BUSINESS

American InterContinental University
ACCT420-Cost Accounting
Mid-Term Examination Review

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

 

Answer the following questions using the information below:

 

The Ranger Company uses the high-low method to estimate its cost function. The information for 2011 is provided below:

Machine-hours               Costs

Highest observation of cost driver                     2,000                       $450,000

Lowest observation of cost driver                      1,000                      $ 250,000

 

1.       What is the constant for the estimating cost equation?

 

 

2.       Variable costs:

 

 

Answer the following questions using the information below:

 

Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3:

                                                                                                 Budget                  Actual

Indirect costs                                                     $270,000               $300,000

Annual salary of each attorney                   $100,000               $110,000

Annual salary of each paraprofessional   $ 29,000                $ 30,000

Total professional labor-hours                         50,000  dlh          60,000  dlh

 

3.       How much should the client be billed in an actual costing system if 200 professional labor-hours are used?

 

 

Answer the following questions using the information below:

 

Nancy’s Niche sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs.

 

4.       The contribution margin percentage is:

 

 

5.       If variable costs decrease by $1 per unit, the new breakeven point is:

 

6.       If a change is made in one parameter of CVP analysis, it is an example of:

 

 

Answer the following questions using the information below:

 

Roosevelt Cabinetry, Inc., manufactures standard sized modular cabinet units for kitchens and other applications within the home. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through the rough cut department and the finish department. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

 

Data for Finish Department for March 2012 are:

Work in process, beginning inventory, 25% converted            1,000 units

Units started during February                                                         1,400 units

Work in process, ending inventory                                                   300 units

 

Costs for Finish department for March 2012 are:

Work in process, beginning inventory:

Direct materials                                                                                $300,000

Conversion costs                                                                              $200,000

Direct materials costs added during February                               $420,000

Conversion costs added during February                                    $1,600,000

 

7.       What is the unit cost per equivalent unit of the beginning inventory in the Finishing Department?

A. $1,100.00        B. $500.00            C. $800.00            D. $300.00

 

8.       If a company would like to increase its degree of operating leverage it should:

 

 

9.       The focus of ABC systems is on:

A. long-term decisions    B. short-term decisions

C. special-pricing decisions           D. make-or-buy decisions

 

10.    Which of the following is NOT a sign that a “smoothing out” costing system exists?

 

 

11.    Standard costing is popular among companies that:

A. manufacture textiles or ceramics

B. produce a product that uses few direct materials items, and has relatively few operational activities

C. produce masses of similar or identical products

D. All of these answers are correct.

 

12.    Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when:

 

 

 

Answer the following questions using the information below:

 

Mertens Company provides the following ABC costing information:

 

Activities                                          Total Costs                 Activity-cost drivers

 

 

The above activities are used by Departments A and B as follows:

                                                                  Department A            Department B

Account inquiry hours                          2,000  hours                4,000  hours

Account billing lines                         400,000  lines             200,000  lines

Account verification accounts          10,000  accounts          8,000  accounts

Correspondence letters                         1,000  letters               1,600  letters

 

13.    How much of the account inquiry cost will be assigned to Department A?

A. $80,000            B. $200,000

C. $40,000            D. None of these answers are correct.

 

Answer the following questions using the information below:

 

The Cuckoo Clock Shop manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Cuckoo Clock Shop uses weighted-average costing.

 

Data for the Assembly Department for June 2013 are:

Work in process, beginning inventory                                             250 units

Direct materials (100% complete)

Conversion costs (50% complete)

 

 

 

Costs for June 2013:

Work in process, beginning inventory:

Direct materials                                                                                  $90,000

Conversion costs                                                                              $135,000

Direct materials costs added during June                                        $500,000

Conversion costs added during June                                                $500,000

 

14.    What amount of conversion costs are assigned to the ending Work-in-Process account for June?

A. $70,555.50      B. $63,225.25       C. $50,978.32      D. $90,074

 

Answer the following questions using the information below:

 

The Rest-a-Lot chair company manufacturers a standard recliner. During February, the firm’s Assembly Department started production of 75,000 chairs. During the month, the firm completed 80,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Rest-a-Lot. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs.

 

Beginning inventory:

Direct materials                          $24,000

Conversion costs                        $35,000

 

Manufacturing costs added during the accounting period:

Direct materials                        $168,000

Conversion costs                      $278,000

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