $12 per unit, fixed costs of
$74,400, and sales for the current year of $100,000. How much is Junipers break-even
point?
a. 4,600 units
b. $25,600
c. 6,200 units
d. 2,133 units
2.
Homer Companys variable costs are 30% of sales. The company is contemplating an
advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by
how much will the companys net income increase?
a. $28,000
b. $6,000
c. $12,000
d. $10,000
3.
A company has total fixed costs of $60,000 and a contribution margin ratio of 40%. The
total variable costs incurred at the break-even level of activity would be
a. $60,000.
b. $150,000.
c. $90,000.
d. $24,000.
4.
A company desires to earn target net income of $30,000 from the sale of its product. If the
unit sales price is $15, unit variable cost is $9, and total fixed costs are $90,000, the
number of units that the company must sell to earn its target net income is
a. 8,000 units.
b. 20,000 units.
c. 16,000 units.
d. 12,000 units.
5.
A company has a policy of having sufficient direct materials inventory on hand at the end
of each month equal to 20% of next month's budgeted production needs. The company
has budgeted production of 15,000 units of product in June and 20,000 units in July. It
takes 2 pounds of direct materials to produce one unit of product and 6,000 pounds of
direct materials were on hand on May 31. How many pounds of direct materials should be
purchased in the month of June?
a. 28,000 pounds
b. 30,000 pounds
c. 38,000 pounds
d. 32,000 pounds
Comprehensive Examination B
6.
B-3
A company has budgeted direct materials purchases of $100,000 in March and $160,000
in April. Past experience indicates that the company pays for 70% of its purchases in the
month of purchase and the remaining 30% in the next month. During April, the following
items were budgeted:
Wages Expense
Purchase of office equipment
Selling and Administrative Expenses
Depreciation Expense
$50,000
24,000
16,000
12,000
Dustin Company sells its product for $40 per unit. During 2008, it produced 60,000 units
and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct
materials $10, direct labor $6, and variable overhead $2. Fixed costs are: $480,000
manufacturing overhead, and $60,000 selling and administrative expenses. The per unit
manufacturing cost under absorption costing is
a. $16.
b. $18.
c. $26.
d. $27.
8.
Monroe Company manufactures a product with a unit variable cost of $42 and a unit sales
price of $75. Fixed manufacturing costs were $80,000 when 10,000 units were produced
and sold, equating to $8 per unit. The company has a one-time opportunity to sell an
additional 1,000 units at $55 each in an international market which would not affect its
present sales. The company has sufficient capacity to produce the additional units. How
much is the relevant income effect of accepting the special order?
a. $42,000
b. $5,000
c. $50,000
d. $13,000
9.
Beavers, Inc. is unsure of whether to sell its product assembled or unassembled. The unit
cost of the unassembled product is $16, while the cost of assembling each unit is
estimated at $17. Unassembled units can be sold for $55, while assembled units could be
sold for $71 per unit. What decision should Beavers make?
a. Sell before assembly, the company will save $1 per unit.
b. Sell before assembly, the company will save $15 per unit.
c. Process further, the company will save $1 per unit.
d. Process further, the company will save $16 per unit.
B-4
10.
How many units should Smithfield produce during the first quarter of 2008?
a. 14,080
b. 14,000
c. 16,800
d. 14,200
11.
How much is budgeted sales revenue for the third quarter of 2008?
a. $16,940
b. $3,388,000
c. $3,360,000
d. $3,080,000
Comprehensive Examination B
B-5
Units
36,000
54,000
45,000
It takes two pounds of direct materials, which cost $6 per pound, to manufacture one unit of
product. It is the companys policy to have a finished goods inventory on hand at the end of each
month equal to 20% of next months sales and to maintain a direct materials inventory at the end
of the month equal to 30% of the next months production needs. The inventory levels at
December 31, 2008, were in accordance with company policy.
Instructions
Answer the following independent questions and show computations to support your answers.
1. Calculate the number of units that should be scheduled for production in the month of
February.
2. What was the number of units in ending finished goods inventory at December 31, 2008?
3. What was the number of units in ending direct materials inventory at December 31, 2008?
4. What was the number of units and the dollar amount of direct materials purchases budgeted
for the month of January?
B-6
Footballs
4,000
$60,000
36,000
9,000
$15,000
Baseballs
2,500
$25,000
7,000
9,000
$ 9,000
$3.75
$3.60
If Sports has unlimited demand for both products, which product should the company emphasize?
Comprehensive Examination B
B-7
c
b
c
b
d
c
7.
8.
9.
10.
11.
c
d
a
a
b
Problem B - II Solution
1. Unit contribution margin = $10 ($200,000 20,000).
Break-even point in units = 12,000 units ($120,000 $10).
2. Additional units to be sold = 2,000 units ($20,000 $10).
3. Contribution margin
Fixed expenses
Expected net income
$250,000
120,000
$130,000
($200,000 1.25)
OR
Additional units: 20,000 25% = 5,000
Additional CM: 5,000 $10 = $50,000
Additional net income: $80,000 + $50,000 = $130,000
4.
