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ACC 312 Fundamentals of Managerial Accounting Midterm Exam 2




Question;ACC 312 Fundamentals of Managerial Accounting Midterm Exam2Test Form A Name______________________________________ UTEID____________________________________ Instructor____________________________________________ Class Days___________________ Time_____________________ InstructionsPages are numbered sequentially;including this page. Confirm that you have 10 pages.1. Answers;to Multiple-Choice Questions (first two sections) should be recorded on the;Scantron.A.;On;your Scantron answer sheet, write and bubble in your name, UTEID, and the ?Test;Form? letter noted above.B.;Use;a #2 pencil only to mark your responses on your Scantron answer sheet. Mark;clearly and erase completely as needed. Only the multiple-choice answers marked;on your Scantron answer sheet will be graded.C.;The;time allotted for an exam includes the time required to ?bubble-in? your;Scantron answer sheets. It is cheating to take extra time to bubble in the;answer sheet after time is up for the exam.2. Answers;to Problems should be recorded on the exam where indicated. Show your work;legibly in the space provided or attach scratch paper.3. Cell;phones, books, notes, PDAs and programmable calculators are NOT allowed at your;desk during the exam. Calculators capable of storing text are NOT allowed.4. In;the interest of minimizing disruptions and making sure all students have;exactly the same information on the exam, only the following kinds of questions;may be asked during the exam:A.;Vocabulary;questions relating to non-course-specific words,B.;Questions;about a possible mistake in the exam.In the latter case, you should;continue working on other questions. If a mistake is confirmed, we will answer;by making an announcement to the whole class. If no announcement is made in a;short period of time, you may assume that the problem is correct as written.5. When;you are finished, Insert any scratch paper into the exam and bring your entire;exam, scratch paper, Scantron answer sheet, and student ID to the front of the;room.6. You;are reminded of the University?s honor policy which requires you do your own;work and not give or receive assistance on this exam. SECTION I ? INTERPRETIVE QUESTIONS;(10 questions, 2.5 points each) - Please choose the ONE BESTanswer for each question and record;your answer on your Scantron answer sheet. 1. Lone;Star Consulting (LSC) provides two primary services: the Texas Two-Step (T2), a;business strategy review typically provided by one professional consultant over;two days, and the Alamo Analysis (A2), a comprehensive two-week business plan;evaluation by two professional consultants and one highly-paid professional;industry specialist. LSC presently;applies overhead to client jobs on the basis of professional labor cost but;would like to simplify their accounting by switching to a system that applies;production overhead based on professional labor hours (consultants and industry;specialists are both considered to be professional labor). Which one of the following is true as a;result of the change?A. Reported;profitability for T2 client jobs would increase.B. Reported;profitability for A2 client jobs would increase.C. No;change in profitability reported for client jobs would occur.D. Both;A and B.E. None;of the above2. Referring;to the prior question, if LSC makes this change at the end of 2014, in what way;will its reported 2014 net income be affected?A. Increase;because costs are reduced in total.B. Decrease;because costs are increased in total.C. Increase;because prices can be lowered for the less costly service leading to increase;demand.D. No;change.E. Cannot;tell from the information provided.3. What;is the correct sequence of the following steps for implementing an ABC system?1.;Identify;activity cost pools.2.;Calculate;cost pool rates.3.;Assign;cost to products or services.4.;Identify;cost drivers.5.;Assign;overhead costs to activity cost pools.A.;1;? 5 ? 2 ? 4 ? 3B.;1;? 5 ? 4 ? 2 ? 3C.;1;? 2 ? 3 ? 4 ? 5D.;1;? 2 ? 4 ? 5 ? 3E.;None;of the above4. Which;of the following correctly presents the elements of costs assigned to WIP in a;Normal Costing system? (Q = quantity, P = price, Act = actual, Std = standard) DM DL MOH Q P Q P Q PA. Act Act Act Act Act ActB. Act Act Std Std Std StdC. Act Act Act Act Std StdD. Std Act Std Act Std ActE. None;of the above 5. The;cash receipts budget relies upon which of the following other budgets?A. Sales;budget only.B. Sales;and Production budgets.C. Sales;Production, and Cash Receipts budgets.D. Production;Direct Materials, Direct Labor, MOH, and SG&A budgets.E. Production;budget only.6. Which;of the following is not an example of one of the purposes of budgeting?A. Deciding;which product lines will receive a share of limited R&D funding.B. Planning;for materials purchase negotiations with suppliers in a manufacturing firm.C. Agreeing;on future production plans to support demand resulting from marketing?s ad;plans.D. Reviewing;the adequacy of short-term financing (line of credit) bank arrangements.E. Deciding;whether to accept or reject a special order.7. The;Danshui Plant No. 2 case presented several management challenges. Which of the;following was not an important issue in;the case?A. Rapidly;increasing direct materials costs.B. Rapidly;increasing direct labor costs. C Inadequate;output of iPhones.D. Profit;shortfall of >500% of budget.E. Producing;iPhones for the first time.8. Which;of the following variances is/are calculated using the standard quantity of;input allowed for the actual amount of output? DL;Efficiency DM Purchase Variable-Overhead Variance Price Variance Spending VarianceA. Yes Yes YesB. No Yes YesC. Yes Yes NoD. No No NoE. Yes No No9. A;large unfavorable direct-labor efficiency variance would be least likely to be;explained by:A. Inadequate;investment in employee training.B. Lower-than-expected;direct-material quality.C. A;labor dispute with unionized employees.D. An;out-of-date direct-labor time standard.E. Producing;more finished units than originally planned. 