ACC 3123 / EXAM 1 / FALL 2010
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ACC 3123 / EXAM 1 / FALL 2010
QUESTIONS 1-3:
The following information is for the Mitchell Company for November.
Inventories
Raw Material
Work in Process
Finished Goods
Beginning
$19,750
35,350
21,300
Direct Labor (22,000 DLH @ $14)
Raw Material Purchases
Indirect Labor
Factory Supplies Used
Other Expenses:
Depr.-Factory Equipment
Ending
$15,400
32,200
27,900
$155,000 Insurance-Office
11,600 Office Supplies Expense
475 Insurance-Factory
Depr. Office Equipment
18,100 Repair/Maintenance-Factory
2,750
1,050
1,825
3,900
7,800
1. Refer to Mitchell Company. What was the total manufacturing costs during the year?
2. Refer to Mitchell Company. What was the Cost of Goods Manufactured?
3. Refer to Mitchell Company. What was the Cost of Goods Sold?
QUESTIONS 4-7:
Davis Company manufactures wood file cabinets. The following information is available for June 2008:
Raw Material Inventory
Work in Process Inventory
Finished Goods Inventory
Beginning
$ 6,000
17,300
21,000
Ending
$ 7,500
11,700
16,300
Direct labor is $9.60 per hour and overhead for the month was $9,600. 1,500 direct labor hours were used
and $21,000 of raw material was purchased.
4. Refer to Davis Company. What is the Cost of Goods Manufactured for June?
5. Refer to Davis Company. What is the total conversion cost for June?
6. Refer to Davis Company. What is the prime cost for June?
8.
7. Refer to Davis Company. How much is Cost of Goods Sold?
Deep Sea Motor Company is exploring different prediction models that can be used to forecast indirect labor
costs. One independent variable under consideration is machine hours. Following are matching observations
on indirect labor costs and machine hours for the past six months:
2
Month
1
2
3
4
5
6
Machine hours
300
400
240
370
200
225
Indirect labor costs
$20,000
$24,000
$17,000
$22,000
$13,000
$14,000
Deep Sea Motor Company is planning on using 350 machine hours in the next month. Using the high low
method, what is the projected indirect labor cost for the next month?
9.
Refer to Deep Sea Motor Company above. Re-answer question 8 using the regression method.
QUESTIONS 10-11:
The following data are available for the Schilling Manufacturing Company for the year 2005, its first year of
operations. These pertain to total production.
Beginning inventory in units
Units produced
Units sold
Sales
Material cost (DM)
Variable conversion cost used (DL+VMOH)
Indirect manufacturing cost (FMOH)
Indirect non-manufacturing costs (NMOH)
10.
Calculate cost of goods sold under variable costing.
11.
Calculate cost of goods sold under full absorption costing.
0
2,400
2,000
$200,000
$24,000
$48,000
$36,000
$40,000
QUESTIONS 12-13:
Marx Brothers, Inc. provides you with the following information.
Actual FMOH
$25,545
Estimated FMOH
$27,000
Actual VMOH
$57,651
Estimated VMOH
$56,000
Estimated DM cost per unit
$5.11
(cost driver for VMOH)
Actual DM cost per unit
$5.33
Actual DL cost per unit
$10.66
Estimated DL cost per unit
$10.51
(cost driver for FMOH)
Actual units produced
9,554
Estimated units
10,000
12.
Calculate the applied FMOH using Normal Costing.
13.
Calculate the applied VMOH using Standard Costing.
QUESTIONS 14-15:
3
McMahon Company would like to institute an activity-based costing system to price products. The
company's Purchasing Department incurs costs of $550,000 per year and has six employees. Purchasing has
determined the three major activities that occur during the year.
Activity
Issuing purchase orders
Reviewing receiving reports
Making phone calls
Allocation
Measure
# of purchase orders
# of receiving reports
# of phone calls
# of
People
1
2
3
Total
Cost
$150,000
$175,000
$225,000
During the year, 50,000 phone calls were made in the department; 15,000 purchase orders were issued; and
10,000 shipments were received. Product A required 200 phone calls, 150 receiving reports, and 50 purchase
orders. Product B required 350 phone calls, 400 receiving reports, and 100 purchase orders.
14. Determine purchasing department cost per unit of product A, if 1,500 units of Product
A and 3,000 units of Product B were manufactured during the year.
15. Determine purchasing department cost per unit of product B, if 1,500 units of Product
A and 3,000 units of Product B were manufactured during the year.
QUESTIONS 16-17:
Erin Sacks, CPA, J.D., provides accounting and tax services to her clients. In 2010, she charged $175 per
hour for accounting and $200 per hour for tax services. Erin estimates the following costs for the year 2011.
Office supplies, advertising and miscellaneous
Computer fees
Secretary's salary
Rent
$ 32,000
48,000
50,000
36,000
$166,000
Operating profits declined last year and Ms. Sacks has decided to use activity based costing (ABC) procedures to evaluate her hourly fees. She has gathered the following information from last year's records:
Activity Levels
Activity
Office Supplies
Computer fees
Secretary's salary
Rent
Cost Driver
Hours billed
Computer hour used
Number of clients
Types of services offered
Accounting
1,000
250
32
1
Tax Services
1,000
750
168
1
Required:
16. Erin wants her hourly fees for the Accounting services to be 150% of their activity-based costs.
What is the fee per hour for this service that Erin must charge?
17. Erin wants her hourly fees for the Tax services to be 200% of their activity-based costs. What is
the fee per hour for this service that Erin must charge?
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QUESTIONS 18-19:
Farris Corporation produces a single product. The following is a cost structure applied to its first year of
operations.
Sales price
Variable costs:
SG&A
Production
Fixed costs (total cost incurred for the year):
SG&A
Production
$15 per unit
$2 per unit
$4 per unit
$14,000
$20,000
During the first year, Farris Corporation manufactured 5,000 units and sold 3,800. There was no
beginning or ending work-in-process inventory.
18. How much income before income taxes would be reported if Farris Corporation uses full
absorption costing?
19. How much income before income taxes would be reported if variable costing was used?
_________________________________________________________________________________
20.
Executive Images Corporation produces two types of wooden bookends: plain and hand-carved.
The following information about the production process is available:
Number produced
Machine hours
Inspection hours
Revenues
Direct costs
Plain
120,000
95,000
7,000
$4,800,000
$3,800,000
Hand-Carved
75,000
25,000
35,000
$4,400,000
$3,100,000
Total factory overhead is $1,200,000. Of this overhead, $500,000 is related to utilities (cost driver = machine
hours) and the remainder is related to quality control (cost driver = inspection hours).
If the Corporation uses ABC allocation method, what is the profit per unit of “Plain” bookend? Per unit of
“Hand-Carved” bookend?
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