Practice Examination I

Accounting 3341

Practice Examination I

HEY GUYS! THIS IS THE BEST EXAMPLE I COULD FIND FOR A PRACTICE EXAM. JUST REMEMBER THAT MY EXAM WILL HAVE SUBSTANTIALLY MORE MULTIPLE CHOICE QUESTIONS ON IT (BOTH CONCEPTUAL AND QUANTITATIVE) AND LESS WORKOUT PROBLEMS. BUT AT LEAST THIS GIVES YOU A CHANCE TO HAVE ADDITIONAL PRACTICE WORKING PROBLEMS. STUDY HARD!

PROFESSOR BORTZ J

PART I (9 Points)

1.  For which of the following products/services would you likely use process costing?

a. Boeing 767 jet aircraft

b. Architectural renovations

c. Designer evening gowns

d.  Consulting assignments

e.  20-inch television sets

____E_____

2. A factor used to systematically link an indirect cost to a cost object is called:

a. a cost pool

b. a cost allocation base

c. a cost tracer

d.  a cost burden

e.  a cost accumulation

____B____

3. Which of the following statements about normal costing is true?

a.  Direct costs and indirect costs are allocated using an actual rate.

b.  Direct costs and indirect costs are traced using budgeted rates.

c.  Direct costs are traced using a budgeted rate and indirect costs are

allocated using an actual rate.

d.  Direct costs are traced using an actual rate, and indirect costs are

allocated using a budgeted rate.

e.  None of the above.

____D____

PART II (14 points)

A local hospital wants to determine, to the extent possible, the actual cost for each patient stay. It is a general health care facility with all basic services, but it does not perform specialized services such as organ transplants. The hospital has a staff of salaried full-time nurses who receive a set salary for the year, regardless of patient volume. Additional contract nurses are hired on an “as needed” basis and paid an hourly wage.

Required: For each of the following, classify it as a direct or indirect cost with respect to each patient. In addition, classify each item as fixed or variable with respect to the number of patient days (i.e., the sum of days each patient was in hospital) the hospital incurs.

Indicate your answer by placing an X in each of the two appropriate spaces for each item.

As an illustration, the answer to the first item is provided to you.

Direct Indirect Fixed Variable

Electronic Monitoring __ X______X__

Cleaning Activities ______X______X_____

Meals for Patients ___X______X___

Utilities ______X___ __X______

Security ______X______X______

Salaries of salaried nurses __X______X______

Wages of contract nurses __X______X____
PART III (16 points)

From the records of Scialfa, Inc., you are given the following information pertaining to its operations for the year 1998 (in thousands of dollars):

Balance as of 1/1/98 Balance as of 12/31/98

Direct Materials - $60 Direct Materials - $114

Work-in-process - $96 Finished Goods - $ 90.

Finished Goods - $75

Sales Revenue = $690;

Materials Purchased = $420

Conversion Costs = $495;

Prime Costs = $636;

Gross Margin = $105.

Required: Compute the following amounts for 1998 and provide them in the indicated spaces. Use the following page for your work if necessary.

a) Direct Materials Used __366K_____

b) Factory Overhead Costs ___225K____

c) Total Manufacturing Costs incurred ___861K____

d) Cost of Goods Manufactured ____600K___

e) Cost of Goods Sold ___585K____

f) Ending WIP Inventory ____357K___

Part IV (22 points) FC Corp. uses a job-order costing system. The firm estimates that total manufacturing overhead for 1999 will be $300,000. In addition, it budgeted 25,000 machine hours for 1999. The following additional information is provided for 1999:

Direct materials WIP Finished Goods

Opening balance $20,000 $12,500 $11,000

Closing balance $15,000 $22,000 $ 7,200

During 1999, direct materials costing $40,000 were purchased. FC applies overhead using machine hours as the cost driver.

Required:

1. The following transactions summarize FC's activities in 1999. Record the journal entry (debit, credit, account name, amount) for each one of them in the space provided.

a. Factory direct labor costs incurred - $85,000 (17,000 hours @ $ 5 per hour).

WIP $85,000

Wages Payable $85,000

b. Raw (direct) materials placed into production.

WIP 45,000

DM 45,000

c.  Manufacturing overhead costs incurred for the year were as follows:

1.  $50,000 for supervisor’s salary.

2.  $130,000 for machine power: (20,000 machine hours @ $6.50 per hour)

3.  $70,000 depreciation on plant and equipment.

