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# Managerial Accounting Exam 1 Fall 2007 (Form A) Name: _____________________________ On my honor I have neither given nor received help

p on this exam. I understand that any violation of the University Honor Policy will result in an automatic ero on this exam! and that I will "e su"#ect to all sanctions availa"le under the University\$s Honor Policy. __________________________ %ignature

Record the proper test form (A or ) and !our name on the scantron form"
#art \$ #ro%lems (7& points) 'elect the %est ans(er and record !our choice on the scantron form" &. 'ast month! when &(!((( units of a product were manufactured! the cost per unit as )*(. +t this level of activity! varia"le costs are ,(- of total unit costs. If &(!,(( units are manufactured next month and cost "ehavior patterns remain unchanged the: +. /. 0. 1. 2. 3. total varia"le cost will remain unchanged. fixed costs will increase in total. varia"le cost per unit will increase. total cost per unit will decrease. None of the a"ove.

4aria"le cost: +. /. 0. 1. 2. increases on a per unit "asis as the num"er of units produced increases. remains constant on a per unit "asis as the num"er of units produced increases. remains the same in total as production increases. decreases on a per unit "asis as the num"er of units produced increases. None of the a"ove.

5.

6ithin the relevant range! the difference "etween varia"le costs and fixed costs is: +. /. 0. 1. 2. varia"le costs per unit fluctuate and fixed costs per unit remain constant. varia"le costs per unit are constant and fixed costs per unit fluctuate. "oth total varia"le costs and total fixed costs are constant. "oth total varia"le costs and total fixed costs fluctuate. None of the a"ove.

7.

6hich of the following statements regarding fixed costs is incorrect8 +. 2xpressing fixed costs on a per unit "asis usually is the "est approach for decision9 ma:ing. /. ;ixed costs expressed on a per unit "asis will react inversely with changes in activity. 0. +ssumptions "y accountants regarding the "ehavior of fixed costs rest heavily on the concept of the relevant range. 1. ;ixed costs fre<uently represent long9term investments in property! plant! and e<uipment. 2. None of the a"ove.

,.

=he contri"ution margin is the excess of revenues over: +. cost of goods sold. /. manufacturing cost. 0. all direct costs. 1. all varia"le costs. 2. none of the a"ove. =he "rea:9even in units sold will decrease if there is an increase in: +. unit sales volume. /. total fixed expenses. 0. unit varia"le expenses. 1. selling price. 2. none of the a"ove. =he linear e<uation ? @ a A "B is often used to express cost formulas. In this e<uation: +. the " term represents varia"le cost per unit of activity. /. the a term represents varia"le cost in total. 0. the B term represents total cost. 1. the ? term represents total fixed cost. /rasher 0ompany manufactures and sells a single product that has a positive contri"ution margin. If the selling price and varia"le expenses "oth decrease "y ,- and fixed expenses do not change! then what would "e the effect on the contri"ution margin per unit and the contri"ution margin ratio8 Contribution margin per unit 1ecrease 1ecrease No change No change Contribution margin ratio 1ecrease No change 1ecrease No change

*.

>.

C.

+. /. 0. 1.

D.

'ast year! /lac: 0ompany reported sales of )*7(!(((! a contri"ution margin of )&*(!(((! and a net loss of )7(!(((. /ased on this information! the "rea:9even point was: +. )*7(!(((. /. )7C(!(((. 0. )C((!(((. 1. )D*(!(((. 2. none of the a"ove. 6ages paid to the factory supply shop foreman are considered an example of:

&(.

+. /. 0. 1. 2. &&.

## +n example of a direct la"or cost is wages paid to a:

+. /. 0. 1. 2. &3.

## 2ntry +. 2ntry /. 2ntry 0. 2ntry 1. none of the a"ove.

6hich of the following would most li:ely not "e included as manufacturing overhead in a furniture factory8 +. /. 0. 1. 2. Elue in a chair. =he amount paid to the individual who stains a chair. =he wor:man\$s compensation insurance of the supervisor who oversees production. =he factory utilities of the department in which production ta:es place. none of the a"ove.

&5.

+ proper #ournal entry to record issuing raw materials to "e used on a #o" would "e:

+. /. 0. 1. 2. &7.

