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DeVry ACCT 346 Midterm Exam 2

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1.
Question : (TCO 1) Managerial accounting stresses accounting concepts
and procedures that are relevant to preparing reports for
Student Answer:
taxing authorities.
internal users of accounting information.
external users of accounting information.
the Securities and Exchange Commission (SEC).
2.
Question :
is true?
Student Answer:
When production
When production
When production

TCO 1) Which of the following statements regarding fixed costs
When production increases, fixed cost per unit increases.
decreases, total fixed costs decrease.
increases, fixed cost per unit decreases.
decreases, total fixed costs increase.

3.
Question : (TCO 1) You own a car and are trying to decide whether or not to
trade it in and buy a new car. Which of the following costs is an opportunity cost in
this situation?
Student Answer:
the trip to Cancun that you will not be able to take if you
buy the car
the cost of the car you are trading in
the cost of your books for this term
the cost of your car insurance last year
4.
Question : (TCO 1) Shula’s 347 Grill has budgeted the following costs for a
month in which 1,600 steak dinners will be produced and sold: materials, $4,080;
hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation, $800; and other
fixed costs, $600. Each steak dinner sells for $14.00 each. How much is the
budgeted variable cost per unit?

Student Answer:
$7.74
$6.68
$3.25

$5.80

5.
Question : (TCO 1) Which of the following is an example of a manufacturing
overhead cost?
Student Answer:
security at the manufacturing plant
fabric used to produce shirts
cost of shipping product to customers
the salary of the president of the company
6.
Question : (TCO 1) Which of the following is a period cost?
Student Answer:
rent on a factory building
depreciation on production equipment
raw materials cost
commissions paid on each unit sold
7.
Question : (TCO 1) If the balance in the Finished Goods Inventory account
increased by $30,000 during the period and the cost of goods manufactured was
$220,000, how much is cost of goods sold?
Student Answer:
$110,000
$190,000
$220,000
$250,000
8.
Question : (TCO 2) BCS Company applies manufacturing overhead based on
direct labor cost. Information concerning manufacturing overhead and labor for
August follows:
Estimated Actual
Overhead cost
$174,000
$171,000
Direct labor hours 5,800 5,900
Direct labor cost
$87,000
$89,975
How much is the predetermined overhead rate?
Student Answer:
1.90
30.00
1.93

2.00

9.
Question : (TCO 2) During 2011, Madison Company applied overhead using
a job-order costing system at a rate of $12 per direct labor hours. Estimated direct
labor hours for the year were 150,000, and estimated overhead for the year was
$1,800,000. Actual direct labor hours for 2011 were 140,000 and actual overhead
was $1,670,000.

What is the amount of under or over applied overhead for the year?
Student Answer:
$10,000 overapplied
$130,000 underapplied
$130,000 overapplied

$10,000 underapplied

10. Question : (TCO 3) Companies in which of the following industries wouldnot
be likely to use process costing?
Student Answer:
cereals
paints
cosmetics
auto body shop
11. Question : (TCO 3) The Blending Department began the period with 45,000
units. During the period the department received another 30,000 units from the
prior department and completed 60,000 units during the period. The remaining
units were 75% complete. How much are equivalent units in The Blending
Department’s work in process inventory at the end of the period?
Student Answer:
30,000
22,500
15,000
11,250
12. Question : (TCO 3) During March, the varnishing department incurred costs
of $90,250 for direct labor. The beginning inventory was 3,500 units and 10,000
units were transferred to the varnishing department from the sanding department
during June. The direct labor cost in the beginning inventory was $27,270. The
ending inventory consisted of 2,000 units, which were 25% complete with respect to
direct labor. What is the cost per equivalent unit for direct labor?
Student Answer:
$8.71
$7.84
$11.19
$9.79
13. Question : (TCO 4) Clearance Depot has total monthly costs of $8,000 when
2,500 units are produced and $12,400 when 5,000 units are produced. What is the
estimated total monthly fixed cost?
Student Answer:
$4,400
$6,580
$3,600
$8,800
1.
Question :
Student Answer:

(TCO 4) The margin of safety is the difference between
total revenue and total fixed costs.

expected level of sales and the break-even point.
budgeted fixed costs and actual fixed costs.
selling price and variable cost per unit.
2.
Question : (TCO 4) Allen Company sells homework machines for $100 each.
Variable costs per unit are $75 and total fixed costs are $62,000. Allen is
considering the purchase of new equipment that would increase fixed costs to
$84,000, but decrease the variable costs per unit to $60. At that level Allen
Company expects to sell 3,000 units next year. What is Allen’s break-even point in
units if it purchases the new equipment?
Student Answer:
2,480 units
36,000 units
2,100 units
3,650 units
3.
Question : (TCO 4) Paula Corporation sells a single product at a price of
$275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales
are expected to be $825,000, what is Paula’s margin of safety?
Student Answer:
$468,140
$124,025
$700,975
$405,000
4.
Question : (TCO 5) In variable costing, when does fixed manufacturing
overhead become an expense?
Student Answer:
Never
In the period when the product is sold
In the period when the expense is incurred
In the period when other expenses are at the lowest level
5.
Question : (TCO 5) Variable costing income is a function of:
Student Answer:
Units sold only.
Units produced only
Both units sold and units produced.
Neither units sold nor units. produced
6.
Question : (TCO 5) Peak Manufacturing produces snow blowers. The selling
price per snow blower is $100. Costs involved in production are:
Direct Material per unit $20
Direct Labor per unit
12
Variable manufacturing overhead per unit
10
Fixed manufacturing overhead per year
$148,500
In addition, the company has fixed selling and administrative costs of $150,000 per
year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow
blowers. How much is cost of goods sold using full costing?

