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BUS 7013 Managerial Accounting Final Exam SuB17 1 1. Conversion cost equals product cost less direct labor cost. a. True b. False 2. The costs of the Accounting Department at Central Hospital would be considered by the Surgery Department to be: a. direct costs. b. indirect costs. c. incremental costs. d. opportunity costs. 3. The nursing station on the fourth floor of Central Hospital is responsible for the care of orthopedic surgery patients. The costs of prescription drugs administered by the nursing station to patients should be classified as: a. direct patient costs. b. indirect patient costs. c. overhead costs of the nursing station. d. period costs of the hospital. 4. The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March. Corporate headquarters building lease.................................... $80,000 Cosmetics Department sales commissionsNorthridge Store $7,000 Corporate legal office salaries................................................. $75,000 Store manager's salaryNorthridge Store................................ $11,000 HeatingNorthridge Store....................................................... $11,000 Cosmetics Department cost of salesNorthridge Store.......... $83,000 Central warehouse lease cost.................................................. $17,000 Store securityNorthridge Store.............................................. $11,000 Cosmetics Department manager's salaryNorthridge Store... $4,000 BUS 7013 Managerial Accounting Final Exam SuB17 2 The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company's stores. What is the total amount of the costs listed above that are direct costs of the Cosmetics Department? a. $83,000 b. $94,000 c. $90,000 d. $127,000 5. (CR Corporation has the following estimated costs for the next year: CR Corporation estimates that 20,000 labor-hours will be worked during the year. If overhead is applied on the basis of direct labor-hours, the overhead rate per hour will be: a. $2.25 b. $3.25 c. $3.45 d. $4.70 6. Clear Colors Corporation uses a predetermined overhead rate based on direct labor costs to apply manufacturing overhead to jobs. At the beginning of the year the Corporation estimated its total manufacturing overhead cost at $350,000 and its direct labor costs at $200,000. The actual overhead cost incurred during the year was $362,000 and the actual direct labor costs incurred on jobs during the year was $208,000. The manufacturing overhead for the year would be: a. $12,000 underapplied. b. $12,000 overapplied. c. $2,000 underapplied. d. $2,000 overapplied. BUS 7013 Managerial Accounting Final Exam SuB17 3 7. Overapplied manufacturing overhead means that: a. the applied manufacturing overhead cost was less than the actual manufacturing overhead cost. b. the applied manufacturing overhead cost was greater than the actual manufacturing overhead cost. c. the estimated manufacturing overhead cost was less than the actual manufacturing overhead cost. d. the estimated manufacturing overhead cost was less than the applied manufacturing overhead cost. 8. Stelmack Corporation, a manufacturing Corporation, has provided data concerning its operations for September. The beginning balance in the raw materials account was $20,000 and the ending balance was $27,000. Raw materials purchases during the month totaled $63,000. Manufacturing overhead cost incurred during the month was $53,000, of which $3,000 consisted of raw materials classified as indirect materials. The direct materials cost for September was: a. $56,000 b. $53,000 c. $70,000 d. $63,000 9. Jawson Corporation uses the weighted-average method in its process costing system. Operating data for the Painting Department for the month of April appear below: What were the equivalent units for conversion costs in the Painting Department for April? a. 67,300 b. 68,820 c. 70,520 d. 63,900 BUS 7013 Managerial Accounting Final Exam SuB17 4 10. Bagley Corporation has two service departments and two operating departments. The space occupied by each department follows: The fixed costs of Custodial Services are allocated on the basis of square feet. If these costs are budgeted at $38,000, the amount of cost allocated to General Administration under the direct method would be: a. $0 b. $5,700 c. $6,000 d. $7,125 11. Grable Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, General Management and Physical Plant, and two operating departments, Sales and AfterSales. Data concerning those departments follow: General Management Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total After-Sales Department cost after allocations is closest to: a. $309,430 b. $306,713 c. $293,590 d. $309,883 BUS 7013 Managerial Accounting Final Exam SuB17 5 12. What is the company's contribution margin ratio? The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. a. 0.667 b. 0.333 c. 0.083 d. None of the above 13. What is the company's break-even in units? The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. a. 6,500 units b. 17,500 units c. 15,000 units d. 5,000 units BUS 7013 Managerial Accounting Final Exam SuB17 6 14. The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. If sales increase by 100 units, by how much should net operating income increase? a. $2,000 b. $4,000 c. $2,500 d. $1,175 15. How many units would the company have to sell to attain a target profit of $125,000? The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. a. 21,000 units b. 20,000 units c. 21,250 units d. 40,000 units BUS 7013 Managerial Accounting Final Exam SuB17 7 16. What is the company's margin of safety in dollars? The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. a. $900,000 b. $1,200,000 c. $15,000 d. $300,000 17. What is the company's degree of operating leverage? The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. a. $100,000 b. 4.0 c. 3.0 d. $300,000 BUS 7013 Managerial Accounting Final Exam SuB17 8 18. Havely International Corporation's only product sells for $200.00 per unit and its variable expense is $70.00. The company's monthly fixed expense is $390,000 per month. The unit sales to attain the company's monthly target profit of $10,000 is closest to: a. 5,714 b. 3,077 c. 3,597 d. 2,000 19. Net operating income is affected by the number of units produced when absorption costing is used. a. True b. False 20. The principal difference between variable costing and absorption costing centers on: a. whether variable manufacturing costs should be included in product costs. b. whether fixed manufacturing costs should be included in product costs. c. whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs. d. whether selling and administrative costs should be included in product costs. 21. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total gross margin for the month under absorption costing is: BUS 7013 Managerial Accounting Final Exam SuB17 9 a. $6,800 b. $197,200 c. $149,600 d. $179,000 22. DC Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $62,000 annually and one salaried estimator who is paid $36,000 annually. The corporate office has two office administrative assistants who are paid salaries of $40,000 and $32,000 annually. The president's salary is $138,000. How much of these salaries are common fixed expenses? a. $138,000 b. $210,000 c. $72,000 d. $258,000 23. The direct labor budget is based on: a. the desired ending inventory of finished goods. b. the beginning inventory of finished goods. c. the required production for the period. d. the required materials purchases for the period. 24. Which of the following might be included as a disbursement on a cash budget? a. Option A b. Option B c. Option C d. Option D BUS 7013 Managerial Accounting Final Exam SuB17 10 25. Sioux Corporation is estimating the following sales for the first four months of next year: Sales are normally collected 60% in the month of sale, 35% in the month following the sale, and the remaining 5% being uncollectible. Based on this information, how much cash should Sioux expect to collect during the month of April? a. $286,500 b. $320,000 c. $192,000 d. $94,500 26. Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales at Fab (in units) for the next three months are as follows: Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fab plan on producing during the month of November? a. 23,200 mugs b. 26,800 mugs c. 25,900 mugs d. 34,300 mugs 27. The following are budgeted data: One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be: a. 19,000 pounds BUS 7013 Managerial Accounting Final Exam SuB17 11 b. 19,200 pounds c. 23,000 pounds d. 18,800 pounds 28. Triste Corporation manufactures and sells women's skirts. Each skirt (unit) requires 2.6 yards of cloth. Selected data from Triste's master budget for next quarter are shown below: Each unit requires 1.6 hours of direct labor, and the average hourly cost of Triste's direct labor is $15. What is the cost of Triste Corporation's direct labor in September? a. $336,000 b. $240,000 c. $150,000 d. $210,000 29. Axsom Inc. bases its manufacturing overhead budget on budgeted direct laborhours. The direct labor budget indicates that 1,300 direct labor-hours will be required in March. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $20,020 per month, which includes depreciation of $2,600. