Note: You should complete all lesson exams before you take the
Complete the following exam by answering the questions and
compiling your answers into a word-processing document. When
youâ€™re ready to submit your answers, refer to the instructions at
the end of your exam booklet. Be certain to indicate the proper
question number before each of your answers. Remember to
show your work if an answer requires a mathematical solution.
Answer each of the following 20 questions. Each answer is
worth 5 points.
1. The work-in-process inventory account of a manufacturing
company shows a balance of $3,000 at the end of an
accounting period. The job-cost sheets of the two incomplete jobs show charges of $500 and $300 for direct
materials, and charges of $400 and $600 for direct labor.
From this information, it appears that the company is
using a predetermined overhead rate as a percentage of
direct labor costs. What percentage is the rate?
2. The break-even point in dollar sales for Rice Company is
$480,000 and the companyâ€™s contribution margin ratio
is 40 percent. If Rice Company desires a profit of
$84,000, how much would sales have to total?
3. Williams Companyâ€™s direct labor cost is 25 percent of its
conversion cost. If the manufacturing overhead for the
last period was $45,000 and the direct material cost was
$25,000, how much is the direct labor cost?
061685012 Final Examination
4. Grading Companyâ€™s cash and cash equivalents consist of
cash and marketable securities. Last year the companyâ€™s
cash account decreased by $16,000 and its marketable
securities account increased by $22,000. Cash provided
by operating activities was $24,000. Net cash used for
financing activities was $20,000. Based on this information, was the net cash flow from investing activities on
the statement of cash flows a net increase or decrease?
By how much?
5. Gladstone Footwear Corporationâ€™s flexible budget cost
formula for supplies, a variable cost, is $2.82 per unit of
output. The companyâ€™s flexible budget performance report
for last month showed an $8,140 unfavorable spending
variance for supplies. During that month, 21,250 units
were produced. Budgeted activity for the month had
been 20,900 units. What is the actual cost per unit for
6. Lyons Company consists of two divisions, A and B. Lyons
Company reported a contribution margin of $60,000 for
Division A, and had a contribution margin ratio of 30
percent in Division B, when sales in Division B were
$240,000. Net operating income for the company was
$22,000 and traceable fixed expenses were $45,000. How
much were Lyons Companyâ€™s common fixed expenses?
7. Atlantic Company produces a single product. For the most
recent year, the companyâ€™s net operating income computed
by the absorption costing method was $7,800, and its net
operating income computed by the variable costing method
was $10,500. The companyâ€™s unit product cost was $15
under variable costing and $24 under absorption costing.
If the ending inventory consisted of 1,460 units, how
many units must have been in the beginning inventory? Final Examination 3
8. Black Company uses the weighted-average method in its
process costing system. The companyâ€™s ending work-inprocess inventory consists of 6,000 units, 75 percent
complete with respect to materials and 50 percent complete with respect to labor and overhead. If the total
dollar value of the inventory is $80,000 and the cost per
equivalent unit for labor and overhead is $6.00, what is
the cost per equivalent unit for materials?
9. At Overland Company, maintenance cost is exclusively a
variable cost that varies directly with machine-hours. The
performance report for July showed that actual maintenance costs totaled $11,315 and that the associated rate
variance was $146 unfavorable. If 7,300 machine-hours
were actually worked during July, what is the budgeted
maintenance cost per machine-hour?
10. The cost of goods sold in a retail store totaled $650,000.
Fixed selling and administrative expenses totaled $115,000
and variable selling and administrative expenses were
$420,000. If the storeâ€™s contribution margin totaled
$590,000, how much were the sales?
11. Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art
numerically controlled machine. The new machine would
cost $600,000 and would have a 10-year useful life.
Unfortunately, the new machine would have no salvage
value. The new machine would cost $20,000 per year to
operate and maintain, but would save $125,000 per year
in labor and other costs. The old machine can be sold
now for scrap for $50,000. What percentage is the simple
rate of return on the new machine rounded to the nearest
tenth of a percent? (Ignore income taxes in this problem.) 4 Final Examination
12. Lounsberry Inc. regularly uses material O55P and currently
has in stock 375 liters of the material, for which it paid
$2,700 several weeks ago. If this were to be sold as is on
the open market as surplus material, it would fetch $6.35
per liter. New stocks of the material can be purchased
on the open market for $7.20 per liter, but it must be
purchased in lots of 1,000 liters. Youâ€™ve been asked to
determine the relevant cost of 900 liters of the material
to be used in a job for a customer. What is the relevant
cost of the 900 liters of material O55P?
13. Harwichport Company has a current ratio of 3.0 and
an acid-test ratio of 2.8. Current assets equal $210,000,
of which $5,000 consists of prepaid expenses. The
remainder of current assets consists of cash, accounts
receivable, marketable securities, and inventory. What
is the amount of Harwichport Companyâ€™s inventory?
14. Tolla Company is estimating the following sales for the
first six months of next year:
Sales at Tolla are normally collected as 70 percent in the
month of sale, 25 percent in the month following the sale,
and the remaining 5 percent being uncollectible. Also, customers paying in the month of sale are given a 2 percent
discount. Based on this information, how much cash
should Tolla expect to collect during the month of April?Final Examination 5
15. Trauscht Corporation has provided the following data
from its activity-based costing system:
The company makes 360 units of product P23F a year,
requiring a total of 725 machine-hours, 85 orders, and 45
inspection-hours per year. The productâ€™s direct materials
cost is $42.30 per unit and its direct labor cost is $14.55
per unit. The product sells for $132.10 per unit. According
to the activity-based costing system, what is the product
margin for product P23F?
16. Williams Companyâ€™s direct labor cost is 30 percent of its
conversion cost. If the manufacturing overhead for the
last period was $59,500 and the direct materials cost
was $37,000, what is the direct labor cost?
17. In a recent period, 13,000 units were produced, and there
was a favorable labor efficiency variance of $23,000.
If 40,000 labor-hours were worked and the standard
wage rate was $13 per labor-hour, what would be the
standard hours allowed per unit of output?
18. The balance in White Companyâ€™s work-in-process inventory account was $15,000 on August 1 and $18,000 on
August 31. The company incurred $30,000 in direct labor
cost during August and requisitioned $25,000 in raw
materials (all direct material). If the sum of the debits to
the manufacturing overhead account total $28,000 for the
month, and if the sum of the credits totaled $30,000, then
was Finished Goods debited or credited? By how much?
Activity Cost Pool Total Cost Total Activity
Assembly $704,880 44,000 machine-hours
Processing orders $91,428 1,900 orders
Inspection $117,546 1,950 inspection-hours6 Final Examination
19. A company has provided the following data:
Sales 4,000 units
Sales price $80 per unit
Variable cost $50 per unit
Fixed cost $30,000
If the dollar contribution margin per unit is increased
by 10 percent, total fixed cost is decreased by 15 percent,
and all other factors remain the same, will net operating
income increase or decrease? By how much?
20. For the current year, Paxman Company incurred
$175,000 in actual manufacturing overhead cost. The
manufacturing overhead account showed that overhead
was overapplied in the amount of $9,000 for the year.
If the predetermined overhead rate was $8.00 per
direct labor-hour, how many hours were worked
during the year?