Accounting 226- Final Exam—due by Saturday, 12/10 at 11:59pm.
Instructions: This exam is individual work only. No other individual may be consulted. The exam should be uploaded
to Blackboard by 11:59 pm on Saturday, December 10th OR emailed to me at both johnsonra1@wofford.edu and
JOHN2942@uscupstate.edu.
Use of textbooks, notes, and other sources, other than people, are ok. Late work will be penalized, and given the
deadline for grading turnaround, could result in an incomplete. Save your file exactly as it is here. Edit the answer
sheet pages to include answers below. Add your name. Save any work and add to your exam file so you may receive
partial credit on problems. Good luck, treat as a challenge, do your best! To the extent possible, try to do your work
on this exam, and save as a single file! Answer sections are provided for problem II and III if you choose to complete
those!
NAME: Darrell Jones
Part I. Multiple Choice: Place answers here. (55 pts total).
1)C
2)D
3)A
4)B
5)D
6)A
7)A
8)D
9)A
10)B
11)A
12)B
13)B
14)B
15)C
16)D
17)A
18)C
19) A
20)B
21)B
22)D
23)A
24)C
Problems: Choose any (4) of the (6) listed later in the exam. Some problems have answer sections provided.
Others do not.
Answers are under each problem I solved
Problem II. Equivalent Units. List all answers on each line, marking them clearly.
1.
2.
3.
4.
Problem III. Journal Entries.
No
General Journal
Debit
Credit
1
2
3
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1
4
5
6
7
8
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Problem I. Multiple Choice items. Mark your selections on the answer sheet at the front of the exam!
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. Goodman Corporation has sales volumes of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed
costs are $66,000, the degree of operating leverage is:
a) 0.79
b) 0.93
c) 2.67
d) 1.73
3. Moyas Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $300,000 and its net
operating income was $24,000. If fixed expenses totaled $96,000 for the year, the break-even point in unit sales was:
a) 12,000 units
b) 9,900 units
c) 15,000 units
d) 14,100 units
4. Last year Easton Corporation reported sales of $480,000, a contribution margin ratio of 25% and a net loss of $16,000. Based on
this information, the break-even point was:
a) $435,000
b) $544,000
c) $506,000
d) $600,000
5. Hopi Corporation expects the following operating results for next year:
Sales
Margin of safety
Contribution margin ratio
Degree of operating leverage
$ 400,000
$ 100,000
75%
4
What is Hopi expecting total fixed expenses to be next year?
a) $75,000
b) $100,000
c) $200,000
d) $225,000
6. Iverson Corporation's variable expenses are 60% of sales. At a $400,000 sales level, the degree of operating leverage is 5. If sales
increase by $40,000, the new degree of operating leverage will be (rounded):
a) 3.67
b) 2.86
c) 5.25
d) 5.00
7. Sufra Corporation is planning to sell 100,000 units for $8.00 per unit and will break even at this level of sales. Fixed expenses
will be $300,000. What are the company's variable expenses per unit?
a) $5.00
b) $4.00
c) $3.00
d) $4.50
8. Ferkil Corporation manufacturers a single product that has a selling price of $100 per unit. Fixed expenses total $225,000 per
year, and the company must sell 5,000 units to break even. If the company has a target profit of $67,500, sales in units must be:
a) 6,000 units
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b) 5,750 units
c) 7,925 units
d) 6,500 units
9. Sales at East Corporation declined from $100,000 to $80,000, while net operating income declined by 300%. Given these data,
the company must have had an operating leverage of:
a) 15
b) 2.7
c) 30
d) 12
10. A company sells two products--J and K. Product J has a contribution margin ratio of 40% whereas Product K has a contribution
margin ratio of 50%. Annual fixed expenses are expected to be $120,000, of which $80,000 belong to product J and the rest
product K. Product J will generate $2 million in sales. Product K will generate $1.8 million in sales. Which product line is the
most efficient to sell?
a) J
b) K
11. Highjinks, Incorporated, has provided the following budgeted data:
Sales
Selling price
Variable expense
Fixed expense
20,000 units
$ 100 per unit
$ 70 per unit
$50,000
How many units would the company have to sell in order to have a net operating income equal to 5% of total sales dollars?
a) 18,000 units
b) 20,000 units
c) 15,333 units
d) 14,286 units
12. The Tse Manufacturing Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead
rate. The company closes any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the
company's Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the
Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500.
The balance in the Finished Goods inventory account at the beginning of the year was:
$28,000
$13,000
$17,500
$8,500
13. The Tse Manufacturing Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead
rate. The company closes any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the
company's Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the
Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500.
