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DeVry ACCT 346 Midterm Exam

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1. (TCO 1) Which of the following is not a difference between financial accounting
and managerial accounting?
Student Answer:
Financial accounting is primarily concerned with reporting
the past, while managerial accounting is more concerned with the future.
Managerial accounting uses more nonmonetary information than is used in
financial accounting.
Managerial accounting is primarily concerned with providing information for
external users while financial accounting is concerned with internal users.
Financial accounting must follow GAAP while managerial accounting is not required
to follow GAAP.
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.

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
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:
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
Question : (TCO 1) Product costs
Student Answer:
are also called manufacturing costs.
are considered an asset until the finished goods are sold.
become an expense when the goods are sold.
All of the above answers are correct.
Question : (TCO 1) At December 31, 2010, WDT Inc. has a balance in the
Work in Process Inventory account of $62,000. At January 1, 2010, the balance was
$55,000. Current manufacturing costs for the year are $292,000, and cost of goods
sold is $284,000. How much is cost of goods manufactured?
Student Answer:
Question : (TCO 2) BCS Company applies manufacturing overhead based on
direct labor hours. Information concerning manufacturing overhead and labor for
August follows:
Estimated Actual
Overhead cost
Direct labor hours 5,800 5,900
Direct labor cost
How much overhead should be applied in total during August?
Student Answer:


Question : (TCO 2) Citrus Company incurred manufacturing overhead costs
of $300,000. Total overhead applied to jobs was $306,000. What was the amount of
overapplied or underapplied overhead?
Student Answer:
$7,000 overapplied
$6,000 overapplied
$6,000 underapplied
$13,000 underapplied
10. Question : (TCO 3) Companies in which of the following industries wouldnot
be likely to use process costing?
Student Answer:
auto body shop
11. Question : (TCO 3) The Blending Department began the period with 20,000
units. During the period the department received another 80,000 units from the
prior department and at the end of the period 30,000 units remained, which were
40% complete. How much are equivalent units in The Blending Department’s work
in process inventory at the end of the period?
Student Answer:
12. Question : (TCO 3) Ranger Glass Company manufactures glass for French
doors. At the start of May, 2,000 units were in-process. During May, 11,000 units
were completed and 3,000 units were in process at the end of May. These in-process
units were 90% complete with respect to material and 50% complete with respect
to conversion costs. Other information is as follows:
Work in process, May 1:
Direct material
Conversion costs $45,000
Costs incurred during May:
Direct material
Conversion costs $255,000
Calculate the cost per equivalent unit for conversion costs.
Student Answer:


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:
(TCO 4) Which of the following will have no effect on the break-even point in units?
Student Answer:
The selling price increases
The variable cost per unit increases
The sales volume increases
Total fixed costs increase
Question : (TCO 4) Circle K Furniture has a contribution margin ratio of 16%.
If fixed costs are $176,800, how many dollars of revenue must the company
generate in order to reach the break-even point?
Student Answer:
Question : (TCO 4) Randy Company produces a single product that is sold
for $85 per unit. If variable costs per unit are $26 and fixed costs total $47,500, how
many units must Randy sell in order to earn a profit of $100,000?
Student Answer:
Question : (TCO 5) In full costing, when does fixed manufacturing overhead
become an expense?
Student Answer:
In the period when other fixed costs are at the highest
In the period when the product is sold
In the period when the expense is incurred
When the controller decides that the expense should be recognized
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
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
Variable manufacturing overhead per unit
Fixed manufacturing overhead per year
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 fixed manufacturing overhead is in ending inventory under full
Student Answer:


Question : (TCO 6) Which of the following is not a reason that companies
allocate costs?
Student Answer:
To calculate the full cost of products for financial
reporting purposes
To discourage managers from using external suppliers
To reduce the frivolous use of company resources
Question : (TCO 6) Which of the following statements about cost pools isnot
Student Answer:
The costs in each of the cost pools should be
homogeneous or similar.
Managers must make a cost-benefit decision when determining how many cost
pools are appropriate.
Only four different kinds of costs may be included in a single cost pool.
More cost pools usually provide more accurate information, but are more
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
Direct labor hours 25,000
If Jones assigns costs to departments based on square footage, how much total
costs will be allocated to Production Department 1?
Student Answer:


10. Question : (TCO 7) A company is currently making a necessary component
in house (the company is producing the component for its own use). The company
has received an offer to buy the component from an outside supplier. A machine is
being rented to make the component. If the company were to buy the component,
the machine would no longer be rented. The rent on the machine, in relation to the
decision to make or buy the component, is:
Student Answer:
sunk and therefore not relevant.
avoidable and therefore not relevant.
avoidable and therefore relevant.
unavoidable and therefore relevant.
11. Question : (TCO 7) Ricket Company has 1,500 obsolete calculators that are
carried in inventory at a cost of $13,200. If these calculators are upgraded at a cost
of $9,500, they could be sold for $22,500. Alternatively, the calculators could be
sold “as is” for $9,000. What is the net advantage or disadvantage of reworking the
Student Answer:
$13,000 advantage
$4,000 advantage
$9,200 disadvantage
$200 disadvantage
12. Question : (TCO 7) YXZ Company’s market for the Model 55 has changed
significantly, and YXZ has had to drop the price per unit from $275 to $135. There
are some units in the work in process inventory that have costs of $160 per unit
associated with them. YXZ could sell these units in their current state for $100 each.
It will cost YXZ $10 per unit to complete these units so that they can be sold for
$135 each.
When the incremental revenues and expenses are analyzed, what is the financial
Student Answer:
$25 per unit profit if the units are completed
$125 per unit if the units are completed
$65 per unit loss if the units are completed
$150 per unit loss if the units are completed
What are transferred-in costs? Which departments will never have transferred-in
Computer Boutique sells computer equipment and home office furniture. Currently,
the furniture product line takes up approximately 50% of the company’s retail floor
space. The president of Computer Boutique is trying to decide whether the company
should continue offering furniture or just concentrate on computer equipment. If
furniture is dropped, salaries and other direct fixed costs can be avoided. In
addition, sales of computer equipment can increase by 13%. Allocated fixed costs
are assigned based on relative sales?

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

Click on the link below for the solution: