Review for Exam 1 Managerial Accounting Winter 2021

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Review for Exam 1

Managerial Accounting

Winter 2021

1. High-glow currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers:

Direct materials $50

Direct manufacturing labor 5

Variable manufacturing overhead 14

Fixed manufacturing overhead 10

Total manufacturing costs $79

The plant is experiencing demand shortage and is considering reducing production to 800 bicycles. What is the Per unit cost of producing 800 bicycles?

A) $79 per unit

B) $81.50 per unit

C) $74 per unit

D) $69 per unit

2. Winner's Sporting Equipment manufactures sporting goods. Selected costs from the past year include:

Plastics used to make products	$ 151,000
Heating and lighting costs for factory	$   65,000
Factory janitor wages	$   67,000
Costs of shipping to customers	$   11,000
Lubricants used in factory equipment	$     2,000
Lighting costs for sales office	$   20,000
Depreciation on factory equipment	$   23,000
Office supplies for sales office	$     6,000
Insurance costs for factory	$   13,000
Maintenance worker wages	$   99,000
Freight-in (on plastics)	$     7,500
Aluminum used to make products	$ 175,000
Assembly-line worker wages	$ 142,000
Salaries of salespeople	$   74,000

Manufacturing costs for Winner's Sporting Equipment totaled

A) $724,000.

B) $744,500.

C) $612,000.

D) $806,500.

3.  Rally Synthesis Inc. manufactures and sells 100 bottles per day. Fixed costs are $22,000 and the variable costs for manufacturing 100 bottles are $30,000. Each bottle is sold for $1,200. How would the daily profit be affected if the daily volume of sales drop by 10%?

A) profits are reduced by $9,000

B) profits are reduced by $3,000

C) profits are reduced by $12,000

D) profits are reduced by $59,000

4. Pederson Company reported the following:

  Manufacturing costs $360,000

  Units manufactured 9,000

  Units sold   7,500 units sold for $90 per unit

  Beginning inventory   1,000 units

What is the manufacturing cost for the ending finished goods inventory?

A) $100,000

B) $60,000

C) $744,000

D) $54,000

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

 

The net operating income for the year (in thousands of dollars) was: 
A. $410
B. $110
C. $40
D. $180

6. The following inventory balances relate to Lequin Manufacturing Corporation at the beginning and end of the year:
 

Lequin's total manufacturing cost was $543,000. What was Lequin's cost of goods sold? 
A. $517,000
B. $545,000
C. $569,000
D. $567,000

7. On the assembly floor, Crystal is paid $20 an hour for straight-time assuming 8 working hours a day and five working days in a week. She is paid $30 an hour for overtime. One week she worked 52 hours. She was idle for 3 hours.

What amount of compensation would be reported as manufacturing overhead?

12 hours overtime x $10 = $120

3 hours idle x $20 = $60

Total $180

8. Dandy Corporation has provided data concerning the company's Manufacturing Overhead account for the month of October. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $68,000 and the total of the credits to the account was $77,000. Which of the following statements is true? 
A. Actual manufacturing overhead incurred during the month was $77,000.
B. Manufacturing overhead applied to Work in Process for the month was $68,000.
C. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $68,000.
D. Manufacturing overhead for the month was overapplied by $9,000.

Explanation: 

Actual MOH is 68,000 and goes to debit side of MOH account. So option A is wrong.

Applied goes to credit. So if the credit side is 77,000 it must be that MOH is over applied by 9,000 

9. The Lee Company uses a job-order costing system. The following data were recorded for June:
  
Overhead is charged to production at 80% of direct materials cost. Jobs 235, 237, and 238 were completed during June and transferred to finished goods. Jobs 235 and 238 have been delivered to customers.Lee Company's cost of goods sold for June was: 
A. $15,520
B. $10,170
C. $9,730

$14,640

 

10. The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $400 and $200 for direct materials, and charges of $300 and $500 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: 
A. 80%
B. 125%
C. 300%
D. 240%

MOH=$ 1,000, which is 125% of labor

11. Graeser Inc. has provided the following data for the month of May. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

 Manufacturing overhead for the month was overapplied by $4,000.
The company allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
The Cost of Goods sold at the end of May after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:  

A.  $100,110
B. $97,590

C. $102,630
D. $2,520 

Explanation:    

Allocating overapplied manufacturing overhead reduces the balances in the inventory and cost of goods sold accounts, resulting in a reduction in all those accounts.