B-8
Problem B - IV Solution
1.
Budgeted unit sales
Desired ending inventory in units
Total required units
Less beginning inventory in units
Required production units
Production Budget
February
Units
54,000
9,000
(20% 45,000)
63,000
10,800
(20% 54,000)
52,200
Production Budget
January
36,000
10,800
(20% 54,000)
46,800
7,200
(20% 36,000)
39,600
2
79,200
30% = 23,760 pounds
Direct Materials
Budget
79,200
31,320
110,520
23,760
86,760
$6
$520,560
Problem B - V Solution
Contribution margin per unit:
Footballs = ($60,000 $36,000) 4,000 = $6
Baseballs = ($25,000 $7,000) 2,500 = $7.20
Sports Company should attempt to sell more baseballs due to the higher contribution margin per
unit.
Comprehensive Examination B
B-9
Problem B - VI Solution
(a)
Variable costs
Fixed costs
Purchase price
Total cost
Make
$ 90,000
60,000
$150,000
Buy
-050,000
110,000
$160,000
$
Net Income
Increase/(Decrease)
$ 90,000
10,000
(110,000)
$ (10,000)
Knox Manufacturing should continue to make the assembly part because net income will be
$10,000 less if the part is purchased.
(b) Yes, the answer now would be to buy the part. The $25,000 is the opportunity cost. In the
above analysis, it should be added to the Make column. In such case, net income of $15,000
($175,000 $160,000) would be realized by buying the part.
COMPREHENSIVE EXAMINATION C
(Chapters 10 - 14)
Points
Approximate
Minutes
Multiple Choice.............................................
22
11
C - II
Variance Analysis.........................................
12
12
C - III
Capital Budgeting.........................................
16
16
C - IV
15
15
C-V
17
15
C - VI
Ratios...........................................................
18
16
100
85
Problem
Topic
C-I
Checking Work.............................................
5
90
C-2
Items from Tedder Companys budget for March in which 2,100 units were produced and
sold appear below:
Direct materials
Indirect materialsvariable
Supervisor salaries
Depreciation on factory equipment
Direct labor
Property taxes on factory
Total
$12,000
2,000
10,000
8,000
7,000
3,000
$42,000
A company developed the following per-unit standards for its product: 2 pounds of direct
materials at $6 per pound. Last month, 2,000 pounds of direct materials were purchased
for $11,400. The direct materials price variance for last month was
a. $11,400 favorable.
b. $600 favorable.
c. $300 favorable.
d. $600 unfavorable.
3.
The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month,
11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000
units of product. The direct materials quantity variance for last month was
a. $3,200 favorable.
b. $2,400 favorable.
c. $3,200 unfavorable.
d. $5,600 unfavorable.
4.
The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in
producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor
hours worked, the total direct labor variance is
a. $1,920 unfavorable.
b. $6,400 favorable.
c. $4,000 unfavorable.
d. $6,400 unfavorable.
5.
The standard rate of pay is $5 per direct labor hour. If the actual direct labor payroll was
$19,600 for 4,000 direct labor hours worked, the direct labor price (rate) variance is
a. $800 unfavorable.
b. $800 favorable.
c. $1,000 unfavorable.
d. $400 favorable.
Comprehensive Examination C
C-3
6.
The standard number of hours that should have been worked for output attained is 8,000
direct labor hours, and the actual number of hours worked was 8,400. If the direct labor
price variance was $8,400 unfavorable, and the standard rate of pay was $18 per direct
labor hour, what was the actual rate of pay for direct labor?
a. $17.00 per direct labor hour
b. $15.00 per direct labor hour
c. $19.00 per direct labor hour
d. $18.00 per direct labor hour
7.
8.
Erickson Company reported net income of $140,000 for 2008. The income statement also
indicates that interest expense for 2008 was $50,000. Assuming an income tax rate of
30%, the number of times interest was earned for 2008 was
a. 4 times.
b. 5 times.
c. 3.8 times.
d. 2.8 times.
9.
During 2008, Thomas Company had an asset turnover ratio of 4 times with sales totaling
$1,000,000. If net income was $80,000, Thomas Company's return on assets in 2008 was
a. 8%.
b. 32%.
c. 40%.
d. 80%.
10.
Equipment was purchased for $72,000 and it is estimated to have a $12,000 salvage
value at the end of its estimated 8-year life. The equipment is estimated to generate cash
inflows of $10,000 each year and will be depreciated by using the straight-line method.
The payback period on this investment is
a. 6 years.
b. 7.2 years.
c. 4.8 years.
d. 4.5 years.
11.
Jensen Company purchased a new machine for $200,000 and will use the straight-line
method of depreciation over 4 years with no salvage value. If the company's minimum
annual rate of return is 10%, this investment must generate expected annual income of
a. $3,000.
b. $10,000.
c. $20,000.
d. $50,000.
C-4
Compute the materials price and quantity variances and indicate whether the variances are
favorable or unfavorable.
(b)
Compute the labor price and quantity variances and indicate whether the variances are
favorable or unfavorable.