Student Answer:
$1,260,000
$2,038,500
$1,408,500

1,359,000

7.
Question : (TCO 6) Costs may be allocated to
Student Answer:
products.
services.
departments.
any of the above.
8.
Question : (TCO 5) An allocation base
Student Answer:
is the minimum amount to be allocated to a cost object.
coordinates the manufacturing overhead costs as they are incurred.
will always be less than the variable costs for a product.
relates the cost pool to the cost objectives.
9.
Question : (TCO 6) The building maintenance department for Jones
Manufacturing Company budgets annual costs of $4,200,000 based on the expected
operating level for the coming year. The costs are allocated to two production
departments. The following data relate to the potential allocation bases:
Production Dept. 1 Production Dept. 2
Square footage
15,000
45,000
Direct labor hours 25,000
50,000
If Jones assigns costs to departments based on square footage, how much total
costs will be allocated to Production Department 1?
Student Answer:
$1,050,000
$1,575,000
$2,100,000

$1,400,000

10. Question : (TCO 7) A company is trying to decide whether to sell partially
completed goods in their current state or incur additional costs to finish the goods
and sell them as complete units. Which of the following is not relevant to the
decision?
Student Answer:
The selling price of the completed units.
The costs incurred to process the units to this point.
The selling price of the partially completed units.
The costs that will be incurred to finish the units.

11. Question : (TCO 7) BigByte Company has 12 obsolete computers that are
carried in inventory at a cost of $13,200. If these computers are upgraded at a cost
of $7,500, they could be sold for $15,300. Alternatively, the computers could be
sold “as is” for $9,000. What is the net advantage or disadvantage of reworking the
computers?
Student Answer:
$6,300 advantage
$1,200 disadvantage
$5,400 disadvantage
$3,000 advantage
12. Question : (TCO 7) Olde Store has 12,000 cans of crab meat just a week
past the expiration date. Each can cost $0.31. The cans could be sold as is for $0.20
each, or relabeled and sold as gourmet cat food. The cost of relabeling the cans
would be $0.04 per can and the cans would then sell for $0.29 per can. What should
be done with the cans and why?
Student Answer:
The cans should be thrown away since there will be a loss
with the other alternatives.
The cans should be relabeled into cat food since the sales price increases $0.09 per
can and the cost is only $0.04 per can.
The cans should be put on clearance since there is no reason to put more money
into something that is already selling below cost.
It doesn’t matter what you do since all alternatives result in a loss.
1.
Question : (TCO 3) Describe a process costing system, including the types
of companies that commonly use this system. How can process costing information
be used in incremental analysis?
2.
Question : (TCO 7) Each year, ACE Engines surveys 7,600 former and
prospective customers regarding satisfaction and brand awareness. For the current
year, the company is considering outsourcing the survey to RBG Associates, who
have offered to conduct the survey and summarize results for $50,000. Robert Ace,
the president of ACE Engines, believes that RBG will do a higher-quality job than his
company has been doing, but is unwilling to spend more than $12,000 above
current costs. The head of bookkeeping for ACE has prepared the following
summary of costs related to the survey in the prior year.
Mailing
$27,000
Printing (done by Lester Print Shop)
9,000
Salary of Pat Fisher, part-time employee who stuffedenvelopes and summarized
data when surveys were returned (130 x $16)
2,080
Share of depreciation of computer and software used to track survey responses and
summarize results 1,200
Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher
vs. entire company
600
Total $39,880
Prepare an incremental analysis in good form to determine the impact on profit of
going outside versus conducting the survey as in the past. Will ACE accept the RBG
offer? Why or why not?

3.
Question : (TCO 4) The following monthly data are available for RedEx,
which produces only one product that it sells for $84 each. Its unit variable costs are
$28 and its total fixed expenses are $64,960. Sales during April totaled 1,600 units.
(a) How much is the breakeven point in sales dollars for RedEx?
(b) How many units must RedEx sell in order to earn a profit of $24,640?
(c) A new employee suggests that RedEx sponsor a company softball team as a
form of advertising. The cost to sponsor the team is $1,792. How many more units
must be sold to cover this cost?

DeVry ACCT 346 Midterm Exam 2

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https://devryfinalexams.com/products/acct-346midterm-exam-2/