Professor's Signature University of Tunis Professor's Signature

(Supervising) (Correcting)
Tunis Business School
School Year 2012-2013, Spring Term
Student's Signature Managerial Accounting (BCOR 225) Grade

FINAL EXAM

Family Name: ....................................................... First Name: .........................................................

C.I.N:.......................................................................................................................................................
Section n˚: ............................ Group n˚: ..................................... Amphitheatre n˚: .........................

1. Which best describes the flow of overhead costs in an activity-based costing system? 2 pts

A. Overhead costs - direct labor cost or hours- products

B. Overhead costs- products
C. Overhead costs - activity cost pools - cost drivers - products
D. Overhead costs - machine hours - products

2. Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’s total

overhead costs consist of assembly costs and inspection costs. The following information is
available:
4 pts

Total cost Cost driver Expected use of cost drivers per product
Titanium Aluminium
Assembly $45,000 Machine hour 500 500
Inspection $75,000 Inspections 350 150

The required labor hours for Titanium and Aluminium are 2,100 and 1,900 respectively. Sitwell
is considering switching from one overhead rate based on labor hours to activity-based costing.

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Using a single overhead rate, determine the total overhead costs assigned to titanium racquets.

Answer:....................................................................................................................................

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3. Sanborn Industries has the following overhead costs and cost drivers. Direct labor hours are

estimated at 100,000 for the year.

Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders $ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections

A. If overhead is applied using traditional costing based on direct labor hours, compute the
overhead application rate. 4 pts

B. If overhead is applied using activity-based costing, calculate the overhead application rate for
ordering and receiving. 4 pts

Answer:
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4. Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic

model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The
company produces 3,400 units of the Basic model and 600 units of the Luxury model each year.
The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10
produced. The company expects to incur $84,600 of total inspecting costs this year. 5 pts

How much of the inspecting costs should be allocated to the Basic model using ABC costing?

Answer: .....................................................................................................................................

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5. Clemson Co. incurs $700,000 of overhead costs each year in its three main departments,

machining ($400,000), inspections ($200,000) and packing ($100,000). The machining

department works 4,000 hours per year, there are 600 inspections per year, and the packing
department packs 1,000 orders per year. Information about Clemson’s two products is as
follows: 5 pts

Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

Using ABC, how much overhead is assigned to Product X this year?

Answer:
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6. Which of the following is a value-added activity?
2 pts
A. Engineering design
B. Machinery repair
C. Inventory storage
D. Inspections

7. The relevant range of activity refers to the 2 pts

A. geographical areas where the company plans to operate.

B. activity level where all costs are curvilinear.
C. levels of activity over which the company expects to operate.
D. level of activity where all costs are constant.

8. Armstrong Industries has a contribution margin of $300,000 and a contribution margin ratio

of 30%. How much are total variable costs? 3 pts

Answer: ....................................................................................................................................

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9. Zehms, Inc. has a contribution margin per unit of $21 and a contribution margin ratio of 60%.

How much is the selling price of each unit? 4 pts

Answer: .....................................................................................................................................

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10. At the break-even point of 2,000 units, variable costs are $110,000, and fixed costs are

$64,000. How much is the selling price per unit? 5pts

Answer: .....................................................................................................................................

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11. Boswell company reported the following information for the current year: Sales (50,000

units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and
fixed costs $270,000. What is Boswell’s contribution margin ratio? 5 pts

Answer: ....................................................................................................................................

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12. Montoya Manufacturing has fixed costs of $2,500,000 and variable costs are 40% of sales.

What are the required sales if Montoya desires net income of $250,000? 4 pts

Answer: ....................................................................................................................................

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13. Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan.

Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual
salary of $32,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are
$10,000 per year. The rooms rent at an average price of $60 per person per night including
breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and
the cost of food which is $5 per person per night.
Instructions
A. Determine the number of rentals and the sales revenue Jane needs to break even using the
contribution margin technique. 4pts

B. If the current level of rentals is 3,500, by what percentage can rentals decrease before Jane
has to worry about having a net loss? 4 pts

Answer: ...............................................................................................................................

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14. Farmers’ Industries has fixed costs of $400,000 and variable costs are 60% of sales.

How much will Farmers report as sales when its net income equals $40,000? 3 pts

Answer: .....................................................................................................................................

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15. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and

70% (Q-Chip Plus). Q-Chip has variable costs per unit of $60 and a selling price of $100. Q-Chip
Plus has variable costs per unit of $70 and a selling price of $130. Ramirez’s fixed costs are
$540,000. How many units of Q-Chip would be sold at the break-even point? 3 pts

Answer: ....................................................................................................................................

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16. The sales mix percentages for Novotna’s Boston and Seattle Divisions are 70% and 30%. The

contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $1,110,000.
What is Novotna’s break-even point in dollars? 3 pts

Answer: .....................................................................................................................................

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 17. Greg’s Breads can produce and sell only one of the following two products:
4 pts

Hours Required Contribution Margin Per Unit

Muffins 0.2 $3
Coffee Cakes 0.3 $4

The company has oven capacity of 1,200 hours. How much will contribution margin be if it
produces only the most profitable product?

Answer: ......................................................................................................................................

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18. Able Company’s unit manufacturing cost is: 5 pts

Variable Costs $50

Fixed Costs $25

A special order for 2,000 units has been received from a foreign company. The unit price
requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will
increase by $2 for additional freight costs.
If the order is accepted, calculate the incremental profit (loss).

Answer: ......................................................................................................................................

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19. Chung Inc. is considering the replacement of a piece of equipment with a newer model. The
following data has been collected: 5 pts

Old Equipment New Equipment

Purchase price $225,000 $375,000
Accumulated depreciation $90,000 - $0 -
Annual operating costs $300,000 $240,000

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If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’s
remaining useful life and the new equipment’s useful life is 5 years.
What is the net cost of the new equipment?

Answer: .....................................................................................................................................

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20. The difference between a budget and a standard is that: 2 pts

A. a budget expresses what costs were, while a standard expresses what costs should be.
B. a budget expresses management's plans, while a standard reflects what actually happened.
C. a budget expresses a total amount, while a standard expresses a unit amount.
D. standards are excluded from the cost accounting system, whereas budgets are generally
incorporated into the cost accounting system.

21. An unfavorable materials quantity variance would occur if: 2 pts

A. More materials were purchased than were used.

B. Actual pounds of materials used were less than the standard pounds allowed.
C.Actual labor hours used were greater than the standard labor hours allowed.
D.Actual pounds of materials used were greater than the standard pounds allowed.

22. Which of the following statements is true? 2 pts

A.Variances are the differences between total actual costs and total standard costs.
B.When actual costs exceed standard costs, the variance is favorable.
C.An unfavorable variance results when actual costs are decreasing but standards are not
changed.
D.All of the above are true.

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23. The total variance is $35,000. The total materials variance is $14,000. The total labor

variance is twice the total overhead variance. 4 pts

What is the total overhead variance?

Answer: .....................................................................................................................................

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24 . All Urban Company produces a product requiring 4 pounds of material costing $3.50 per

pound. During December, All Urban purchased 4,200 pounds of material for $14,112 and used
the material to produce 500 products.
What was the materials price variance for December? 5 pts

Answer: ......................................................................................................................................

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25. Shep Corporation estimated it would produce 6,200 buckets, though actual production was

6,000 during August. The standard labor cost is 2 buckets per hour at $18.00 per hour. Actual
cost per hour was $18.40 with a total labor cost of $53,360. 5 pts

Determine the amounts of the labor price and the labor quantity variances for August.

Answer: ......................................................................................................................................

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