Exam 2 Managerial Accounting CH 4-6

Managerial Accounting BADM 225
Fall 2012
Exam 2, Chapters 4 - 6
Name____________________________________________________Date_______________
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The exam is extensive, so please show all your calculations clearly to obtain the most points. I do
give partial credit.
True/ False: Worth 3 points each, total 27 points.

Please circle your answer, If emailing in, Highlight answer with a dark color
1. True False A process costing system would be best suited for production of
a large quantity of a homogeneous product.
2. True False The job cost sheet is used in both job-order and process
costing.
3. True False When assigning costs to partially completed units in the ending
work in process inventory, it is not necessary to consider the percentage
completion of the units under the weighted-average method.
4. True False Reynold Enterprises sells a single product for $25. The variable
expense per unit is $15 and the fixed expense per unit is $5 at the current
level of sales. The company's net operating income will increase by $5 if one
more unit is sold.
5. True False The break-even point in units can be obtained by dividing total
fixed expenses by the contribution margin ratio.
6. True False At the break-even point: Sales - Variable expenses = Fixed
expenses.
7 True False Under variable costing, fixed manufacturing overhead cost is
treated as a product cost.
8 True False The unit product cost under absorption costing does not include
fixed manufacturing overhead cost.
9. True False Contribution margin and segment margin mean the same thing.
Multiple Choices: Worth 3 points each, Total 27 Points Please circle

(or Highlight in a dark color) your answer

Fall 2012
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1. In a process costing system, manufacturing overhead applied is usually
recorded as a debit to:
A. Finished
goods.
B. Work in
process.
C. Manufacturing
overhead.
D. Cost of goods
sold.
2. A process costing system:

A. uses a separate Work in Process account for each processing
department.
B. uses a single Work in Process account for the entire
company.
C. uses a separate Work in Process account for each type of product
produced.
D. does not use a Work in Process account in any
form.
3. Which of the following characteristics applies to process costing, but does

not apply to job order costing?
A. the need for
averaging.
B. the use of equivalent units of
production.
C. separate, identifiable
jobs.
D. the use of predetermined overhead
rates.

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4. Which of the following formulas is used to calculate the contribution
margin ratio?

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A. (Sales - Fixed expenses)
Sales

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B. (Sales - Cost of goods sold)
Sales

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C. (Sales - Variable expenses)
Sales

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D. (Sales - Total expenses)
Sales

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5. The break-even point in unit sales is found by dividing total fixed expenses
by:

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A. the contribution margin
ratio.

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B. the variable expenses per
unit.

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C. the sales price per
unit.

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D. the contribution margin per
unit.

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6. If Q equals the level of output, P is the selling price per unit, V is the
variable expense per unit, and F is the fixed expense, then the break-even
point in units is:

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A. Q (PV).

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B. F (PV).
C. V (PV).
D. F [Q(PV)].
7. Fixed manufacturing overhead is included in product costs under:
8. Selling and administrative expenses are considered to be:

A. a product cost under variable
costing.
B. a product cost under absorption
costing.
C. part of fixed manufacturing overhead under variable
costing.
D. a period cost under variable
costing.
9. If the number of units produced exceeds the number of units sold, then net
operating income under absorption costing will:
A. be equal to the net operating income under variable
costing.
B. be greater than net operating income under variable
costing.
C. be equal to the net operating income under variable costing plus total
fixed manufacturing costs.
D. be equal to the net operating income under variable costing less total
fixed manufacturing costs.

Fall 2012
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Essay: Worth 5 Points each, total 20 Points

1.
Larney Corporation uses process costing. A number of transactions that

occurred in June are listed below.
(1) Raw materials that cost $38,200 are withdrawn from the storeroom for use
in the Mixing Department. All of these raw materials are classified as direct
materials.
(2) Direct labor costs of $36,500 are incurred, but not yet paid, in the Mixing
Department.
(3) Manufacturing overhead of $42,100 is applied in the Mixing Department
using the department's predetermined overhead rate.
(4) Units with a carrying cost of $112,400 finish processing in the Mixing
Department and are transferred to the Drying Department for further
processing.
(5) Units with a carrying cost of $143,800 finish processing in the Drying
Department, the final step in the production process, and are transferred to
the finished goods warehouse.
(6) Finished goods with a carrying cost of $138,500 are sold.
Required: Prepare T-Account entries for each of the transactions listed

above.
Raw Materials
Work In Process
Goods
COGS
Mixing Dept
_____________ _______________
__________
38,200|
|
|
|
|
|
|
|
|
|
|
|
Work In Process
Finished
Drying Dept.
_______________
________________
Salaries and Wages

