NATIONAL CHENGCHI UNIVERSITY – IMBA PROGRAM

ACCOUNTING FALL 2021

FINAL EXAM
December 16, 2021
Instructions
1. This is a closed book exam. Materials other than writing utensils and calculators (without
saving functions) are not permitted for this exam.
2. This exam has two parts with a total of 17 pages. Please be sure to hand in all pages before
leaving the examination hall.
3. Part A consists of 30 multi-choice questions (MCQs) worth a total of 60 marks. Answer these
MCQs ONLY in the answer box provided below.
4. Part B consists of 4 computational and short-answer questions worth a total of 40 marks.
Answer these questions ONLY in the spaces after each question provided in this booklet.
5. Provide your name and student number in the space below.

Name: _________________________ Student Number: ___________________

Multiple-choice Answer Box

1. 2. 3. 4. 5.

6. 7. 8. 9. 10.

11. 12. 13. 14. 15.

16. 17. 18. 19. 20.

21. 22. 23. 24. 25.

26. 27. 28. 29. 30.

*Please write your answers for the multiple choice questions

here. Failure to do so will result in questions not being Score
marked.
Part A: Multiple Choice (60%)

1. When costs can be traced to a particular cost object in an economically feasible way, the
cost is a:

A. direct cost
B. indirect cost
C. allocated cost
D. budgeted cost

2. Which of the following statements about the direct/indirect cost classification is true?

A. Indirect costs are always traced.

B. Indirect costs are always allocated.
C. The design of sales target affects the direct/indirect classification.
D. The direct/indirect classification depends on the cost control measures.

3. A manufacturing plant produces two product lines: golf equipment and soccer equipment.
An example of a direct cost for the golf equipment line is:

A. beverages provided daily in the plant break room for the entire staff
B. monthly lease payments for a specialized piece of equipment needed to manufacture
the golf driver
C. salaries of the clerical staff that work in the company administrative offices
D. overheads incurred in producing both golf and soccer equipment

4. A manufacturing plant produces two product lines: golf equipment and soccer equipment.
An example of indirect cost for the soccer equipment line is the:

A. material used to make the soccer balls

B. labor to shape the leather used to make the soccer ball
C. material used to manufacture the soccer studs
D. property taxes paid on the land and building (plant)

5. The East Company manufactures several different products. Unit costs associated with
Product ORD105 are as follows:

Direct materials $92

Direct manufacturing labor 32
Variable manufacturing overhead 12
Fixed manufacturing overhead 32
Sales commissions (2% of sales) 26
Administrative salaries 6
Total $200

What is the percentage of the total variable costs per unit associated with Product
 ORD105 with respect to total cost?

A. 81%
B. 68%
C. 84%
D. 71%

6. Orion Company sells several products. Information of average revenue and costs is as
follows:

Selling price per unit $21

Variable costs per unit:
Direct material $6
Direct manufacturing labor $1.80
Manufacturing overhead $0.50
Selling costs $2
Annual fixed costs $96,000

The company sells 12,000 units at the end of the year.

If direct labor and direct material costs increase by $1 each, contribution margin:

A. increases by $24,000
B. increases by $12,000
C. decreases by $24,000
D. decreases by $12,000

7. Bell Company sells several products. Information of average revenue and costs is as
follows:

Selling price per unit $32.00

Variable costs per unit:
Direct material $5.25
Direct manufacturing labor $2.50
Manufacturing overhead $0.30
Selling costs $2.25
Annual fixed costs $115,000

The company sells 11,000 units.

The contribution margin per unit is:

A. $11.25
B. $21.70
C. $23.95
D. $24.25
8. Firebird Ltd. sells packaged birdseed for $5.50 per package. Variable product costs are
$4.50 per package. Fixed costs are $12,000 per period. How many packages must
Firebird sell to earn a target operating income of $7,700?

A. 12,000 packages
B. 7,700 packages
C. 19,700 packages
D. 3,582 packages

9. How many units would have to be sold to yield a target operating income of $24,000,
assuming variable costs are $26 per unit, total fixed costs are $4,000, and the unit selling
price is $31?

