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Mizzou ACCTCY 2037 - Accounting 2037 Exam 1 with Answers

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Accounting 2037 Exam 1 with Answers: Fall 2012Completion [2 pts each] Complete each sentence or statement with one of the phrases below.Possible answers:Available costsCost driversInternal failure costsLabor efficiency standardMake or buyPrevention costsQuantity standardBudget overhead rateExpenseISO 9000Labor efficiency varianceManufacturing cellsPrice standardSpecial orderContribution marginIncremental costsKaizenLabor price standardNet incomeProduct mixTQM1. In determining allocation of advertising dollars, the company’s profit increases if the contribution margin resulting from the increased sales is more than the increase in advertising costs.2. Manufacturing costs become a(n) expense only when the company sells finished goods inventory.3. The labor efficiency variance is the difference between the cost of the direct labor hours that should havebeen used (at the standard price) that the company did use.4. The activities on which a company bases cost pools for factory overhead are often called cost drivers.5. Incremental costs are cost increases resulting from the performance of an additional activity.True/False [2 pts each]Indicate whether the sentence or statement is true or false.6. In the make versus buy decision, concerns about control of quality and reliability could well override choosing the lowest cost supplier provided part. T7. Process costing systems are appropriate in any manufacturing situation that involves a processing of unique products in small quantities. F8. A manager practicing the principle of management by exception in variance analysis would examine each and every variance each time one occurred. F9. Activity based costing is less expensive to use. F10. The key to evaluating the profit effects of a company’s decision to drop a product is to determine the avoidable costs and the revenue that it would not earn if it discontinued production and sale of the product. TMultiple Choice [2 pts each] Identify the letter of the choice that best completes the statement or answers the question.11. Which of the following is not included in factory overhead?a. Direct laborb. Indirect laborc. Raw materials that cannot be traced directly to a productd. None of the above12. What cannot be traced back to a unit of production?a. Factory overheadb. Direct labor costsc. Raw materialsd. Conversion cost13. What is a direct materials price variance?a. The difference between the standard cost that a company should have incurred to acquire the direct materials and the actual cost it did incur to acquire the direct materials.b. The amount of direct materials that should be used for the company’s actual production level.c. The difference between the standard cost of the quantity of direct materials that a company should have used for the actual number of units produced and the standard cost of the quantity ofdirect materials that it did use to produce those unitsd. None of the above14. Which of the following statements is false?a. Variances point to problems and to possible causes of problemsb. Favorable variances are always good.c. Variances should be measured as quickly and as possible after they occur so that managers can recognize problems early and correct them before they cause too much damage.d. All of the above statements are true.15. A company would decide to drop a product if:a. The relevant costs are greater than the costs of another alternativeb. The revenues are less than the sunk costsc. The avoidable costs are greater than the foregone revenuesd. The revenues are less than the revenues of another alternativeProblem 1 [18 points]The Ray Manufacturing Company uses a job order cost accounting system (not standard costs). During the month of April, the company completed the following transactions:Required: for each event/transaction use the table below to indicate the accounts affected, whether it increased or decreased and by how much.a) Purchased $1,200 of raw materials on account. (use row 1 in the table)b) $1,400 of raw materials were issued by the storekeeper for job #12. $1,275 of these were considered to be direct materials while the remainder were classified as indirect materials. (you may use two rows if you’d like.c) Factory personnel earned total wages of $21,000 for job #12 but have not yet been paid. Labor tickets indicated that, of that amount, $15,000 was for direct labor on specific job orders. (you may use two rows if you’d like)d) Factory overhead costs of $7,500 were applied to job #12. (use 1 row)e) Various job orders with a total cost of $19,750 were completed. (use 1 row)f) Products that had cost $17,000 to manufacture were sold for $25,000 on credit. (you may use 2 rows if you’d like.Accounts ReceivableRaw MaterialsGoods inProcessFactory OverheadFinished GoodsAccountsPayableWages PayableRevenue Costs ofGoods Sold1,200 1,200(1275) 1275(125) 12515,000 15,0006,000 6,0007500 (7500)(19,750) 19,75025,000 (17,000) 25,000 17,0001 point per box. Must have account and amount correct.Problem 2 [12 points]a) Calculate the direct labor efficiency variance using the following information:Quantity of direct labor used 2,500 hoursActual rate for direct labor $15.25 per hourUnits completed during the month450 unitsStandard direct labor per unit 6.25 hoursStandard rate for direct labor $16.50 per hourPlanned units for month 425 unitsSP (SQ-AQ)16.50 (2812.5* - 2500) =5156.25 F*450 x 6.25 = 2812.5b) Calculate the direct material price variance from the information below.Direct materials price standard $5.00 per poundDirect materials quantity standard2 pounds per unitDuring July 2003, the company purchased 22,000 pounds of direct materials at $4.90 per pound, and manufactured 10,000 units of product. To do so, Quick Start used 21,000 pounds of direct materials.AQp (SP-AP)22,000 ( 5 – 4.90 ) = 2200 FProblem 3 [12 pts]a) A business manufactures three similar products for eventual sale: A, B, and C. The selling prices are $129; $165; and $59 respectively. The variable costs of producing each are: $29; $45; and $26 respectively. Each product must go through the same machine and that machine is limited in its production to 1,800 hours per month. Product A takes 2 hours to process, Product B takes 3 hours and Product C takes .5 hour.Required:1. Calculate the contribution per machine hour for each product.A: ( 129 – 29 ) / 2 = 50B: ( 165 – 45 ) / 3 = 40C: ( 59 – 26 ) / 0.5 = 662. Assuming you can sell as many as:1000 units of product


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Mizzou ACCTCY 2037 - Accounting 2037 Exam 1 with Answers

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