Accounting 611 Midterm Exam - Spring 2014

Problem 1

  Using the following information find the unknown amounts. Assume each set of information is an independent case.

a.   Merchandise Inventory           Purchases                                   $210,000

                                                      Cost of goods sold                       223,000

                                                      Beginning balance                          41,000

                                                      Ending balance                                        ?

b.   Direct Materials                      Beginning balance                         $ 7,000

                                                      Ending balance                              14,000

                                                      Purchases                                       48,000

                                                      Direct materials used                               ?

c.   Work-in-process Inventory     Ending balance                           $ 22,000

                                                      Cost of goods manufactured         21,000

                                                      Beginning balance                            8,000

                                                      Current manufacturing costs                   ?

d.   Finished Goods Inventory      Cost of goods manufactured       $62,000

                                                      Ending balance                              20,000

                                                      Cost of goods sold                         61,000

                                                      Beginning balance                                   ?

Problem 2

 Sprint Manufacturing Company produces two products, X and Y. The following information is presented for both products:

                                                        X                      Y

            Selling price per unit         $30                  $20

            Variable cost per unit          20                      5

Total fixed costs are $292,500.

Required:

a.   Calculate the contribution margin for each product.

b.   Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y.

c.   Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y.

Problem 3

Rachel's Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:

                             Number of           Number of                       Number of

Product                       Setups         Components        Direct Labor Hours

Standard                               3                          30                                    650

Deluxe                                   7                          50                                    150

Overhead costs          $40,000               $120,000

Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.

a.   What is the total amount of overhead costs assigned to the standard model?

b.   What is the total amount of overhead costs assigned to the deluxe model?

Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.

c.   What is the total amount of overhead costs assigned to the standard model?

d.   What is the total amount of overhead costs assigned to the deluxe model?

Problem 4

Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000 units. The cost of placing an order is $80 and the cost of carrying one unit in inventory for one year is $25.

Required:

a.   Use the economic-order-quantity model to determine the optimal order size.

b.   Determine the reorder point assuming a lead time of 10 days and a work year of 250 days.

c.   Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units.

Problem 5

The following data are available for Ruggles Company for the year ended September 30, 2011.

Sales:                                                            24,000 units at $50 each

Expected and actual production:                                    30,000 units

Manufacturing costs incurred:

      Variable:                                                                         $525,000

      Fixed:                                                                             $372,000

Nonmanufacturing costs incurred:

      Variable:                                                                         $144,800

      Fixed:                                                                               $77,400

Beginning inventories:                                                                none

Required:

a.   Determine operating income using the variable-costing approach.

b.   Determine operating income using the absorption-costing approach.

Problem 6

Jerry's TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.

                        Sales (1,000 televisions)                  $ 900,000

                        Cost of goods sold                             400,000

                        Store manager's salary per year            70,000

                        Operating costs per year                     157,000

                        Advertising and promotion per year    15,000

                        Commissions (4% of sales)                  36,000

Part 1. What was the variable cost per unit sold for 2011?

A) $36

B) $436

C) $678

D) $400

Part 2 What were total fixed costs for 2011?

A) $678,000

B) $436,000

C) $242,000

D) $227,000

Part 3 What are the estimated total costs if Penny's expects to sell 3,000 units next year?

A) $1,550,000

B) $1,332,000

C) $1,671,000

D) $1,453,000

Part 4 Which cost estimation method is being used by Jerry's TV and Appliance Store?

A) the industrial engineering method

B) the conference method

C) the account analysis method

D) the quantitative analysis method