A. 800 units
B. 1,077 units
C. 5,600 units
D. 1,334 units

10. Which of the following most accurately describes the contrast between process and job
costing?

A. In process costing, they include all the factors of production but job costing
includes only materials and labor
B. Job costing includes materials, labor and overhead while process costing only
considers conversion costs
C. The main difference is the extent of averaging used to compute the unit costs
D. Job costing measures the variable cost of identical jobs while process costing
measures the cost of identical products using average units costs of materials and
conversion costs, some of which are fixed costs

11. Which if the following are not conversion costs?

A. the cost of direct laborers who assemble the parts of an automobile

B. the cost of tires on an automobile
C. the cost of depreciation on an automobile assembly plant
D. the cost of electricity to run the tools in the automobile assembly plant

12. Which of the following statements best describes conversion costs?

A. Conversion costs are all manufacturing and nonmanufacturing costs.

B. Conversion costs are all manufacturing costs other than direct materials costs.
C. Conversion costs are all nonmanufacturing costs including marketing costs.
D. Conversion costs are all nonmanufacturing costs other than fixed selling and
distribution costs.
13. Process-costing systems separate costs into cost categories according to:

A. when costs are introduced into the process

B. cost behavior (fixed versus variable)
C. the specific job being worked on
D. customer being served

14. Overcosting a particular product may result in:

A. pricing the product too high

B. pricing the product too low
C. operating efficiencies
D. understating total product costs

15. Extreme Manufacturing Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Account inquiry $140,000 14,000 hours
Account billing $120,000 6,000,000 lines
Account verification accounts $198,000 80,000 accounts
Correspondence letters $33,000 6,000 letters
Total costs $491,000

The above activities are used by Departments A and B as follows:

Department A Department B
Account inquiry hours 2,700 hours 4,200 hours
Account billing lines 800,000 lines 650,000 lines
Account verification accounts 8,000 accounts 6,000 accounts
Correspondence letters 1,200 letters 1,600 letters

How much of account verification costs will be assigned to Department A?

A. $14,850
B. $19,800
C. $198,000
D. $99,000

16. Columbus Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor $368,000 8,000 hours
Gas $72,000 6,000 gallons
Invoices $130,000 6,500 invoices
Total costs $570,000

The above activities used by their three departments are:

 Lawn Department Bush Department Plowing Department
Labor 2,600 hours 1,300 hours 4,100 hours
Gas 1,700 gallons 800 gallons 3,500 gallons
Invoices 1,100 invoices 300 invoices 5,100 invoices

If labor hours are used to allocate the non-labor, overhead costs, what is the overhead
allocation rate? (Round the final calculation to the nearest cent.)

A. $71.25 per hour

B. $27.80 per hour
C. $46.00 per hour
D. $25.25 per hour

17. Columbus Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor $410,000 10,000 hours
Gas $40,000 4,000 gallons
Invoices $56,000 3,500 invoices
Total costs $506,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor 2,600 hours 1,500 hours 5,900 hours
Gas 1,900 gallons 1,000 gallons 1,100 gallons
Invoices 1,100 invoices 100 invoices 2,300 invoices

How much of invoice cost will be assigned to the Bush Department?

A. $1,600
B. $36,800
C. $17,600
D. $56,000

18. All of the following are ways to calculate different versions of ROI EXCEPT:

A. Revenues/Total Assets
B. Return on sales × investment turnover
C. Income/Investments
D. Operating Income/Revenues × Revenues/Total Assets
19. The return on investment is usually considered the most popular approach to measure
performance because:

A. it blends all the ingredients of profitability into a single percentage

B. once determined, there is no need to use it with other measures of performance
C. it throws light on the company's working capital
D. it measures the cash balance of the company in the most efficient manner

20. Return on investment can be increased by:

A. increasing current assets

B. increasing return on sales
C. decreasing revenues
D. increasing the debt portion of the capital

21. Beginning raw materials inventory was $32,000. During the month, $276,000 of raw
material was purchased. A count at the end of the month revealed that $28,000 of raw
material was still present. What is the cost of direct material used?