If the estimated manufacturing overhead for the year was $24,000, and the applied overhead was $26,500, the actual
manufacturing overhead cost for the year was:
a) $19,500
b) $22,000
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c) $28,500
d) $31,000
14. Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?
a) The cost of the glue in a chair.
b) The amount paid to the individual who stains a chair.
c) The workman’s compensation insurance of the supervisor who oversees production.
d) The factory utilities of the department in which production takes place.
15. Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms
correctly describes the monthly lease payments made on the delivery vehicle?
Direct Cost
Yes
Yes
No
No
A)
B)
C)
D)
a)
b)
c)
d)
Fixed Cost
Yes
No
Yes
No
Choice A
Choice B
Choice C
Choice D
16. The costs of direct materials are classified as:
Conversion cost
Yes
No
Yes
No
A)
B)
C)
D)
a)
b)
c)
d)
Manufacturing cost
Yes
No
Yes
Yes
Prime cost
Yes
No
No
Yes
Choice A
Choice B
Choice C
Choice D
17. The cost of electricity for running production equipment is classified as:
A)
B)
C)
D)
a)
b)
c)
d)
Conversion cost
Yes
Yes
No
No
Period cost
No
Yes
Yes
No
Choice A
Choice B
Choice C
Choice D
18. The fixed portion of the cost of electricity for a manufacturing facility is classified as a:
A)
B)
C)
D)
a)
b)
c)
d)
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Period cost
Yes
No
No
Yes
Product Cost
Yes
No
Yes
No
Choice A
Choice B
Choice C
Choice D
5
19. For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have
remained stable. This cost per unit increase may be due to _____________ costs if the level of activity at Jinan is
_______________.
a)
b)
c)
d)
fixed, decreasing
fixed, increasing
variable, decreasing
variable, increasing
20. When the level of activity decreases within the relevant range, the fixed cost per unit will:
a) decrease.
b) increase.
c) remain the same.
d) the effect cannot be predicted.
21. Budgeting processes, regardless of the type, should generally begin with a
a. Production budget.
b. Master budget.
c. Cash budget.
d. None of these are correct.
22. Budgeting has many purposes, and in general, all of the items below are positive results of a good budgeting process EXCEPT:
a. Budgeted and actual results have always been very close.
b. The organization began its processes by creating a budget for anticipated sales.
c. The organization came in well under budget last year.
d. The organization receives input on the budget from a variety of sources.
e. The budget is presented clearly to all relevant stakeholders.
23. The schedule of Cost of Goods Manufactured is used for what purpose?
a. For manufacturers to approximate the “Purchases” account as would be used by retailer in calculating COGS.
b. For creating additional gainful employment for cost accountants.
c. It equals COGS- BI so it is a convenient plug figure.
d. To motivate management to be efficient.
e. None of these is true.
24. Barney Corporation uses job-order costing. They make an entry to record the transfer of inventoried materials from work in
process A to work in process B. This could be
a. debit to inventory expense.
b. a debit to manufacturing overhead.
c. a debit to WIP-B
d. a potential error.
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Free response section. 45 points total. Choose any (4) of the problems below.
Answers are under each problem I solved
Problem II. Equivalent Units. Transfer your answers to the answer sheet. Show all work when you turn in so you may
receive partial credit.
Selzik Company makes super-premium cake mixes that go through two processing departments—Blending and Packaging.
The following activity was recorded in the Blending Department during July:
Production data:
Units in process, July 1 (materials 100% complete; conversion 30% complete)
Units started into production
Units in process, July 31 (materials 100% complete; conversion 40% complete)
Cost data:
Work in process inventory, July 1:
Materials cost
Conversion cost
Cost added during the month:
Materials cost
Conversion cost
10,000
170,000
20,000
$
$
8,500
4,900
$139,400
$244,200
All materials are added at the beginning of work in the Blending Department. The company uses the FIFO method in its
process costing system.
Required:
1. Calculate the Blending Department's equivalent units of production for materials and conversion for July.
2. Calculate the Blending Department's cost per equivalent unit for materials and conversion for July.
3. Calculate the Blending Department's cost of ending work in process inventory for materials, conversion, and in total for
July.