So COGS = 100,110-2,520 = 97,590

12. Brace Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,600 hours. At the end of the year, actual direct labor-hours for the year were 20,400 hours, the actual manufacturing overhead for the year was $506,920, and manufacturing overhead for the year was underapplied by $23,440. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: 
A. $501,920
B. $531,445
C. $483,480
D. $511,920

13. ABC  Inc. has provided the following data for the month of March. The balance in the Finished Goods inventory account at the beginning of the month was $43,000 and at the end of the month was $42,000. The cost of goods manufactured for the month was $221,000. The actual manufacturing overhead cost incurred was $45,000 and the manufacturing overhead cost applied to Work in Process was $49,000. Assuming that the balance in the Manufacturing Overhead Account is reduced to zero and the difference is written off to Cost of Goods Sold, the adjusted cost of goods sold that would appear on the income statement for March is: 
A. $218,000
B. $220,000
C. $222,000
D. $221,000

14. Extreme Manufacturing Company provides the following ABC costing information:

  Activities   Total Costs  Activity-cost drivers

  Account inquiry $280,000 14,000 hours

  Account billing $350,000 7,000,000 lines

  Account verification accounts $93,750 50,000 accounts

  Correspondence letters $29,000  4,000 letters

  Total costs $752,750 

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

  Department A  Department B

  Account inquiry hours 2,100 hours 3,600 hours

  Account billing lines 500,000 lines 350,000 lines

  Account verification accounts 7,000 accounts 5,000 accounts

  Correspondence letters 1,200  letters 1,600 letters

How much of the total costs will be assigned to Department A?

A) $88,825

B) $118,825

C) $120,000

D) $85,075

Let us first calculate Rates:

Account inquiry $280,000 /14,000 hours =20/hour

  Account billing $350,000 /7,000,000 lines= .05/line

  Account verification accounts                                                $93,750 /50,000 accounts=1.875/account

  Correspondence letters $29,000 /4,000 letters = 7.25/letter

Now, we apply the rates:

Department A  Department B

  Account inquiry hours 20 X 2,100 hours =42,000 3,600 hours

Account billing lines .05 X 500,000 lines= 25,000 350,000 lines

  Account verification accounts 1.875 X 7,000 accounts = 13,125 5,000 accounts

  Correspondence letters 7.25 X 1,200  letters =8,700 1,600 letters

TOTAL      $88,825

15. Using the ABC system, what is the estimated total cost of manufacturing one unit for each type of door?

A) $189.10 for Deluxe, $134.62 for Standard

B) $180 for Deluxe, $130 for Standard

C) $260 for Deluxe, $250 for Standard

D) $192.75 for Deluxe, $132.90 for Standard

16. Assume a traditional costing system applies the $40,000 of overhead costs based on direct labor hours. What is the total amount of overhead cost assigned to the deluxe model? 

A) $16,000

B) $24,000

C) $25,000

D) $15,000

17. Using a traditional system (with direct labor hours as the overhead allocation base), the estimated operating profit per thousand sugar cookies is.:

A) $390.52

B) $600.00

C) $385.50

D) $430.00

18. Using the ABC system, for the sugar cookie:, compute the estimated operating profit per thousand cookies

A) $390.52

B) $600.00

C) $385.50

D) $430.00

19. Ryan Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Ryan's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $52 per machine hour, while the finishing department uses a departmental overhead rate of $28 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments:

Actual results	Casting Department	Finishing Department
Direct labor hours used	5	12
Machine hours used	4	3

The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800.

What was the total cost of Job A216 if Ryan Fabrication used the departmental overhead rates to allocate manufacturing overhead?

A) $2,434

B) $2,344

C) $2,888

D) $2,940

20. Black Company's sales are $565,000, its fixed expenses are $150,000, and its variable expenses are 60% of sales. Based on this information, the margin of safety (number of sales dollars that can be safely lost) is:

A. $90,000

B. $190,000

C. $225,000

D. $240,000

21. Sinclair Company's single product has a selling price of $25 per unit. Last year the company reported a profit of $20,000 and variable expenses totaling $180,000. The product has a 40% contribution margin ratio. Because of competition, Sinclair Company will be forced in the current year to reduce its selling price by $2 per unit. How many units must be sold in the current year to earn the same profit as was earned last year? 

A. 15,000 units
B. 12,000 units
C. 16,500 units
D. 12,960 units

22. Assume the following cost information for Murdoch Company:

Selling price $120 per unit

Variable costs $80 per unit

Total fixed costs $80,000

Tax rate 40%

What minimum volume of sales dollars is required to earn an aftertax net income of $30,000?

A) $465,000

B) $330,000

C) $390,000

D) $165,000

23. Hitchens Inc. produces and sells two products. Data concerning those products for the most recent month appear below:

		Product V06Z	Product  U85Z
	Sales	$38,000	$82,000
	Variable Expenses	$14,600	$31,000

The fixed expenses of the entire company were $24,010. The break-even point for the entire company is closest to: 

A.	$33,817
B.	$38,726
C.	$34,160
D.	$24,010

		Product V06Z	Product  U85Z	Total
	Sales	$38,000	$82,000	120,000
	Variable Expenses	$14,600	$31,000	44,600
	Contribution Margin			75,400
	CMR			75,400/120,000=.62
	BEP			24010/.62

24. Craylon Manufacturing Company produces two products, X and Y. The following information is presented for both products:

X Y

Selling price per unit $40 $25

Variable cost per unit 25 15

Total fixed costs are $275,000.

How much is the breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y?

A. 5,000 Y and 1,000 X

B. 15,000 X and 5,000 Y

C. 9,000 X and 3,000 Y

D. 1,000 Y and 3,000 X