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for March should be: a. $22.30 b. $24.30 c. $15.40 d. $8.90 30. Sparks Corporation has a cash balance of $7,500 on April 1. The company must maintain a minimum cash balance of $6,000. During April, expected cash receipts are $48,000. Cash disbursements during the month are expected to total $52,000. Ignoring interest payments, during April the company will need to borrow: a. $3,500 BUS 7013 Managerial Accounting Final Exam SuB17 12 b. $2,500 c. $6,000 d. $4,000 31. The Khaki Corporation has the following budgeted sales data: The regular pattern of collection of credit sales is 40% in the month of sale, 50% in the month following sale, and the remainder in the second month following the month of sale. There are no bad debts. The budgeted accounts receivable balance on February 28 would be: a. $250,000 b. $210,000 c. $175,000 d. $215,000 32. Hatzenbuhler Manufacturing Corporation has prepared the following overhead budget for next month. The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machine-hours rather than 6,800 machine-hours? BUS 7013 Managerial Accounting Final Exam SuB17 13 a. $107,824.00 b. $110,600.00 c. $108,300.00 d. $107,347.06 33. Loomer Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $550 per month plus $95 per job plus $21 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in July to be 12 jobs and 136 meals, but the actual activity was 13 jobs and 137 meals. The actual cost for catering supplies in July was $4,770. The catering supplies in the planning budget for July would be closest to: a. $4,403 b. $4,770 c. $4,662 d. $4,546 34. Ohme Framing's cost formula for its supplies cost is $1,620 per month plus $13 per frame. For the month of April, the company planned for activity of 882 frames, but the actual level of activity was 878 frames. The actual supplies cost for the month was $13,500. The supplies cost in the flexible budget for April would be closest to: a. $13,086 b. $13,500 c. $13,034 d. $13,027 35. Danoff Midwifery's cost formula for its wages and salaries is $1,540 per month plus $497 per birth. For the month of March, the company planned for activity of 112 births, but the actual level of activity was 107 births. The actual wages and salaries for the month was $56,850. The activity variance for wages and salaries in March would be closest to: a. $2,485 U b. $354 U c. $2,485 F d. $354 F BUS 7013 Managerial Accounting Final Exam SuB17 14 36. Vanderhyde Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During May, the kennel budgeted for 3,300 tenant-days, but its actual level of activity was 3,340 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The net operating income in the planning budget for May would be closest to: a. $13,020 b. $19,025 c. $13,436 d. $19,489 37. Borunda Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $37,020 per month plus $2,731 per flight plus $6 per passenger. The company expected its activity in July to be 73 flights and 253 passengers, but the actual activity was 75 flights and 251 passengers. The actual cost for plane operating costs in July was $231,770. The activity variance for plane operating costs in July would be closest to: a. $6,131 F b. $5,450 F c. $6,131 U d. $5,450 U 38. Gershon Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $38,720 per month plus $2,061 per flight plus $9 per passenger. BUS 7013 Managerial Accounting Final Exam SuB17 15 The company expected its activity in June to be 76 flights and 238 passengers, but the actual activity was 75 flights and 239 passengers. The actual cost for plane operating costs in June was $196,310. The spending variance for plane operating costs in June would be closest to: a. $864 U b. $1,188 F c. $1,188 U d. $864 F 39. Which of the following represents the normal sequence in which the below budgets are prepared? a. Sales Budget, Budgeted Balance Sheet, Budgeted Income Statement b. Budgeted Balance Sheet, Sales Budget, Budgeted Income Statement c. Sales Budget, Budgeted Income Statement, Budgeted Balance Sheet d. Budgeted Income Statement, Sales Budget, Budgeted Balance Sheet 40. All the following are considered to be benefits of participative budgeting, except for: a. Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization. b. The budget estimates are prepared by those in directly involved in activities. c. When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations. d. Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others. 41. Trumbull Corporation budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Experience indicates that none of the sales on account will be collected in the month of the sale, 60% will be collected the month after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be: a. $169,800 b. $147,960 c. $197,880 d. $194,760 BUS 7013 Managerial Accounting Final Exam SuB17 16 42. Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. *Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 480,000 units during next year, the number of units it would have to manufacture during the year would be: a. 440,000 units b. 450,000 units c. 480,000 units d. 510,000 units 43. G Products, Inc. manufactures garlic gravy. G's production budget indicated the following units (jars) of gravy to be produced for the upcoming months indicated: Five grams of garlic are needed for every jar of gravy. G also likes to have enough garlic on hand at the end of the month to cover 10% of the next month's production requirements for garlic. How many grams of garlic should G plan on purchasing during the month of May? a. 399,500 grams b. 407,500 grams c. 397,500 grams d. 437,500 grams 44. Morie Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.75 direct labor-hours. The direct labor rate is $8.10 per direct labor-hour. The production budget calls for producing 2,000 units in March and 2,300 units in April. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 1,760 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months? a. $28,512.00 b. $26,406.00 c. $28,228.50 d. $26,122.50 BUS 7013 Managerial Accounting Final Exam SuB17 17 45. Wexell Framing's cost formula for its supplies cost is $1,230 per month plus $10 per frame. For the month of October, the company planned for activity of 592 frames, but the actual level of activity was 597 frames. The actual supplies cost for the month was $7,050. The activity variance for supplies cost in October would be closest to: a. $50 F b. $50 U c. $100 F d. $100 U 46. Dus Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $400 per month plus $89 per job plus $10 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 11 jobs and 81 meals, but the actual activity was 7 jobs and 76 meals. The actual cost for catering supplies in March was $1,810. The activity variance for catering supplies in March would be closest to: a. $406 U b. $406 F c. $379 F d. $379 U 47. If sales volume decreases, and all other factors remain unchanged, the contribution margin ratio will decrease. a. True b. False 48. The impact on net operating income of a given dollar change in sales can be computed by multiplying the contribution margin by the dollar change in sales. a. True b. False 49. Lepage Corporation has provided its contribution format income statement for January. The company produces and sells a single product. BUS 7013 Managerial Accounting Final Exam SuB17 18 If the company sells 4,700 units, its total contribution margin should be closest to: a. $83,600 b. $18,373 c. $89,300 d. $98,000 50. Bowe Corporation's fixed monthly expenses are $21,000 and its contribution margin ratio is 61%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $74,000? a. $7,860 b. $45,140 c. $24,140 d. $53,000 51. Solen Corporation's break-even-point in sales is $900,000, and its variable expenses are 75% of sales. If the company lost $32,000 last year, sales must have amounted to: a. $628,000 b. $772,000 c. $804,000 d. $868,000 52. The formula for target cost is: a. Target cost = Anticipated selling price - Desired profit. b. Target cost = Unit cost + (Markup percentage Unit cost) c. Target cost = Units sold Unit cost traceable to product d. Target cost = (Desired return on assets employed + Selling and administrative expenses) (Units sold Unit product cost) BUS 7013 Managerial Accounting Final Exam SuB17 19 53. When using the absorption approach to cost-plus pricing described in the text: a. all costs are included in the cost base. b. the "plus" or markup figure contains fixed costs and desired profit. c. the cost base is made up of the unit product cost. d. only selling and administrative expenses are included in the cost base. 54. Erdahl Corporation's management believes that every 7% increase in the selling price of one of the company's products leads to a 11% decrease in the product's total unit sales. The product's price elasticity of demand as defined in the text is closest to (fx ln): a. -1.05 b. -1.72 c. -1.84 d. -2.05 55. Sawit Corporation, a manufacturer of woodworking tools, wants to introduce a new power screwdriver. To compete effectively, the screwdriver cannot be priced at more than $14. The company requires a 15% rate of return on investment on all new products. In order to produce and sell 80,000 screwdrivers each year, the company will need to make an investment of $800,000. The target cost per screwdriver would be: a. $1.50 b. $12.50 c. $14.00 d. $15.50