4. Calculate the Blending Department's cost of units transferred out to the next department for materials, conversion, and in
Reconciliation of Units
% already
% completed this
completed
period
Units
Conver
Conver
Material
Material
sion
sion
Beginnin
g WIP
Units
introduc
ed
Total
units to
be
account
ed for
Complet
ed and
Transfer
red unit
Ending
total for July. WIP
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10,000
100%
30%
0%
70%
160,000
0%
0%
100%
100%
20,000
0%
0%
100%
40%
170,000
180,000
7
Equivalent Units
Material
UnitsTr
ansferr
ed:
From
WIP
From
units
started/I
ntroduce
d
Total
Total
Units
10,000
Total
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%
Equival
complet
ent
ed this
Units
period
Equival
ent
Units
0% -
70%
7,000
150,000
100% 150,000
100% 150,000
160,000
150,000
157,000
Total
Units
Ending
WIP
Conversion
Material
Conversion
%
%
Equival
Equival
complet
complet
ent
ent
ed this
ed this
Units
Units
period
period
20,000
100% 20,000
40%
8,000
8
Cost per Equivalent Units
Material
Conversion
Cost
incurred
in
Current
Period
Total
Equivale
nt Units
Cost
per
Equival
ent
Units
$139,400
$244,200
170,000
165,000
$0.82
$1.48
Material
Equivale
nt Units
of
Producti
on
170,000
Material
Cost per
equivale
nt Unit
TOTAL
$383,600
$2.30
Conversi
on
165,000
Conversi
on
$0.82
$1.48
Cost per Equivalent Units AND Cost to be accounted for
Material Conversion TOTAL
$ 139,400 $ 244,200 $ 383,600
170,000 165,000
$ 0.82
$ 1.48 $ 2.30
$ 8,500
$ 4,900 $ 13,400
$ 397,000
Cost incurred in Current Period
Total Equivalent Units
Cost per Equivalent Units
Cost of Beginning WIP
Total cost to be accounted for
. Cost report [Including Reconciliation]
Cost of
From Beginning WIP:
Material
Conversion
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Units
Transferred 160,000.00
Equivalent
Cost per Equivalent
Units
Units
units
Cost of Units
Transferred
TOTAL
7,000
$0
$ 10,360
$ 10,360
$ 0.82
$ 1.48
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From units started & completed
Material
150,000
$ 0.82
$ 123,000
Conversion
150,000
$ 1.48
$ 222,000
Total
Cost of Beginning WIP
Total Cost of Units transferred
Cost of
Material
Conversion
Total Cost of Ending WIP
$ 13,400
$ 368,760
Ending WIP
Equivalent
Units
20,000
8,000
20,000.00
Cost per Equivalent
Units
$ 0.82
$ 1.48
$ 28,240
units
Cost of Ending WIP
$ 16,400
$ 11,840
Total Cost accounted for
$ 397,000
Rounding Off Differences
$0
Total cost to be accounted for $ 397,000
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$
345,000
$
355,360
10
TOTAL
Problem III. Journal Entries/Process Costing. Transfer your answers to the journal entry grid on the front of the
exam. Show all work when you turn in so you may receive partial credit.
Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two
processing departments—Refining and Blending. Raw materials are introduced at various points in the Refining Department.
The following incomplete Work in Process account is available for the Refining Department for March:
Work in Process—Refining Department
March 1 balance
Materials
Direct labor
Overhead
March 31 balance
38,000
Completed and transferred
to Blending
?
495,000
72,000
181,000
?
The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $25,000;
direct labor, $4,000; and overhead, $9,000.
Costs incurred during March in the Blending Department were: materials used, $115,000; direct labor, $18,000; and overhead
cost applied to production, $42,000.
Required:
1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during
March. Key your entries to the items (a) through (g) below.
a.
b.
c.
d.
e.
Raw materials used in production.
Direct labor costs incurred.
Manufacturing overhead costs incurred for the entire factory, $225,000. (Credit Accounts Payable.)
Manufacturing overhead was applied to production using a predetermined overhead rate.
Units that were complete with respect to processing in the Refining Department were transferred to the Blending
Department, $740,000.
f. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods,
$950,000.
g. Completed units were sold on account, $1,500,000. The Cost of Goods Sold was $900,000.
2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March.
(The beginning balance in the Refining Department’s Work in Process is given in the T-account shown above.)
Raw materials
$ 618,000
Work in process—Blending Department$ 65,000
Finished goods
$ 20,000
Journal Entry
No. Account Titles and Explanation
a. Work in process-Refining department
Work in process-Blending department
Raw Materials inventory
(To record direct materials used in
production)
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Debit
$156,000.00
$45,000.00
Credit
$201,000.00
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b. Work in process-Refining department
Work in process-Blending department
Salary and Wages Payable
(To record direct labor costs incurred)
$68,200.00
$16,700.00
c. Manufacturing overhead
Accounts Payable
(To record manufacturing overhead
incurred)
$656,000.00
d. Work in process-Refining department
Work in process-Blending department
Manufacturing overhead
(To record manufacturing overhead
applied)
$488,000.00
$104,000.00
e. Work in process-Blending department
Work in process-Refining department
(To record transfers from Refining to
Blending department)
$682,000.00
f.
