BUSI 1002 Sample Final Exam Questions

Question 1 – Multiple Choice Questions

1.       Tech-o-meter has been producing and selling 20,000 meters a year. The company has the capacity to produce 25,000 meters with its present facilities. The                following information is also available:

Selling price per unit

Variable costs per unit:

Manufacturing

Selling and Admin

Fixed costs in total:

Manufacturing

Selling and Admin

$150

55

25

$640,000

280,000

The least that Tech-o-meter would be willing to sell a meter for in the short run would be:

a)       $80.00

b)       $150.00

c)       $24.00

d)       $33.20

2.       The Jabbour Company has the following income statement for the previous year:

Sales

Variable costs            Contribution margin

Fixed costs

Operating Income

$250,000

150,000 

100,000

70,000 

$ 30,000 

What is Jabbour’s breakeven sales?

a)       $116,667

b)       $175,000

c)       $216,667

d)       $233,333

3.       Huang Corp has a job-order costing system. The following debits (credits) appeared in the WIP account for the month of June:

Balance, June 1                                                                     $12,000

Direct materials                                                                          40,000

Direct labour                                                                                30,000

Overhead applied                                                                      27,000

Transfer to finished goods                                             (100,000)

Huang applies overhead at a predetermined rate of 90% of direct labour cost. Job 232, the only job still in process at the end of June, has been charged with              manufacturing overhead of $2,250. What was the amount of direct materials        charged to Job 232?

a)       $2,250

b)       $2,500

c)       $4,250

d)       $9,000

Question 2

Projected sales for Nath Inc. for next year, with beginning and ending inventory information, are as follows:

Unit price

Sales

Beginning inventory

Targeted ending inventory

$60

50,000 units

16,000 units

20,000 units

Each unit requires four kilograms of material, which costs $6 per kilogram. The beginning inventory of raw materials is 12,000 kilograms.

Nath Inc. wants to have 14,000 kilograms of material in inventory at the end of the year. Each unit produced requires three hours of direct labour, which costs $22 per hour.

Required –

a.           How many units will need to be manufactured next year?

b.           How many kilograms will have to be purchased next year?

c.           What is the total direct labour budget for the year?

Question 3

Fotheringham Co. uses a job-order costing system and provided the following information for the current year:

Required –

a.           What is the journal entry to record materials placed into production?

b.           What is the journal entry to record the application of the factory overhead?

c.           What is the journal entry to record the transfer from work in process inventory to finished goods inventory?

d.           What is the balance in Fotheringham Co.’s ending direct materials inventory?

e.          What is the journal entry to write off the over or under applied inventory at the end of the year assuming that Fotheringham writes off directly to cost of goods sold.

SOLUTION

Question 1

a        Variable manufacturing cost per unit

Variable selling and administrative cost per unit

b        CM Ratio = $100,000 / 250,000 = 40%

Breakeven sales = $70,000 / 0.4 = $175,000

c         Balance in the WIP Account (

$12,000 + 40,000 + 30,000 + 27,000 – 100,000)

Less overhead

Direct labour ($2,250 / 0.9)

Direct materials

$55

25

$80

$9,000

(2,250)   (2,500)    $4,250  

Question 2

Ending inventory

Less beginning inventory

Budgeted production

b.         Materials required for production: 54,000 x 4 kg. Ending inventory requirement

Less beginning inventory

Budgeted purchases (kg.)

c.         54,000 units x 3 hours x $22  = $3,564,000

$50,000

20,000   (16,000)    $54,000  

$216,000

14,000   (12,000)    $218,000  

Question 3

a.      Work in process inventory                                                          164,000 Direct materials inventory

b.      Work in process inventory ($260,000 x 1.1)                            286,000 Manufacturing overhead

c.       Finished goods inventory                                                            584,000 Work in process inventory

d.      $52,000 + 296,000 – 164,000 = $184,000

e.      Overhead is underapplied by $292,000 – 286,000 = $6,000

Cost of goods sold                                                                                    6,000

Manufacturing overhead

164,000

286,000

584,000

6,000