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Hi, may I know how to solve question 19 and 20? Thank you. ACCT7107 Revision MC Questions Students should note that these MCQ's are not

Hi, may I know how to solve question 19 and 20?

Thank you.

image text in transcribed ACCT7107 Revision MC Questions Students should note that these MCQ's are not descriptive of the questions you will find on your mid semester exam but give you an idea of different styles of questions and levels of difficulty. 1. Inventoriable costs are: a) only purchased goods for resale b) a category of costs used only for manufacturing companies c) recorded as expenses when incurred and later reclassified as assets d) recorded as assets when incurred 2. Morton Graphics successfully bid on a job printing standard notebook covers during the year using last year's price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked to discover that the company had suffered a loss. \"How could this be?\" she exclaimed. \"We had no increases in cost and our price was the same as last year. Last year we had a healthy income.\" What could explain the company's loss in income this current year? a) Their costs were all variable costs and the amount produced and sold increased. b) Their costs were mostly fixed costs and the amount produced this year was less than last year. c) They used a different cost object this year than the previous year. d) Their costs last year were actual costs but they used budgeted costs to make their bids. 3. Data from the duplicating department of Fastcopy Ltd for the 5 months are as follow: Month #Copies Dept Costs January 14,800 $12,830 February 16,000 13,930 March 20,000 17,300 April 23,600 19,430 May 18,500 15,800 What are the expected duplicating department costs for June if 19,000 copies are expected to be made? a) $15,858 b) $15,980 c) $16,216 d) $18,580 4. A manufacturing company makes mobile phones. Materials that became part of the finished products cost $869,000. Insurance at the manufacturing plant cost $56,000. Plant management were paid $202,000. Rent on corporate headquarters was $48,000. Salespeople were paid $250,000 in salary and $62,000 in commissions. The screws used in the phone (that are hard to keep track of) cost $7,500. The workers on the production line were paid $1,250,000. Depreciation on manufacturing equipment cost $155,000. Utilities at the manufacturing plant cost $132,000. Advertising of the products cost $37,000. Supplies for the corporate office cost $12,000. Glue used to put the front and back of the phone together cost $3,900. Warehousing cost for finished units was $35,000. The manufacturing overhead costs for the period totalled: a) $409,000 b) $ 591,400 c) $ 556,400 d) $965,400 5. If total manufacturing costs are equal to the cost of goods manufactured and greater than cost of goods sold: a) The inventory of WIP increases b) The inventory of WIP decreases c) The inventory of FG increases d) The inventory of FG decreases 6. The cost of an accounting lecturer on campus would be a direct cost to the Business School but would need to be allocated as an indirect cost to the: (a) university (b) course/subject (c) individual student (d) faculty 7. Tee Times Pty Ltd produces and sells the finest quality golf clubs in Australia. The company expects the following revenues and costs in 2014 for its Elite golf club set: $ 240,000 Revenues (400 sets) Variable costs 160,000 Fixed costs 50,000 What sales revenue does Tee Times need to earn an after tax net income of $63,000 (tax rate = 30%)? a) $489,000 b) $429,000 c) $420,000 d) $300,000 8. What effect would an increase in building insurance have on the breakeven point and the contribution margin? Breakeven Point Contribution Margin a) Increase Increase b) Increase Decrease c) Increase No effect d) Decrease Decrease 9. The JIB Corporation produces and sells two products A and B with the following information: Product Contribution margin per unit Budgeted salesmix ratios A $10 .25 B $ 5 .75 JIB has budgeted fixed manufacturing costs of $100,000 and budgeted fixed selling and administrative expenses of $20,000. The tax rate is 40%. How many units of B would be needed to generate an after tax income of $24,000? a) 21,333 b) 19,200 c) 16,000 d) 12,800 10. Which of the following is (are) a benefit of normal costing? a) Normal costing enable companies to smooth out, or normalize, seasonal production fluctuations b) Under normal costing, a firm can quickly calculate the cost of items manufactured c) Under normal costing, a firm uses a predetermined overhead rate in applying overhead to each unit as the firm produces it throughout the year, rather than wait for the actual overhead rate to be determined at the end of the year d) All of the answers are correct 11. Hogan's Ltd uses a job order cost system and allocates manufacturing overhead to orders on the basis of direct labour cost. The predetermined overhead rates for the year are 200% for Department A and 50% for Department B. Job# 23, started and completed during the year, had the following costs (note: some of the data below is incomplete): Department A B Direct materials $25,000 $5,000 Direct labour ? 