$700,000.00
Finished goods inventory
Work in process-Blending department
(To record goods completed and
transferred to finished goods)
g. Accounts receivable
Sales revenue
(To record sales on account)
$656,000.00
$592,000.00
$682,000.00
$700,000.00
$1,340,000.00
$1,340,000.00
Cost of goods sold
Finished goods inventory
(To record cost of sales)
Raw Materials Inventory
Debit
Credit
Beg. Bal. 209600
201000
$84,900.00
$660,000.00
$660,000.00
a.
End. Bal. 8600
Work in Process-Refining Department
Debit
Credit
Beg. Bal. 34300
156000
682000
e.
68200
488000
End. Bal. 64500
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Work in Process-Blending Department
Debit
Credit
Beg. Bal. 53,000.00
45,000.00
70,000.00 f.
16,700.00
104,000.00
682,000.00
End. Bal. 830,700.00
Wages Payable
Debit
End. Bal.
Credit
84900
b.
84900
Manufacturing Overhead
Debit
Credit
656000
592000
d.
End. Bal. 64000
Accounts Payable
Debit
End. Bal.
Credit
656000
656000
Finished Goods Inventory
Debit
Credit
Beg. Bal. 11000
700000
640000
End. Bal. 71000
c.
g.
Cost of Goods Sold (COGS)
Debit
Credit
660000
End. Bal. 660000
Sales Revenue
Debit
End. Bal.
Credit
1340000
1340000
Accounts Receivable
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Debit
1340000
End. Bal. 1340000
Credit
Problem IV: Flexible Budgets. Re-create the schedule below, completing any missing values.
For the month ended August 31
Revenue and
Actual Res
Flexible Budg Actual Varian Planning Budg
Spending vari
ults
et
ces
et
ances
Car washed (q)
8,800
Revenue ($4.90q)
$ 43,080
8,800
9,000
$ 40 U
$43,120
$ 980 U
$ 44,100
Cleaning supplies ($0
$ 7,560
.80)
$ 520 U
$ 7,040
$ 160 F
$ 7,200
Electricity ($1,200 + $
$ 2,670
0.15q)
$ 150 U
$ 2,520
$ 30 F
$ 2,550
Maintenance ($0.20q
$ 2,260
)
$ 500 U
$ 1,760
$ 40 F
$ 1,800
Wages and salaries (
$ 8,500
$5,000 + $ 0.30q)
$ 860 U
$ 7,640
$ 60 F
$ 7,700
Depreciation ($6,000) $ 6,000
$0
$ 6,000
$0
$ 6,000
Rent ($8,000)
$0
$ 8,000
$0
$ 8,000
Administrative expen
ses ($4,000 + $0.10q $ 4,950
)
$ 70 U
$ 4,880
$ 20 F
$ 4,900
Total expenses
$ 2,100 U
$ 37,840
$ 310 F
$ 38,150
$ 2,140 U
$ 5,280
$ 670 U
$ 5,950
Expenses:
$ 8,000
$ 39,940
Net operating income $ 3,140
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Problem V: Quantitative Free Response
Required: Identify any concept from the term that you find most valuable or interesting to you. This can be a
qualitative concept, or a quantitative concept.
For the concept:
1) Name and describe its purpose or use and the context in which you’d use it.
2) Demonstrate (or calculate) the concept using either real or hypothetical data.
3) Briefly analyze the results you compiled.
4) Comment on the significance or importance of the concept or finding.
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Problem VI: Performance variances
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a.
Materials price
variance:
Standard rate
Actual rate
Actual Quantity
Materials price
Variance (spap)*actual qty
$5.00
$4.95
60000
$3000
favorable
Materials
quantity/efficiency
variance
Standard quantity 45000
15000*3.0
Actual quantity
49200
Standard price
$5.00
$21000
unfavorable
b.
Labor
price
variances
Standard $16.00
rate
Actual
$17.00
rate
Actual
11800
hours
Labor
$11800
price
variances
(sr-ar)*
actual
hours
unfavorable
Labor
quantity/efficiency
variance
Standard hours
12000
15000*0.80
Actual hours
11800
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Standard rate
Labor efficiency
variance SHAH*standard rate
$16.00
$3200
favorable
Problem VII: Balanced Scorecard.
Using any business or enterprise you choose, select 2-3 organizational goals or measures. Using the 4 levels in the
Balanced Scorecard hierarchy, indicate how (using + and – notation as usual) these measures might work in your chosen
enterprise.
(for example: Learning and Growth might suggest USC Upstate would want (+) higher retention rates for highlyeffective professors. Internal Processes might indicate that this would lead to (+) student enrollment in classes with these
professors. Customer (or constituent) effects might be (+) greater learning for those students, and for Financial results (or
outcomes) this could lead to (+) retention rates for all four years for these students- a financial benefit to the institution.)
Show your chart as a graphic (lucidchart recommended!).
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