## 2ntry +. 2ntry /. 2ntry 0. 2ntry 1. none of the a"ove.

Nil 0o. uses a predetermined overhead rate "ased on direct la"or cost to apply manufacturing overhead to #o"s. ;or the year ended 1ecem"er 5&! Nil\$s estimated manufacturing overhead was )*((!(((! "ased on an estimated volume of ,(!((( direct la"or hours! at a direct la"or rate of )*.(( per hour. +ctual manufacturing overhead amounted to )*3(!(((! with actual direct la"or cost of )53,!(((. ;or the year! manufacturing overhead was: +. /. 0. 1. 2. overapplied "y )3(!(((. underapplied "y )33!(((. overapplied "y )5(!(((. underapplied "y )5(!(((. none of the a"ove.

&,.

?oung 2nterprises has "udgeted sales in units for the next five months as follows:

Past experience has shown that the ending inventory for each month should "e e<ual to &(- of the next month\$s sales in units. =he inventory on Fay 5& fell short of this goal since it contained only 7(( units. =he company needs to prepare a Production /udget for the next five months. )he total num%er of units to %e produced in *ul! is+ +. /. 0. 1. 2. >!>7( units. >!3(( units. >!(3( units. >!3C( units. none of the a"ove.

## #art \$\$ #ro%lems (&0 points)

&. =he following information is from Farchant Fanufacturing 0o. for %eptem"er:
1irect materials used in production 1irect la"or =otal manufacturing cost Gaw materials inventory! %ept. & 6or: in process inventory! %ept. & ;inished goods inventory! %ept. & Purchases of raw materials 0ost of goods manufactured %elling H +dmin expense %ales Net income ) D,!((( *>!((( 357!((( 37!((( *!((( &(&!((( &(3!((( 355!((( D>!((( 577!((( 5(!(((

Ge<uired: (1& points) If you are stuc: on a particular num"er ma:e a guess and use that for the rest of your calculationsI JHint: =he easiest method of solving this pro"lem is to s:etch out the income statement and the schedule of cost of goods manufactured! enter the given amounts! and then enter the un:nowns as plug figures..

a. 0ompute the 0ost of Eoods %old. _____________ ". 0ompute the "alance in ;inished Eoods Inventory at %eptem"er 5(. _____________ c. 0ompute the "alance in 6or: in Process Inventory at %eptem"er 5(. _____________ d. 0ompute the "alance in Gaw Faterials Inventory at %eptem"er 5(. _____________ e. 0ompute the total manufacturing overhead. _____________

+nswer:
F+G0H+N= F+NU;+0=UGINE %chedule of 0ost of Eoods Fanufactured 1irect materials used: Inventory! %ept. & Purchases Inventory! %ept. 5( Jd.Kplug 1irect materials usedKgiven 1irect la"or Fanufacturing overhead Je.Kplug =otal manufacturing costKgiven Inventory of wor: in process! %ept & Inventory of wor: in process! %ept 5( Jc. Kplug 0ost of goods manufacturedKgiven F+G0H+N= F+NU;+0=UGINE Income %tatement %ales 0ost of goods sold: ;inished goods! %ept & 0ost of goods manufacturedKa"ove +vaila"le for sale ;inished goods! %ept 5( J". Kplug 0ost of goods sold Ja.Kplug Eross marginKgiven Operating expenses: +dministrative expenses %elling expenses Net incomeKgiven )577!((( )&(&!((( 355!((( 557!((( &&>!((( 3&>!((( &3>!((( 7&!((( ,*!((( D>!((( ) 5(!(((

) 37!((( &(3!((( &3*!((( 5&!((( D,!((( *>!((( >3!((( 357!((( *!((( 37(!((( >!((( )355!(((

3.

=he 0entral 4alley 0ompany is a merchandising firm that sells a single product. =he company\$s revenues and expenses for the last three months are given "elow: 0entral 4alley 0ompany 0omparative Income %tatement ;or the %econd Luarter %ales in units %ales revenue 'ess cost of goods sold Eross Fargin 'ess operating expenses: %hipping expense +dvertising expense April 7!,(( )&!5,(!((( D7,!((( 7(,!((( &D!((( ,(!((( May *!((( )&!C((!((( &!3*(!((( ,7(!((( 33!((( ,(!((( June ,!((( )&!,((!((( &!(,(!((( 7,(!((( 3(!((( ,(!(((

%alaries and commissions 1epreciation expense =otal operating expenses Net income Ge<uired: (2& points)

## &5(!((( 7(!((( 37(!((( )3&(!(((

a. 1etermine which expenses are mixed and! "y use of the high9low method! separate each mixed expense into its varia"le and fixed components. %tate the cost formula for each expense. ". 0ompute the company\$s total contri"ution margin for Mune. c. 0alculate the "rea:even sales in units and in dollars.