MOH/FOH Control $250,000

Salary Payable $50,000

Machine Power-utility $130,000

Accum. Depreciation $70,000

d.  Application of overhead to units produced.

Budget FOH rate = $300,000/25,000 m-hr = $12/m-hr

WIP ($12/m-hr) x 20,000 m-hrs $240,000

MOH/FOH Applied $240,000

e.  Journal entry for the year end reconciliation of manufacturing overhead accounts with under/overapplied amounts written off to Cost of Goods Sold.

MOH/FOH Applied $240,000

COGS $10,000

MOH/FOH Control $250,000

2. Was overhead under or over-applied?

Applied < Actual Under Applied

3. Calculate the Cost of Goods Manufactured and the Cost of Goods Sold for FC Corp for 1999?

WIP FG

COGM = $360,500

COGS = $364,300+$10,000 (under applied) = $374,300
PART V (24 points)

The Moray Company manufactures snack foods, and their main product is the Dried Eel. Moray produces this product using 4 steps, the last of which is the Stamping process. Packaging materials are added at the end of the stamping process, while labor and overhead costs are added evenly during the process. The controller gives you the following information regarding the Stamping Department for March 2000:

WIP inventory on March 1:

1,250 cases of eels, 80% complete in terms of processing Transferred-In Costs: $28,920

Conversion Costs: 9,060

$37,980

During March, an additional 5,000 cases (carrying a cost of $94,000) were brought in to be stamped, while 5,250 cases were stamped and transferred out. The incomplete cases as of March 31 were 40% complete in terms of processing. Total costs incurred in March included materials costs of $25,200 and conversion costs of $38,400.

Required:

a.  Calculate the number of units in ending WIP inventory and the number of units started and completed during March.

BWIP + Trans-In = EWIP + Trans -out

1250 + 5000 = 1000 + 5250

S & C = Trans-out - BWIP = 4000

b.  Using the FIFO method, compute the equivalent units of production in the Stamping Department for the relevant inputs.

BWIP S&C EWIP E. U.

Trans-In 0 4,000 1,000 = 5,000

DM 1250 4,000 0 = 5,250

CC 250(1250x20%) 4,000 400 (1000X40%) = 4,650

c.  Using the Weighted Average method, compute the equivalent units of production in the Stamping Department for the relevant inputs.

Completed EWIP E. U.

Trans-In 5,250 1,000 = 6,250

DM 5,250 0 = 5,250

CC 5,250 400 (1000X40%) = 5,650

d.  UNDER FIFO, compute the cost per equivalent unit for March.

Costs E.U. Rate

Trans-In 94,000 5,000 = 18.80

DM 25,200 5,250 = 4.80

CC 38,400 4,650 = 8.258

e.  UNDER FIFO, what is the cost of the units in ending WIP on March 31, 2000?

Trans-In for EWIP CC for EWIP

(1,000x18.80) + (400x8.258) = 22,103.226

f.  What is the journal entry for the goods transferred out during March?

BWIP Work to complete BWIP S & C

37,980 + [ ( 1250x4.8)+(250x8.258) ] + [ 4,000 x (18.80+4.80+8.258)]

= 37,980 + [96,000+2,064.5)] + 127,432

= 173,476.50

FG $173,477

WIP- Stamping $173,477
PART VI (15 points): Needham Inc. makes computer disk drives. For November, there were no beginning inventories of raw materials and no beginning or ending WIP. Needham uses a JIT production system and backflush costing. The November standard cost per unit is: direct materials $26, conversion costs $15. The following data pertain to November manufacturing:

Raw materials and components purchased - $ 10,600

Conversion Costs incurred - $ 6,160

Number of finished units manufactured - 400

Number of finished units sold - 384

Needham writes off overapplied or underapplied conversion costs at the end of each month. Assume that there are no variances for direct materials costs (i.e., actual and applied costs are the same for direct materials).

Required: Suppose that Needham's backflush system employs two trigger points:

(i) purchase of raw materials and components and (ii) completion of finished goods.

Prepare summary journal entries for November for Needham.

(1) Inventory $10,600

A/P $10,600

CC Control $6,160

Variable Accounts $6,160

(2) FG $16,400

Inventory ($26x400) $10,400

CC Applied ($15x400) $6,000

(3) CC Applied $6,000

COGS 160

CC Control $6,160