Exam (elaborations) ACCT 505 Midterm Exam 4 Sets LATEST 2021 (ACCT505)

Exam (elaborations) ACCT 505 Midterm Exam 4 Sets LATEST 2021 (ACCT505) Wages paid to a timekeeper in a factory are a:  Prime Cost YES.....Conversion Cost NO  Prime Cost YES.....Conversion Cost YES  Prime Cost NO....Conversion Cost NO  Prime Cost NO.....Conversion Cost YES QUESTION 2: A cost incurred in the past that is not relevant to any current decision is classified as a(n):  period cost.  opportunity cost.  sunk cost.  differential cost. QUESTION 3: Inventoriable costs are also known as:  variable costs  conversion costs  product costs  fixed costs QUESTION 4: When the activity level is expected to decline within the relevant range, what effects would be anticipated with respect to each of the following?  Fixed Costs per Unit Increase and Variable Costs per Unit Increase  Fixed Costs per Unit Increase and Variable Costs per Unit do not change  Fixed Costs per Unit do not change and Variable Costs per Unit do not change  Fixed Costs per Unit do not change and Variable Costs per Unit Increase QUESTION 5: When manufacturing overhead is applied to production, it is added to:  the Cost of Goods Sold account  the Raw Materials account  the Work in Process account  the Finished Goods inventory account QUESTION 6: Which of the following statements about process costing system is incorrect?  In a process costing system, each processing department has a work in process account  In a process costing system, equivalent units are separately computed for materials and for conversion costs ACCT 505 Midterm Exam 4 Sets LATEST 2021  In a process costing system, overhead can be under- or overapplied just as in job-order costing  In a process costing system, materials costs are traced to units of products QUESTION 7: The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:  can be used under any cost flow assumption  does not require the use of predetermined overhead rates  keeps costs in the beginning inventory separate from current period costs  does not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production QUESTION 8: The contribution margin ratio always increases when the:  break-even point increases  break-even point decreases  variable expenses as a percentage of net sales decreases  variable expenses as a percentage of net sales increases QUESTION 9: Which of the following would not affect the break-even point?  total variable expenses  selling price per unit  variable expenses per unit  total fixed expenses QUESTION 10: Under variable costing:  net operating income will tend to move up and down in response to changes in levels of production  inventory costs will be lower than under absorption costing  net operating income will tend to vary inversely with production changes  net operating income will always be higher than under absorption costing QUESTION 11: The following data (in thousands of dollars) have been taken from the accounting records of Larder Corporation for the just completed year. Sales ........................................................................... $950 Purchases of raw materials ........................................ $170 Direct labor ................................................................ $210 Manufacturing overhead ............................................ $200 Administrative expenses ............................................ $180 Selling expenses ......................................................... $140 Raw materials inventory, beginning .......................... $70 Raw materials inventory, ending ............................... $80 Work in process inventory, beginning ....................... $30 Work in process inventory, ending ............................ $20 Finished goods inventory, beginning ......................... $100 Finished goods inventory, ending .............................. $70 Required: a. Prepare a Schedule of Cost of Goods Manufactured in good form. b. Compute the Cost of Goods Sold. c. Using data from your answers above as needed, prepare an Income Statement in good form Level: Medium LO: 1,3,4 Answer: a. Schedule of cost of goods manufactured Direct materials: Raw materials inventory, beginning ........................... $ 70 Add: Purchases of raw materials ................................ 170 Raw materials available for use ................................. 240 Deduct: Raw materials inventory, ending .................. 80 Raw materials used in production ................................. $160 Direct labor .................................................................... 210 Manufacturing overhead ................................................ 200 Total manufacturing cost ............................................... 570 Add: Work in process inventory, beginning. ................ 30 600 Deduct: Work in process inventory, ending .................. 20 Cost of goods manufactured .......................................... $580 b. Computation of cost of goods sold Finished goods inventory, beginning .............................. $100 Add: Cost of goods manufactured ................................... 580 Cost of goods available for sale ....................................... 680 Deduct: Finished goods inventory, ending ...................... 70 Cost of goods sold ........................................................... $610 c. Income statement Sales ................................................................................. $950 Less: Cost of goods sold .................................................. 610 Gross margin ................................................................... 340 Less: Administrative expenses ........................................ 180 Less: Selling expenses ..................................................... 140 Net operating income ...................................................... $ 20 Similar exercise with different data The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just completed year. Sales ................................................................................ $870 Purchases of raw materials ............................................. $190 Direct labor ..................................................................... $200 Manufacturing overhead ................................................. $230 Administrative expenses ................................................. $150 Selling expenses .............................................................. $140 Raw materials inventory, beginning ............................... $10 Raw materials inventory, ending .................................... $40 Work in process inventory, beginning ............................ $20 Work in process inventory, ending ................................. $50 Finished goods inventory, beginning .............................. $90 Finished goods inventory, ending ................................... $130 Required: a. Prepare a Schedule of Cost of Goods Manufactured in good form. b. Compute the Cost of Goods Sold. c. Using data from your answers above as needed, prepare an Income Statement in good form Answer: a. Schedule of cost of goods manufactured Direct materials: Raw materials inventory, beginning ............................ $ 10 Add: Purchases of raw materials .................................. 190 Raw materials available for use ................................... 200 Deduct: Raw materials inventory, ending .................... 40 Raw materials used in production ................................... 160 Direct labor ...................................................................... 200 Manufacturing overhead ................................................. 230 Total manufacturing cost ................................................. 590 Add: Work in process inventory, beginning. .................. 20 610 Deduct: Work in process inventory, ending .................... 50 Cost of goods manufactured ............................................ $560 b. Computation of cost of goods sold Finished goods inventory, beginning .............................. $ 90 Add: Cost of goods manufactured ................................... 560 Goods available for sale .................................................. 650 Deduct: Finished goods inventory, ending ...................... 130 Cost of goods sold ........................................................... $520 c. Income statement Sales ................................................................................ $870 Less: Cost of goods sold ................................................. 520 Gross margin ................................................................... 350 Less: Administrative expenses ........................................ 150 Less: Selling expenses ..................................................... 140 Net operating income ...................................................... $ 60 QUESTION 12: 2. Question : (TCO F) The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completed Units Materials Conversion Work in process, June 1 150,000 75% 55% Work in process, Jun 30 145,000 85% 75% The department started 475,000 units into production during the month and transferred 480,000 completed units to the next department. REQUIRED: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs. Instructor Explanation: Equivalent Units Materials Conversion Units transferred to the next department 480,000 480,000 Ending Work in process: Materials x 85% 123,250 Conversion x 75% 108,750 Equivalent units of production 603,250 588,750 Similar exercise with different data Wisconsin Company Percent Complete Units Materials Convers ion Work in process, June 1 60,000 65% 45% Units Started into Production during June 275,000 Units completed & Transferred to Next Department 280,000 Work in process, June 30 55,000 65% 45% Weighted Average Method