ACCT 304 Final Exam

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ACCT 304 Final Exam 100% Correct Answers

ACTIVITY BASED COSTING

  1. If a predetermined overhead rate is not employed and the volume of production is increased over the level planned, the cost per unit would be expected to

A.    Decrease for fixed costs and remain unchanged for variable costs.

B.    Remain unchanged for fixed costs and increase for variable costs.

C.    Decrease for fixed costs and increase for variable costs.

D.    Increase for fixed costs and increase for variable costs.

  1. If fixed costs decrease while variable cost per unit remains constant, the contribution margin will be

A.    Unchanged                                                       C.    Higher

B.    Lower                                                                 D.    Indeterminate

  1. The high-low method is criticized because it

A.    is not a graphical method.

B.    is a mathematical method.

C.    ignores much of the available data by concentrating on only the extreme points.

D.    does not provide reasonable estimates.

  1. [i].      The controller of Jema Company has requested a quick estimate of the manufacturing supplies that it needs for the month of July when the expected production are 470,000 units. Below are the actual data from the prior three months of operations.

Production in units

Manufacturing supplies

March

450,000

P723,060

April

540,000

853,560

May

480,000

766,560

Using these data and the high-low method, what is the reasonable estimate of the cost of manufacturing supplies that would be needed for July? (Assume that this activity is within the relevant range.)

A.    P 805,284                                                         C.    P 755,196

B.    P1,188,756                                                       D.    P 752,060

  1. [ii].      Almond Company wishes to determine the fixed portion of its maintenance expense (a semi-variable expense), as measured against direct labor hours for the first Malayan three months of the year. The inspection costs are fixed; however, the adjustments necessitated by errors found during inspection account for the variable portion of the maintenance costs. Information for the first Malayan quarter is as follows:

Direct Labor  Hours

Maintenance  Costs

January

34,000

P61,000

February

31,000

58,500

March

34,000

61,000

 

What is the fixed portion of Almond Company’s maintenance expense, rounded to the nearest pesos?

A.    P28,330                                                             C.    P37,200

B.    P32,677                                                             D.    P40,800

  1. [iii].     If there were 30,000 pounds of raw material on hand on January 1, 60,000 pounds are desired for inventory at December 31, and 180,000 pounds are required for annual production, how many pounds of raw material should be purchased during the year?

A.    150,000 pounds                                              C.    120,000 pounds

B.    240,000 pounds                                              D.    210,000 pounds

  1. [iv].     The Avelina Company has the following historical pattern on its credit sales.

70    percent collected in month of sale

15    percent collected in the first month after sale

10    percent collected in the second month after sale

4    percent collected in the third month after sale

2    percent uncollectible

 

The sales on open account have been budgeted for the last six months of 2007 are shown below:

July                                                                                                                                 P  60,000

August                                                                                                                                70,000

September                                                                                                                         80,000

October                                                                                                                              90,000

November                                                                                                                        100,000

December                                                                                                                          85,000

 

 

The estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter would be

A.    P172,500                                                          C.    P265,400

B.    P230,000                                                          D.    P251,400

  1. [v].      Harem Corporation consists of two divisions, Mining and Builders. The Mining makes black steel, a product that can be used in the product that the Builders division makes. Both divisions are considered profit centers. The following data are available concerning black steel and the two divisions:

Mining

Builders

Average units produced

150,000

Average units sold

150,000

Variable mfg cost per unit

P2

Variable finishing cost per unit

P5

Fixed divisional costs

P75,000

P125,000

 

The Mining Division can sell all of its output outside the company for P4 per unit. The Builders Division can buy the black steel from other firms for P4. The Builders Division sells its product for P12.

 

What is the optimal transfer price in this case?

A.    P2 per unit                                                          C.    P7 per unit

B.    P4 per unit                                                          D.    P9 per unit

  1. The sequence that reflects increasing breadth of responsibility is

A.    cost center, investment center, profit center

B.    cost center, profit center, investment center

C.    profit center, cost center, investment center

D.    investment center, cost center, profit center

 

  1. In responsibility accounting the most relevant classification of costs is

A.    fixed and variable                                            C.    discretionary and committed

B.    incremental and nonincremental                 D.    controllable and noncontrollable

 

  1. If a firm operates at capacity, the transfer price should be the:

A.    external market price.                                      C.    actual cost.

B.    differential cost.                                                 D.    standard cost.

  1. The basic methods used in transfer pricing are

A.    variable or full costs                                         C.    market price or negotiated price

B.    dual prices                                                         D.    all of the above

  1. Market-based transfer prices are best for the

A.    company when the selling division is operating below capacity.

B.    company when the selling division is operating at capacity.

C.    buying division if it is operating at capacity.

D.    buying division.

Assume that Steel Division has a product that can be sold either to outside customers on an intermediate market or to Fabrication Division of the same company for use in its production process. The managers of the division are evaluated based on their divisional profits.

Steel Division:

Capacity in units                                                                                                                                        200,000

Number of units being sold on the intermediate market                                                                    200,000

Selling price per unit on the intermediate market                                                                                     P90

Variables costs per unit (including P3 of avoidable selling expense if sold internally)                         70

Fixed costs per unit (based on capacity)                                                                                        13

 

Fabrication Division:

Number of units needed for production                                                                                          40,000

Purchase price per unit now being paid to an outside supplier                                                 P86

The appropriate transfer price should be:

A.    P90                                                                      C.    P70

B.    P87                                                                      D.    P86

Use the following data to answer questions 11 through 13.

N & R Company transfers a product from division N to division R. Variable cost of this product is anticipated to be P40 a unit and total fixed costs amount to P8,000. A total of 100 units are anticipated to be produced. Actual cost, however, amounts to P50 for variable costs. Fixed costs were same as budget. However, actual output was twice as many.

 

  1. [vi].     Actual cost per unit amounts to

A.    P90                                                                      C.    P115

B.    P92                                                                      D.    P120

 

  1. [vii].    The transfer price based on actual variable costs plus 130% markup amounts to

A.    P90                                                                      C.    P115

B.    P92                                                               &am

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