Test No.

First Midterm Examination

ACC3200
Instructions:
1 You must write your name on this sheet as well as the scantron sheet.
2 The answers to the multiple questions should be entered on the scantron sheet.
3 IMPORTANT: You MUST SHOW how you calculated your answers in the space provided below
for each question. If you fail to do so, you will NOT RECEIVE credit for the question even if you
show the correct answer on the scantron sheet.

The Baruch Honor Code is the standard of professional behavior on this exam. When you have
completed your exam, please read the following pledge and add your signature to indicate that you
have complied with the Honor Code.

I PLEDGE THAT I HAVE NEITHER GIVEN NOR RECEIVED ANY UNAUTHORIZED

ASSISTANCE ON THIS EXAM, AND THAT ANY VIOLATIONS OF THE HONOR CODE BY
OTHERS THAT I HAVE OBSERVED, OR OTHERWISE BECOME AWARE OF, WILL BE
REPORTED BY ME TO THE HONOR COUNCIL.

Name (Please print)

Last
Signature

You should hand in BOTH the scantron and this exam.

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First

1 Which of the following statements is true?

A. Total variable costs remain constant as level of activity increases (in the relevant range).
B. Total fixed costs increase as the level of activity increases (in the relevant range).
C. It is impossible to determine whether variable and fixed costs will increase or decrease based on the level of
activity (within the relevant range).
D. Per unit variable cost increases as the level of activity increases (within the relevant range).
E. Per unit fixed cost decreases as the level of activity increases (within the relevant range).

2 Tallahassee Company is highly automated and uses a computer to control manufacturing operations. Tallahassee uses
a job-order costing system and applies manufacturing overhead (MOH) cost to products on the basis of computer
hours. The estimates below were used in preparing the predetermined OH rate at the beginning of the year:
Fixed MOH cost
Variable MOH per computer hour
Computer hours

$
$

1,275,000
3.00
85,000 hrs

During the year, a severe economic recession resulted in the cutting back production and the building of inventory in
the company's warehouse. The company's cost records revealed the following actual cost and operating data for the
year:
Computer-hours
Manufacturing overhead cost
Balances at year-end:
Work-in-process Inventory
Finished Goods Inventory
Costs of Good Sold

60,000
$1,350,000
$160,000
$1,040,000
$2,800,000

What is the predetermined overhead rate for the year ?

A.
$15.00 per hour
B.
$21.25 per hour
C.
$22.50 per hour
D.
$18.00 per hour
$15.88 per hour
E.

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3 Bostons Dairy has just opened its main yogurt factory in upstate Massachusetts. This main factory can produce 3,500

boxes of yogurt monthly (each box contains twelve 6-oz cups). Due to overwhelming demand for the companys
product, Bostons Dairy has signed a contract to rent a new factory, which can produce up to 8,000 boxes per month.
The monthly total fixed costs are $40,000 in the main factory and $16,000 in the new factory. The variable
production cost of yogurt is $4.50 per box in the main factory. The variable production cost in the new factory is $6.0
per box as materials have to be redistributed from the main factory. The average selling price is $15, and the variable
selling expense is $1 per box, which is the same for all factories.
In addition, Bostons Dairy plans to pay its sales force $0.80 per box as added bonus for every box sold above the
break-even point. How many boxes does the company have to produce and sell in order to earn a net operating income
of $10,000 per month (round all decimal up to one box)?
A.
B.
C.
D.
E.

11,500
6,344
7,733
4,233
1,389

boxes
boxes
boxes
boxes
boxes

4 Olympia Companys variable expenses are 60% of sales. At a $600,000 sales level, the degree of operating leverage is

4. The company's chief executive officer has decided to purchase and install a new automated assembly line that will
increase the company's fixed expenses by 80% but will reduce variable expenses per unit of product by 40%.
Assuming that the sales level remains the same and the change will not affect the sales price, determine the new
degree of operating leverage after the new assembly is installed:
3.91
A.
4.00
B.
6.40
C.
D.
2.91
E. None of the above

5 Sacramento Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the

estimated direct labor-hours were 15,700 hours. At the end of the year, actual direct labor-hours for the year were
16,700 hours, the actual manufacturing overhead for the year was $352,960, and manufacturing overhead for the year
was overapplied by $27,800. The estimated manufacturing overhead at the beginning of the year used in the
predetermined overhead rate must have been:
A.
$
327,124
B.
$
357,960
C.
$
380,760
D.
$
347,960
E. None of the above

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