A. $276,000
B. $272,000
C. $280,000
D. $2,000

22. Direct materials used in production totaled $280,000. Direct labor was $375,000, and
$180,000 of manufacturing overhead was added to production for the month. What were
total manufacturing costs incurred for the month?

A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined

23. Tiger, Inc., had actual manufacturing overhead costs of $1,210,000 and a predetermined
overhead rate of $4.00 per machine-hour. Tiger, Inc., worked 290,000 machine-hours
during the period. Tiger’s manufacturing overhead is:

A. $50,000 overapplied.
B. $50,000 underapplied.
C. $60,000 overapplied.
D. $60,000 underapplied
 24. What effect will the overapplied overhead have on net operating income?

A. Net operating income will increase

B. Net operating income will be unaffected
C. Net operating income will decrease

25. Job WR53 at NW Fab, Inc., required $200 of direct materials and 10 direct labor-hours at
$15 per hour. Estimated total overhead for the year was $760,000, and estimated direct
labor-hours were 20,000. What would be recorded as the cost of Job WR53?

A. $200
B. $350
C. $380
D. $730

Use the following information for questions 25-27

Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a
cup of coffee is $1.49, and the average variable expense per cup is $0.36. The average fixed
expense per month is $1,300. An average of 2,100 cups are sold each month.

26. What is the CM ratio for Coffee Klatch?

A. 1.319
B. 0.758
C. 0.242
D. 4.139

27. What is the break-even sales dollars?

A. $1,300
B. $1,715
C. $1,788
D. $3,129

28. What is the break-even sales in units?

A. 872 cups
B. 3,611 cups
C. 1,200 cups
D. 1,150 cups
29. Which method will produce the highest values for work in process and finished goods
inventories?

A. Absorption costing
B. Variable costing
C. They produce the same values for these inventories
D. It depends

30. Redmond Awnings, a division of Wrap-Up Corp., has a net operating income of $60,000
and average operating assets of $300,000. The required rate of return for the company is
15%. What is the division’s ROI?

A. 25%
B. 5%
C. 15%
D. 20%

- End of Part A -
Part B - Short Answer Questions (40%)

Problem 1 (5%)
Jolly’s Fixtures produced 100 cabinets and sold 85 cabinets at a selling price of $700 per unit. The
variable cost is $350 per unit and the overall fixed cost is $20,000 (of which $15,000 consists of
manufacturing).

Provide your answers and show your computations below.

(a) Fill in the blanks
Line Item Contribution Line Item Gross Margin
Margin
Sales 59,500 Sales 59,500
Variable Costs 29,750 Cost of Goods Sold 42,500
Contribution Margin 29,750 Gross Margin 17,000
Fixed Manufacturing 15,000 Non-Manufacturing 5,000
Costs Costs
Fixed Non- 5,000
Manufacturing Costs
Operating Income 9,750 Operating Income 12,000

(b) Compare the two figures: ___________________

Problem 2 (10%)
Willy Wonka, Inc., uses the weighted-average method in its process costing system. It
manufactures a product that passes through two departments. Data for a recent month for the first
department follow:

Units Materials Labor Overhead

Work in process inventory, Beginning 30,000 $9,500 $4,250 $7,790
Units started in process 65,000
Units transferred out 86,000
Work in process inventory, ending 9,000
Cost added during the month $52,720 $21,514 $32,212

The beginning work in process inventory was 90% complete with respect to materials and 50%
complete with respect to labor and overhead. The ending work in process inventory was 80%
complete with respect to materials and 20% complete with respect to labor and overhead.

Provide your answers and show your computations below.

