Sample Exam 324 3

Topics: Variable cost, Costs, Total cost Pages: 14 (2435 words) Published: November 13, 2014
Management Accounting

Use the data below to answer questions 1 through 3.

The following data for ABC Ltd pertain to the production of 3,000 skate gaurds during April.

Direct Materials (All materials purchased were used):

Standard cost: $9.00 per meter.
Total actual cost: $5,985.
Standard cost allowed for units produced was $5,400.
Materials efficiency variance was $270 unfavourable.

1) The flexible budget amount expressed in number of input units per output unit is:
a) 0.20 meters
b) 0.21 meters
c) 0.19 meters
d) 600.00 meters
e) None of the above

2) The materials price variance is:

a) $855 favorable
b) $315 favorable
c) $855 unfavorable
d) $315 unfavorable
e) None of the above

3) The actual cost per meter is:

a) $10.500
b) $ 9.975
c) $ 9.500
d) $ 9.474
e) None of the above

4) A chemical company sells liquid acid for $2.00 per litre. The production costs per 10,000 litres are:

Material$ 3,500
Direct labor $ 2,500
Overhead $ 5,000

Upon completion, the acid is poured into 1-litre containers and sent to the distribution centre. The cost of each container is $0.175 and transportation costs are $0.025 per litre.

The company has the ability to further process the acid into cleaning fluid. For every 50 litres of acid input, 25 litres of cleaning fluid are output. If the company decides to continue processing, total production costs will increase by $8,000 per 10,000 litres of acid processed (resulting in 5,000 litres of cleaning fluid) over existing amounts. 1 litre of cleaning fluid can be sold for $4.20. The litre containers used to package the cleaning fluid cost $0.350 each and transportation costs are $0.050 per litre of cleaning fluid.

Should the company process further and sell cleaning fluid?

a) Yes. Profit will increase by $7,000
b) Yes. Profit will increase by $1,000
c) No. Profit will decrease by $7,000
d) No. Profit will decrease by $1,000
e) None of the above will result.

8. Which of the following is NOT an assumption of CVP analysis?

a) Costs may be separated into separate fixed and variable components. b) Total revenues and total costs are linear in relation to output units. c) The time value of money is not relevant.
d) The unit selling price, unit variable costs, and fixed costs are known. e) There will be a change between beginning and ending levels of inventory.

11. King Company uses a single cost pool for fixed manufacturing overhead with production units as the denominator. June’s budget was $500,000; however, the actual amount was $700,000. Actual production for June was 13,000 units, and actual machine hours were 11,000. Budgeted production included 18,000 units and 13,000 machine hours.

What is the fixed overhead application rate per unit used in the company’s standard cost system throughout the year?

a) $38.89 per unit
b) $53.85 per unit
c) $27.78 per unit
d) $38.46 per unit
e) $35.00 per unit

In business, forecasts are the basis for:

capacity planning


sales planning

production planning

all of the above

The following information pertains to questions 15, 16 and 17. Blue Company, which produces a single product, began operations on January 1. Material A is added at the start of the production process and packaging material B is added at the end of the process. Conversion costs are incurred uniformly throughout the process. Inspection takes place when manufacturing is completed, but before packaging material B is added. Spoiled units are discarded. Normal spoilage for this production process is 3.5% of good output. Production data for the first quarter was as follows: Units started19,000 units

Good units completed and transferred-out16,000 units
Ending work-in-process inventory2,000 units
Using a first-in, first-out (FIFO) process costing system, Blue Company incurred the following costs per...
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