30,000 Manufacturing Overhead 40,000 ? The total cost of Job# 23 is: a) $100,000 b) $135,000 c) $180,000 d) $195,000 12. Assume that a company has a constant sales level of 10,000 units per period. Under absorption costing, net income will be maximized by: a) Producing 10,000 units per period b) Producing 10,000 units per period less any beginning inventory c) Producing 10,000 units per period plus any beginning inventory d) Producing as much inventory as possible given the capacity constraints 13. Wood Co. Ltd has total budgeted overhead of $40,000 at 10,000 machine hours. During the most recent period, 10,500 machine hours were used in the manufacture of all jobs. The actual cost totaled $40,500. The Company uses a normal job cost system with any over or underallocated overhead closed to COGS at the end of the period. The amount closed to COGS and the direction of the change (i.e., debit or credit) would be: a) Debit of $500 b) Credit of $500 c) Debit of $1,500 d) Credit of $1,500 14. Sam's Toy Factory produces a small toy wagon. Sam's results for the year are as follow: Wagons sold = 36,000 Wagons produced = 44,000 Sales Price per wagon = $20 Beginning Inventory = 0 Variable Manufacturing cost per wagon = $8 Variable selling and admin cost per wagon = $2 Total fixed costs per year = $120,000 Fixed manufacturing costs per wagon = $2 (based on an annual capacity of 48,000 wagons) Any over or underallocation of fixed overhead is closed to COGS. Sam's accountants have calculated the net income (before tax) on the basis of absorption costing and variable costing. What was the difference in reported net income? a) AC>VC by $24,000 b) AC>VC by $16,000 c) No difference d) VC>AC by $8,000 15. Use of capacity levels based on demand: a) Hides the amount of unused capacity b) Highlights the cost of capacity acquired but not used c) Yields an allocation rate that does not include a charge for unused capacity d) Results in a price that covers the cost of capacity customers expect to pay 16. Assume the Spring Company produces two Products A and B. Both products are mixed in Department P1 and canned in Department P2. Most of the overhead costs are related to direct materials (DM) in P1, while most of the overhead costs in P2 are related to machine time. Data for a recent month follows: Department Overhead Costs Product Machine Hours DM Costs P1 $600,000 A 10,000 $500,000 B 40,000 $500,000 P2 $450,000 A 45,000 $20,000 B 30,000 $30,000 If Spring uses a plantwide rate based on machine hours, the total overhead allocated to A and B would be: A ; B a) $390,000 ; $660,000 b) $520,000 ; $530,000 c) $480,000 ; $570,000 d) $462,000 ; $588,000 17. Refer to the data in Question 16. above. If the company uses departmental rates based on machine hours then the total overhead allocated to A and B would be: A ; B a) $390,000 ; $660,000 b) $520,000 ; $530,000 c) $480,000 ; $570,000 d) $462,000 ; $588,000 18. Sox Ltd has two production departments: D and J. Sox Ltd also has 3 service departments: Personnel, Administration, and Shipping. Shipping costs are allocated on the basis of number of packages, while Personnel and Administration costs are allocated using number of employees. Assume that the ranking of the benefits provided is in the order listed below (ie., allocate personnel first followed by admin...) Department Costs Employees # of Packages Personnel $600,000 25 7,000 Administration 800,000 20 9,000 Shipping 700,000 12 27,500 D 500,000 10 5,000 J 400,000 15 6,000 ` Using the stepdown method, what amount of Administration costs is allocated to Department D (rounded to the nearest $)? a) $ 97,561 b) $216,216 c) $273,115 d) $409,673 19. The Jagar Company produces two products X and Y. Some information for a recent period is provided below: Data X Y Annual production quantity 900 100 DM costs per unit $100 $100 DL hours per unit 1 1 Machine hours per unit .1 .1 Purchase orders per year 20 10 Machine setups per year 6 3 Activity Pool Annual Costs Activity Measure Purchasing and receiving $3,000 # purchase orders Machining, power and maintenance $6,000 # machine hours Materials planning and handling $2,000 # materials $ Machine setup $1,000 # machine setups Although Jagar is currently using direct labour hours to allocate overhead costs to products, a consultant has recommended using ABC using the activity cost pools and measurements above. Using the ABC method, the total overhead cost allocated to X (rounded to dollars) would be: a) $6,000 b) $6,667 c) $9,867 d) $10,800 20. What is the lowest number of cost pools that could be used to accurately allocate Jagar's costs using ABC? (note: this may not provide appropriate information for activity based management) a) 1 b) 2 c) 3 d) 4 21. When using the weighted average method, the unit cost in process costing represents: a) The average cost of the work performed in the current month b) The average cost of work remaining at the end of the previous month and the work performed during the current month c) The average cost of the work performed during the current month less the work performed on the beginning inventory during the month d) The average cost of all the work performed during both the current month and the previous month 22. Calculate equivalent units of conversion for XYZ Company using the Weighted Average method using the following information: Beginning Inventory: 50,000 units, 70% complete Units completed: 100,000 units Units in ending inventory: 25,000 units, 