10. The;manufacturing overhead applied to a unit of Work-in-Process Inventory by a;company that uses standard costing would be computed as:A. Actual;hours x Predetermined (standard) overhead rate.B. Standard;hours x Predetermined (standard) overhead rate.C. Actual;hours x Actual overhead rate.D. Standard;hours x Actual overhead rate.E. $0;because users of standard costing do not apply overhead to work in process.SECTION II ? SHORT CALCULATIONS (10;questions, 4 points each) - Please choose the ONE BESTanswer for each question and record;your answer on your Scantron answer sheet. 11. Dimebox;Mfg uses a predetermined overhead application rate of $12 per direct labor hour;in a Normal costing system. A review of the company's accounting records;revealed budgeted manufacturing overhead for the period of $312,000, applied;manufacturing overhead of $288,000, and underapplied overhead of $4,700. What;were the amounts of actual and budgeted direct labor hours? Actual BudgetedA. 24,392 24,000B. 24,000 26,000C. 25,608 24,392D. 26,000 24,000E. 24,392 26,00012. How;much was the actual spending on manufacturing overhead at Dimebox Mfg (refer to;previous problem)?A. $283,300B. $288,000C. $292,700D. $312,000E. Cannot;be determined from the information given13. Austin;Aces assigns manufacturing overhead (MOH) based on direct-labor hours (DLH).;The company?s flexible budget for 15,000 DLH includes variable MOH of $90,000;and fixed MOH of$120,000. Total MOH in a flexible;budget for 25,000 DLH would be what amount?A. $210,000B. $270,000C. $290,000D. $350,000E. Cannot;be determined from the information given 14. During;July, Blanco Blankets had budgeted to produce 50,000 units of its only product;the Blanco Blanket. However, due to a brief machine breakdown, it actually;produced only 40,000 blankets during July, using 22,000 machine hours to do so;and spending $60,000 on manufacturing overhead (MOH) costs. Blanco?s cost;driver for assigning all MOH (fixed and variable) to WIP inventory is machine;hours (MH), with a standard of 0.5 MH per blanket. Its predetermined (standard);manufacturing overhead rate is $2.50 per MH. In its original budget, how much;did Blanco Blankets budget for total MOH in July?A. $50,000B. $55,000C. $60,000D. $62,500E. Cannot;be determined from the information given15. Referring;again to the data for Blanco Blankets (previous problem), which of the;following correctly lists the overhead cost that would be assigned to WIP under;different costing models at Blanco Blankets? Actual Normal StandardA. $60,000 $55,000 $50,000B. $60,000 $50,000 $55,000C. $50,000 $55,000 $50,000D. $50,000 $50,000 $55,000E.;Cannot be determined from the information given16. Cool;Electric Car Co. (CECO), a start-up, plans to produce its first car (one model;only) in September. Their sales budget calls for sales of 10,000 units, 9,600;units, and 10,200 units in October, November, and December, respectively. CECO;plans to have an ending finished goods inventory each month that equals 40% of;the following month?s sales. On the basis of this information, how many cars;would CECO plan to produce in November?A. 9,360B. 9,440C. 9,720D. 9,840E. 10,31517. Each;CECO car requires two identical electric motors, and the company?s motor;supplier requires orders in increments of 2,500 motors. CECO plans to end each;month with an inventory of motors equal to at least 20% of the following;month?s needs, while ordering no more motors than they must to meet this;requirement. At the beginning of October, the company expects to have 5,000;motors in inventory. Referring to the previous question for additional;information as needed, how many electric motors will CECO plan to purchase;during October?A. 15,000B. 17,500C. 20,000D. 22,500E. 25,000 18. During;March, Gulf Enterprises recorded direct material cost of $165,000 and direct;labor costs of$40,000. The month?s beginning and;ending inventories of WIP and finished goods were $0, and the company reported;gross margin of $115,000 on March sales of $450,000. Gulf, which currently uses;a traditional costing system based on direct-labor hours, is considering an;activity-based costing system. How much manufacturing overhead would have been;assigned by an ABC system in March?A. $105,000B. $130,000C. $205,000D. $245,000E. $335,00019. Balcones;Business Development recently used 14,000 direct-labor hours (DLH) to produce;7,500 completed units. According to manufacturing specifications, each unit is;anticipated to take two DLH to complete. The company's actual payroll cost for;direct labor amounted to $158,200. If the standard direct-labor cost per hour;is $11, Balcones' direct-labor efficiency variance is:A. $11,000 U B. $11,000 F C. $11,300 U D. $11,300 FE. None of the