BMGT 221
Principles of Accounting
Exam 1 – MC Practice
1. A $2.00 increase in a product’s variable expense per unit accompanied by a $2.00 increase in its selling price per unit will:
A) decrease the degree of operating leverage.
B) decrease the contribution margin.
C) have no effect on the break-even volume.
D) have no effect on the contribution margin ratio.
2. Light Yagami, the CEO of Life Note Inc., produces Shinigami notebooks and tracks costs in compliance with GAAP. At a production level of 1,500 notebooks, the fixed product cost per notebook is $10, the variable product cost per notebook is $50, and the advertising cost is $20. The company also incurs a cost of $20,000 for Light Yagami’s salary. If the company produces 100 notebooks, what is the total inventoriable cost?
A) $6,000
B) $5,000
C) $20,000
D) None of the above
3. In the Schedule of Cost of Goods Manufactured, which of the following statements is true?
1. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory — Ending work in process inventory.
2. Total raw materials available = Ending raw materials inventory + Purchases of raw materials.
3. Raw materials used in production = Beginning raw materials inventory + Purchases of raw materials — Ending raw materials inventory.
4. Total direct materials = Raw materials used in production — Ending raw materials inventory.
A) Both statements 1 and 2 are true.
B) Both statements 2 and 3 are true.
C) Both statements 2 and 4 are true.
D) Both statements 1 and 3 are true.
4. Corporation Dime sold 25,000 units of product last year. The contribution margin per unit
was $2, and fixed expenses totaled $40,000 for the year. This year fixed expenses are expected to increase to $45,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same net operating income as was earned last year?
A) 22,500
B) 27,500
C) 35,000
D) 2,500
5. In a job-order costing system that is based on machine-hours, which of the following formulas for finding predetermined overhead rate (POHR) is correct?
A) POHR = Actual manufacturing overhead ÷ Actual machine-hours
B) POHR = Actual manufacturing overhead ÷ Estimated machine-hours
C) POHR = Estimated manufacturing overhead ÷ Actual machine-hours
D) POHR = Estimated manufacturing overhead ÷ Estimated machine-hours
6. Mcdale Incorporated produces and sells two products. Data concerning those products for the most recent month appear below:
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Product I49V
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Product Z50U
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Sales
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$ 28,000
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$ 33,000
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Variable expenses
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$ 11,600
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$ 23,170
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The fixed expenses of the entire company were $39,180. The break-even point for the entire company is closest to:
A) $73,950
B) $91,116
C) $39,180
D) $46,300
7. Use the following information for Zephyr Apparels:
Zephyr Apparels is a clothing retailer. All unit costs associated with one of its products, Product DCT121, are as follows:
Direct materials $ 70
Direct manufacturing labor 20
Variable manufacturing overhead 15
Fixed manufacturing overhead 32
Sales commissions (2% of sales) 5
Administrative salaries 16
Total $158
What are the inventoriable (product) costs per unit associated with Product DCT121?
A) $90
B) $105
C) $110
D) None of the above
8. Find the manufacturing overhead applied to Job 17 if the company uses a normal costing system and overhead is allocated based on direct material cost.
Note: DM stands for direct materials, DL stands for direct labor, and MOH stands for manufacturing overhead. Round your final answer to the nearest whole number.
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Job 17
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Annual (all jobs)
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Budgeted Actual
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Budgeted Actual
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DM $
DL $
MOH $
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250 240
710 700 600 610
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900 700 1,200 1,800
1,100 1,400
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A) $293
B) $306
C) $480
D) $1,233
9. Sargent Corporation applies overhead cost to jobs on the basis of 70% of direct labor cost. If Job 210 shows $8,890 of manufacturing overhead cost applied, how much was the direct labor cost on the job?
A) $8,890
B) $6,350
C) $12,700
D) $15,113
10. Refer to the T-account below:
Manufacturing Overhead
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Debit
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Credit
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(2) 9,000
(3) 15,000
(4) 80,000
(5) 30,000
(6) 25,000
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(12)
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167,000
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159,000
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167,000
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|
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Balance
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8,000
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The ending balance of $8,000 represents which of the following?
A) Underapplied overhead.
B) Manufacturing overhead that will be carried over to the next period.
C) Overapplied overhead.
D) A bookkeeping error.
11. Darcey & Stacey’s Bridal Boutique specializes in high-end wedding attire. With a fixed cost structure of $200,000 and variable costs of $500 per wedding dress, the company sold 1,000 wedding dresses last year at $1,500 each. If Darcey & Stacey’s Bridal Boutique were to reduce its fixed costs to $100,000 while increasing variable costs by $550 per dress and keeping sales at 1,000 dresses, the new operating leverage would be closest to:
A) 1.12
B) 1.29
C) 2.0
D) 2.5
12. Abburi Company’s manufacturing overhead is 45% of its total conversion costs. If direct labor is $57,200, and direct materials are $22,100, then the manufacturing overhead is:
A) $46,800
B) $69,911
C) $18,082
D) $64,882
13. Junior Bodway, Incorporated, has provided the following budgeted data:
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Sales
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10,000
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units
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Selling price
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$50
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per unit
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Variable expense
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$30
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per unit
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Fixed expense $180,000
How many units would the company have to sell in order to have a net operating income of $40,000?
A) 20,000 units
B) 9,000 units
C) 11,000 units
D) 7,333 units
14. Which of the following statements are true?
I. Depreciation is always considered a period cost for external financial reporting purposes in a manufacturing company.
II. Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost.
A) Only statement I is true.
B) Only statement II is true.
C) Both of the statements are true.
D) Neither of the statements are true.
15. When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?
A) Work in Process will decrease.
B) Cost of Goods Sold will increase.
C) Net income will decrease.
D) Gross margin will increase.
16. Bottum Corporation’s break-even-point in sales is $675,000, and its variable expenses are 75% of sales. If the company lost $24,000 last year, sales must have amounted to:
A) $651,000
B) $579,000
C) $603,000
D) $471,000
17. VSenk Corporation, a manufacturing corporation, has provided data concerning its
operations for May. The beginning balance in the raw materials account was $23,000 and the ending balance was $42,000. Raw material purchases during the month totaled $69,000. Manufacturing overhead cost incurred during the month was $114,000, of which $2,600 consisted of raw materials classified as indirect materials. Direct materials cost for May was:
A) $69,000
B) $50,000
C) $88,000
D) $47,400
18. Which of the following costs would be considered a period rather than a product cost in a manufacturing company?
A) Employee commissions for generating customer leads.
B) Depreciation of an electrical safety device used while processing raw materials.
C) Cost of testing the durability of a new model of hiking boots.
D) Salary of a quality control inspector testing the assembly of phones at the plant.
19. Refer to the T-account below:
Raw Materials
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Debit
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Credit
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Balance (5)
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15,000
85,000
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(9) 75,000
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Balance
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25,000
|
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Entry (5) could represent which of the following?
A) Payments for raw materials.
B) Requisitions of raw materials to be used in production.
C) Purchases of raw materials.
D) Overhead cost applied to Work in Process.
20. IverSons Co. had a sales level of $200,000 last year, with a degree of operating leverage equal to 4. The company has variable expenses that are 50% of sales. If sales increase by $100,000 this year, what will be the new degree of operating leverage (rounded)?
A) 5.00
B) 4.00
C) 3.00
D) 2.00