40% complete a) 110,000 b) 150,000 c) 135,000 d) 125,000 23. The Parker Company produces a single product in one process and uses a weighted average process costing system. During the most recent period, the Company started 18,000 units and had 5000 units in opening WIP that were 60% complete. A total of 20,000 units were completed during the period. Ending WIP was twothirds complete. Costs in opening WIP of $25,000, consisted of materials of $10,000 and conversion costs of $15,000. During the current period $31,500 of materials were added along with $70,400 of conversion costs. If materials are added at the beginning of the process, the unit material cost would be (rounded to the closest cent): a) $1.37 b) $1.80 c) $1.58 d) $1.89 24. Use the information from Question 23 except that you should ignore the cost data provided and assume that the material was added at the end of the process not the beginning. If the EU cost of material was $2 and the EU conversion cost was $3 the value of closing WIP would be: a) $11,000 b) $12,000 c) $ 6,000 d) $ 66,000 25. Top That manufactures baseballstyle hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. In the Sewing Department, additional direct materials are added to the product at the end of production. Assume that 200,000 units were transferred from the Cutting Department and that the weightedaverage method is used. Data for February follow: Work in process, January 3170,000 units (30% complete as to conversion) Units completed during February240,000 units Work in process, February 28???? (80% complete as to conversion) For the Sewing Department, the equivalent units of work done in February is Transferred In Direct Materials Conversion Costs a) 200,000 200,000 200,000 b) 200,000 170,000 194,000 c) 240,000 240,000 245,000 d) 270,000 240,000 264,000 26. Troy Instruments uses ten units of Part 107 each month in the production of scientific equipment. The cost to make one unit of Part 107 is presented below: Direct Materials $ 4,000 Materials Handling (10% of DM cost) 400 Direct Labour 6,000 Overhead (based on DL cost) 12,000 Total manufacturing costs $22,400 The materials handling represents the direct variable costs of the Receiving Department that are applied to both DM and purchased components on the basis of their cost. This is a separate charge in addition to overhead. Troy's annual overhead cost is budgeted to be variable and fixed. Duncan, one of Troy's reliable vendors, has offered to supply Part 107 at a unit price of $17,000. If Troy purchase the Part from Duncan, the capacity Troy used to make these parts would be idle. If Troy purchases the parts from Duncan, the unit cost of Part 107 would: a) Decrease by $3,700 b) Decrease by $5,600 c) Increase by $3,600 d) Increase by $5,300 27. RCG Services (a services firm) is investigating its profitability relationship with each of its customers. What is the key question RCG should ask in deciding to keep or drop a particular customer? a) Will the customer meet a specific designated gross margin percentage? b) Will the customer be willing to pay a higher price to insure RCG's profitability? c) Will enough customers be found to replace any customers dropped for lack of profitability? d) Will expected total corporate office costs decrease if the decision is made to drop the customer? 28. The Fast Trax Company manufactures adding machines. The company's capacity is 5,000 units per month; however, it currently sells only 3,000 units per month at $35 each. Company X has a special order to buy 1,000 adding machines at $25 each. Accounting records report each adding machine's full absorption costs are $30 which includes fixed costs of $20. If Fast Trax was to accept Company X's offer, what would be the impact on Fast Trax's operating income (ie., what would be the change in income)? a) Additional profit of $15,000 b) Additional profit of $25,000 c) A loss of $5,000 on this order d) A loss of $10,000 on this order 29. Woods Milling and Manufacturing Ltd manufactures part 7107 used in several of its final products. Monthly production costs for 1,000 units of the part are as follows: Direct materials $ 20,000 Direct labour 5,000 15,000 Variable overhead costs Fixed overhead costs 10,000 Total costs $50,000 It is estimated that 10% of the fixed overhead costs assigned to the part will no longer be incurred if the company purchases the part from an outside supplier for $42.50. If Woods' purchases 1,000 parts from the outside supplier per month, then its monthly operating income will: a) increase by $1,000 b) increase by $40,000 c) decrease by $1,500 d) decrease by $42,500 30. Bazza Company manufactures three sizes of battery operated camping fridges: small, medium, and large. Product information is provided below. Small Medium Large Unit selling price $320 $550 $1,100 Unit costs: Variable manufacturing (140) (290) (500) Fixed manufacturing (80) (100) (240) Variable selling and administrative (60) (60) (60) Unit profit $ 40 $ 100 $ 300 Demand in units 100 120 100 Machinehours per unit 20 40 100 The maximum machinehours available are 6,000 per month. How many of each size should be produced per month using a shortrun profit maximizing strategy? Small Medium Large a) 0 120 12 b) 100 0 40 c) 100 100 0 d) 100 20 40

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