above20. During;January, Escarpment Enterprises purchased 50,000 gallons of direct material;S-Plus. All of the S-Plus purchased was used in the January production of;11,000 units of the chemical product Entrop. Entrop is designed such that each;finished unit is expected to use five gallons of S-Plus in its production.;Variance analysis for January shows that S-Plus has a direct-material price;variance of$5,000U and a direct-material;quantity variance of $3,000F. What was the actual price paid by Escarpment for;each gallon of S-Plus during January?A. $0.50 B. $0.60 C. $0.70D. An;amount other than those shown aboveE. Cannot;be determined from the information given SECTION III - PROBLEMS (35 points;total) You MUST show your work to receive any partial credit. Please try to be;as neat and organized as possible. Unless stated otherwise, round to two;decimal places. PROBLEM 1 (15 points)ATX TechLaunch is a consulting firm;that provides information technology (IT) services and e-commerce consulting;services. For all services, the firm bills $200 per hour for Senior Consultants;and $100 per hour for Staff Consultants. ATX is having difficulty hiring;additional professional staff due to the present tight labor market in the tech;sector.Selected annual information for;2013:? Billable;hours (all consultants) to clients for the year totaled 5,000, consisting of;3,100 hours of information technology services and 1,900 hours of e-commerce;consulting.? Overhead;costs relating to production of billable services totaled $342,000, composed of;the following: $180,000 staff support, $136,400 in-house computing, and $25,600;miscellaneous office expenses.? A;recent costing study concluded that staff support is correlated to the number;of clients served, in-house computing is correlated to the number of in-house;computer hours logged, and miscellaneous offices expenses are correlated to the;number of client transactions. A breakdown of these items follows. IT E-commerce Services consulting Number of clients 200 50Number of computer hours 2,600 1,800Number of client transactions 400 600ATX currently uses a traditional;costing structure with a single pool of overhead costs and billable hours as;the cost driver. Based on the conclusions of the recent costing study, they are;considering a switch to activity-based costing.a. Complete;the following table of cost pool rates for the possible ABC system (3 points)Cost per client Cost per computer hour Cost per client transaction b. Compute;the overhead cost that would have been assigned to E-commerce consulting in;2013 under the traditional and ABC costing systems (6 points). E-Commerce;ConsultingTraditional Activity-Based Costing c. The;average Senior Consultant salary is $160,000 per year (including benefits) for;2,000 hours of work. The comparable number for a Staff Consultant is $100,000.;Taking all costs into account, what profit would be reported for the following;E-commerce consulting client in 2013, under the traditional and ABC costing;systems? (6 points).Billable hours:Senior Consultant 40Staff Consultant 100Computer hours 200Client transactions 20 Client;ProfitTraditional Activity-Based Costing Cavity Central, a candy wholesaler;provided the following budget information:Month Merchandise Purchases SalesJanuary $142,000 $172,000February 148,000 162,000March 136,000 165,000April 154,000 178,000May 160,000 166,000Normally, customers pay 60% of their;balances in the month of sale, 30% in the month following sale, and 10% in the;second month following sale. The company pays all invoices for merchandise;purchases in the month following purchase and takes advantage of a 3% discount;on all amounts due. Non- merchandise cash operating expenses, however, are paid;in full in the month incurred. May?s non- merchandise operating expenses are;budgeted to be $144,500, including $15,000 of depreciation on the warehouse and;$10,000 of expense from a $120,000 annual computer lease that is paid each;January.Cavity Central's cash balance on May;1 was $127,800.Required: Determine the following:a. Budgeted;cash collections (receipts) during May. (3 points)b. Budgeted;cash balance on May 31. (4 points)c. Budgeted;accounts receivable balance on May 31. (3 points) PROBLEM 3;(10 points) The Colorado offices of Weird Al?s;Wire, a producer of computer network cables, were flooded this past September.;Unfortunately, only scraps of the costing records have been found and Al?s;investors are demanding their August financial report. Weird Al himself has;contacted you in desperation, begging for your help in reconstructing his;August cost reports. He knows only that 450 rolls of cable were produced during;August. Help him out by filling in the blanks below. (2 points each)May Direct Material (all materials;purchased were used):Standard quantity of direct material;per roll of cable was pounds, at;$4.00 per pound.Actual quantity of direct material;was pounds;costing $9,600. Standard direct material cost for actual output was$9,000. Direct materials price;variance was.Direct material quantity variance;was $80 unfavorable.May Direct Labor:Standards for direct labor were 3;hours per roll of cable at $8.00 per hour. Actual wage rate paid per hour was;$8.25.Total actual cost of direct labor was Direct labor rate variance was Direct labor efficiency variance was;$400 unfavorable.;="msonormal">="msonormal">


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