Manufacturing Overhead
Payable
_______________
_____________________
|
|
|
|
|

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2. Lagasca Corporation's contribution format income statement for December
appears below:
What is the degree of operating leverage ?
3. The following is Allison Corporation's contribution format income

statement for last month:

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4. The ARB Company has two divisions: Electronics and DVD/Video Sales.
Electronics has traceable fixed expenses of $146,280 and the DBD/Video
Sales has traceable fixed expenses of $81,765. If ARB Company has a total of
$322,490 in fixed expenses, what are its common fixed expenses?
5. Tsuchiya Corporation manufactures a variety of products. Last year, the

company's variable costing net operating income was $57,500. Fixed
manufacturing overhead costs deferred in inventory under absorption
costing amounted to $35,400. What was the absorption costing net
operating income last year?
Problems: Worth 5 points each

1. Jumper Company uses the weighted-average method in its process costing
system. The following data pertain to operations in the first processing
department for a recent month:

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How much cost, in total, was transferred to the next department during the
month?

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2.Jalonen Inc., which produces and sells a single product, has provided the
following contribution format income statement for October:
Required:
Redo the company's contribution format income statement assuming that
the company sells 4,500 units.
3. Colen Corporation produces and sells a single product. In January, the

company sold 1,700 units. Its total sales were $153,000, its total variable
expenses were $79,900, and its total fixed expenses were $56,800.
Required:
a. Construct the company's contribution format income statement for
January in good form. (Hint-see above)
b. Redo the company's contribution format income statement assuming that
the company sells 1,600 units.
4. Gore Corporation has two divisions: the Business Products Division and the
Export Products Division. The Business Products Division's divisional segment
margin is $55,700 and the Export Products Division's divisional segment
margin is $70,600. The total amount of common fixed expenses not
traceable to the individual divisions is $107,400. What is the company's net
operating income?

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Extra Credit, Worth 15 Points (5 points each section) All students

should attempt the extra credit problems. Credit is given for work
done, so even a stab will net you some points!
The following monthly data in contribution format are available for the MN
Company and its only product, Product SD:
The company produced and sold 300 units during the month and had no
beginning or ending inventories.

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Required:
a. Without resorting to calculations, what is the total contribution margin at
the break-even point?
b. Management is contemplating the use of plastic gearing rather than metal
gearing in Product SD. This change would reduce variable expenses by $18
per unit. The company's sales manager predicts that this would reduce the
overall quality of the product and thus would result in a decline in sales to a
level of 250 units per month. Should this change be made?
c. Assume that MN Company is currently selling 300 units of Product SD per
month. Management wants to increase sales and feels this can be done by
cutting the selling price by $22 per unit and increasing the advertising
budget by $20,000 per month. Management believes that these actions will
increase unit sales by 50 percent. Should
this change be made?

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Managerial Accounting BADM 225

True/ False: Worth 3 points each, total 27 points.

Multiple Choices: Worth 3 points each, Total 27 Points Please circle

Managerial Accounting BADM 225

2. A process costing system:

3. Which of the following characteristics applies to process costing, but does

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

Managerial Accounting BADM 225

8. Selling and administrative expenses are considered to be:

Managerial Accounting BADM 225

Essay: Worth 5 Points each, total 20 Points

Larney Corporation uses process costing. A number of transactions that

Required: Prepare T-Account entries for each of the transactions listed

Salaries and Wages

Managerial Accounting BADM 225

What is the degree of operating leverage ?

3. The following is Allison Corporation's contribution format income

Managerial Accounting BADM 225

5. Tsuchiya Corporation manufactures a variety of products. Last year, the

Problems: Worth 5 points each

Managerial Accounting BADM 225

Managerial Accounting BADM 225

3. Colen Corporation produces and sells a single product. In January, the

Managerial Accounting BADM 225

Extra Credit, Worth 15 Points (5 points each section) All students

Managerial Accounting BADM 225

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