5%
7.72173
6%
7.36009
8%
6.71008
9%
6.41766
10%
6.14457
11%
5.88923
12%
5.65022
15%
5.01877
Comprehensive Examination C
C-5
$ 25,000
38,000
4,000
10,000
20,000
1,000
12,000
$110,000
Instructions
The actual manufacturing costs incurred for the month of March, when 24,000 machine hours
were worked, are listed below on a partially completed budget report. Complete the budget report
in a manner that would be most useful for evaluating the performance of the Machining
Department manager for the month of March, 2008.
HEALEY COMPANY
Manufacturing Overhead Budget Report
Machining Department
For the Month Ended March 31, 2008
Budget at
Actual at
$ 30,800
44,500
7,000
11,000
93,300
20,000
1,000
12,000
33,000
$126,300
Difference
Favorable F
Unfavorable U
$
C-6
$54,000
6,000
11,000
2,000
20,000
(3,000)
$90,000
$12,000
8,000
7,000
3,000
20,000
(2,000)
$48,000
$ 1,000
13,000
33,000
43,000
$90,000
$ 4,000
14,000
18,000
12,000
$48,000
$280,000
$184,000
42,300
1,000
1,200
2,500
9,000
240,000
$ 40,000
Cash dividends of $9,000 were paid during the year. Land costing $15,000 was acquired by the
issuance of common stock. The property was subsequently sold for $12,500 cash.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2008 using the indirect
method.
Comprehensive Examination C
C-7
2008
$280,000
80,000
550,000
760,000
525,000
100,000
100,000
57,000
330,000
220,000
Instructions
Calculate the following ratios for Falls Company for 2008.
1. Current ratio.
2. Average collection period of receivables in days.
3. Return on assets.
4. Debt to total assets ratio.
5. Inventory turnover.
6. Return on common stockholders equity.
7. Asset turnover.
8. Profit margin.
2007
$170,000
90,000
450,000
600,000
510,000
110,000
60,000
48,000
270,000
180,000
C-8
a
b
a
b
d
c
7.
8.
9.
10.
11.
b
b
b
b
b
Problem C - II Solution
Actual Quantity
Actual Price
15,000 $8.05 =
$120,750
Actual Quantity
Standard Price
15,000 $8 =
$120,000
Price Variance
$750 U
Standard Quantity
Standard Price
16,000 $8 =
$128,000
Quantity Variance
$8,000 F
Actual Hours
Standard Rate
1,480 $10 =
$14,800
Price Variance
$740 F
Standard Hours
Standard Rate
1,200 $10 =
$12,000
Quantity Variance
$2,800 U
(b)
(c)
Internal rate of return (to the nearest %) $500,000 $85,000 = 5.88235, close to factor
for 11% (5.88923). Accept project.
(d)
Comprehensive Examination C
C-9
Problem C - IV Solution
HEALEY COMPANY
Manufacturing Overhead Budget Report
Machining Department
For the Month Ended March 31, 2008
Budget at
24,000 MH
Variable manufacturing overhead
Indirect materials ($1.25)
Indirect labor ($1.90)
Repairs ($.20)
Utilities ($.50)
Total variable
Fixed manufacturing overhead
Supervisory salaries
Property taxes
Depreciation
Total fixed
Total costs
Actual at
24,000 MH
Difference
Favorable F
Unfavorable U
$ 30,000
45,600
4,800
12,000
92,400
$ 30,800
44,500
7,000
11,000
93,300
$ 800
1,100
2,200
1,000
900
U
F
U
F
U
20,000
1,000
12,000
33,000
$125,400
20,000
1,000
12,000
33,000
$126,300
-0$ 900 U
Problem C - V Solution
MOTT COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2008
(Indirect Method)
Cash flows from operating activities
Net income...................................................................................
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense..........................................................
Decrease in accounts receivable.........................................
Increase in inventory............................................................
Decrease in prepaid expenses............................................
Decrease in accounts payable.............................................
Loss on sale of land.............................................................
Net cash provided by operating activities....................
Cash flows from investing activities
Proceeds from sale of land...........................................................
Cash flows from financing activities
Payment of cash dividends...........................................................
Payment of long-term note...........................................................
Net cash used by financing activities...................................
Net increase in cash..............................................................................
Cash at beginning of period..................................................................
Cash at end of period............................................................................
Noncash financing and investing activities
Acquired land through issuance of common stock .......................
$40,000
$1,000
2,000
(4,000)
1,000
(3,000)
2,500
(500)
39,500
12,500
(9,000)
(1,000)
(10,000)
42,000
12,000
$54,000
$15,000
C - 10
Problem C - VI Solution
1.
2.
$760,000
= 9.5
(100,000 + $60,000) 2
$57,000
= 11.4%.
($550,000 + $450,000) 2
3.
Return on assets:
4.
5.
$525,000
Inventory turnover: = 5.
($110,000 + $100,000) 2
6.
7.
$760,000
Asset turnover: = 1.52
($450,000 + $550,000) 2
8.
$57,000
= 19%
($270,000 + $330,000) 2