(a) Compute the first department’s equivalent units of production
For materials: 86,000 + 9,000x0.8 = 93,200
For labor: 86,000 + 9,000x0.2 =87,800
For overhead: 86,000 + 9,000x0.2 =87,800

(b) Compute for first department’s cost per equivalent unit

For materials: (52,720+9,500)/93,200 = 0.67
For labor: (21,514+4,250)/87,800 = 0.30
For overhead: (32,212+7,790)/87,800 = 0.46
Problem 3 (15%)
YTC Company manufactures and sells one product. The following information pertains
to each of the company’s first two years of operations:
Variable costs per unit:
Manufacturing:
Direct materials $20
Direct labor $10
Variable manufacturing overhead $7
Variable selling and administrative $1

Fixed costs per year:

Fixed manufacturing overhead $600,000
Fixed selling and administrative $110,000

During its first year of operations, YTC produced 75,000 units and sold 60,000 units.
During its second year of operations, it produced 60,000 units and sold 75,000 units. The selling
price of the company’s product is $58 per unit.

Provide your answers and show your computations below.

(a) Assume the company uses variable costing, compute the unit product cost
For Year 1: 20+10+7 = 37
For Year 2: 20+10+7 = 37

(b) Prepare an income statement under variable costing for Year 1 and Year 2
Year 1 Year 2
Sales $3,480,000 $4,350,000
Variable COGS 2,220,000 2,775,000
Variable S&A 60,000 75,000
Contribution margin 1,200,000 1,500,000
Fixed MOH 600,000 600,000
Fixed S&A 110,000 110,000
Net operating income $490,000 $790,000
(c) Assume the company uses absorption costing, compute the unit product cost
For Year 1: 37+(600,000/75,000) = 45
For Year 2: 37+(600,000/60,000) = 47

(d) Prepare an income statement under absorption costing for Year 1 and Year 2

Year 1 Year 2
Sales $3,480,000 $4,350,000
COGS 2,700,000 3,495,000
Gross margin 780,000 855,000
S&A expenses 170,000 185,000
Net operating income $610,000 $670,000

Problem 4 (10%)
 ClinicSphere buys medical supplies from a variety of manufacturers and then resells and
delivers these supplies to hundreds of hospitals. ClinicSphere sets its prices for all hospitals by
marking up its cost of goods sold to those hospitals by 10%. For example, if a hospital buys
supplies from ClinicSphere that cost ClinicSphere $100 to buy from manufacturers, ClinicSphere
would charge the hospital $110 to purchase these supplies.

For years, ClinicSphere believed that the 10% markup covered its selling and
administrative expenses and provided a reasonable profit. However, in the face of declining profits
ClinicSphere decided to implement an activity-based costing system to help improve its
understanding of customer profitability. The company broke its selling and administrative
expenses into five activities as shown in the table on the below.

Activity Cost Pool (Activity Measure) Total Cost Total Activity

Customer deliveries (# of deliveries) $ 800,000 2,500
Manual Order processing (# of manual orders) $ 333,000 5,000
Electronic order processing (# of electronic orders) $ 252,000 14,000
Line item picking (# of line items picked) $ 1,000,000 475,000
Other organization-sustaining costs (None) $ 800,000
Total selling and administrative expenses $ 3,185,000

ClinicSphere gathered the data below, in the table below, for two of the many hospitals
that it serves—Hopkins and Smith (each hospital purchased medical supplies that had cost
ClinicSphere $40,000 to buy from manufacturers):

Activity
Activity Measure Hopkins Smith
# of deliveries 8 20
# of manual orders 0 25
# of electronic orders 35 0
# of line items picked 140 300

Provide your answers and show your computations below.

(a) Total revenue that ClinicSphere will receive from Hopkins: ___________________
Total revenue that ClinicSphere will receive from Smith: ___________________
(b) Total activity rate for each activity cost pool: ______________________

(c) Total activity cost assigned to Hopkins: _________________

Total activity cost assigned to Smith: __________________

(d) ClinicSphere’s customer margin for Hopkins: ________________

ClinicSphere’s customer margin for Smith: __________________
(Hint: Do not overlook the $40,000 cost of goods sold that ClinicSphere incurred serving each
hospital.)

- End of Part B –
Worksheet Page 1 of 2
* You may use the worksheet pages to compute the answers but MUST write your answers in the
space specified. Please hand in your exam and any worksheets to your TA or CA.

Worksheet Page 2 of 2