DeVry ACCT 434 Midterm Exam

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1.
Question : (TCO 1) Which of the following is a sign that an ABC system
may be useful?
Student Answer:
Operations staff agrees with accountants about the
costs of manufacturing and marketing products and services.
There are small amounts of indirect costs.
Products make diverse demands on resources because of differences in
volume, process steps, batch size, or complexity.
Products a company is less suited to produce and sell show small profits.
Question 2. Question : (TCO 1) Merriamn Company provides the following
ABC costing information:
Activities Total Costs Activity-cost drivers
Account inquiry hours $400,000 10,000 hours
Account billing lines
$280,000 4,000,000 lines
Account verification accounts $150,000 40,000 accounts
Correspondence letters $ 50,000
4,000 letters
Total costs $880,000
The above activities are used by Department A and B as follows:
Department A
Department B
Account inquiry hours 2,000 hours4,000 hours
Account billing lines
400,000 lines
200,000 lines
Account verification accounts 10,000 accounts 8,000 accounts
Correspondence letters 1,000 letters
1,600 letters
How much of the inquiry cost will be assigned to Department A?
Student Answer:
$400,000
$160,000
None of the above

$80,000

Question 3. Question : (TCO 2) Budgeting provides all of the following

EXCEPT
Student Answer:
a means to communicate the organizations shortterm goals to its members.
support for the management functions of planning and coordination.
a means to anticipate problems.
an ethical framework for decision making.
Question 4. Question : (TCO 2) White planned to use $82 of material per
unit but actually used $80 of material per unit, and planned to make 1,200
units but actually made 1,000 units. The flexible-budget variance is
Student Answer:
$2,000 favorable.
$14,000 unfavorable.
$16,400 unfavorable.
$2,400 favorable.
Question 5. Question : (TCO 3) Which of the following does NOT represent a
cause-and-effect relationship?
Student Answer:
It makes sense that if a complex product has a large
number of parts, it will take longer to assemble than a simple product with
fewer parts.
Material costs increase as the number of units produced increases.
A company is charged 40 cents for each brochure printed and mailed.
Utility costs increase at the same time that insurance costs increase.
Question 6. Question : (TCO 4) Relevant costs in a make-or-buy decision of a
part include
Student Answer:
setup overhead for the manufacture of the product
using the outsourced part.
currently used manufacturing capacity that has alternative uses.
annual plant insurance that will remain the same.
corporate office costs that will be allocated differently.
Question 7. Question : (TCO 5) The theory of constraints is used for cost
analysis when
Student Answer:
a manufacturing company produces multiple
products and uses multiple manufacturing facilities and/or machines.
using a long-term time horizon.
operating costs are assumed fixed.
All of the above

Question 8. Question : (TCO 5) Jensen Company has relevant costs of $80

per unit to manufacture Part A. A current supplier offers to make Part A for
$70 per unit. If capacity is constrained, the opportunity cost of buying Part A
from the supplier is
Student Answer:
0.
$10,000.
$70,000.
indeterminable.
Question 9. Question : (TCO 3) For January, the cost components of a picture
frame include $0.35 for the glass, $0.65 for the wooden frame, and $0.80 for
assembly. The assembly desk and tools cost $400. A total of 1,000 frames is
expected to be produced in the coming year. What cost function best
represents these costs?
Student Answer:
y = 1.80 + 400X
y = 2.20 + 1,000X
y = 400 + 1.80X
y = 1.00 + 400X
Question 10.
Question : (TCO 4) Sunk costs
Student Answer:
are future costs.
are past costs.
have future implications.
are relevant to all decisions.
1.
Question : (TCO 1) For each of the following activities, identify an
appropriate activity-cost driver.
a. machine maintenance
b.

machine setup

c.

quality control

d.

material ordering

e.

production scheduling

f.

warehouse expense

g.

engineering design

Question 2. Question : (TCO 2) Lubriderm Corporation has the following

budgeted sales for the next six-month period
Month
Unit Sales

June

90,000

July

120,000

August

210,000

September
October

150,000
180,000

November

120,000

There were 30,000 units of finished goods in inventory at the beginning of

June. Plans are to have an inventory of finished products that equal 20% of
the unit sales for the next month.
Five pounds of materials are required for each unit produced. Each pound of
material costs $8. Inventory levels for materials are equal to 30% of the
needs for the next month. Materials inventory on June 1 was 15,000 pounds.
Prepare a purchases budget in pounds for July, August, and September, and
give total purchases in both pounds and dollars for each month.
Question 3. Question : (TCO 3) The Wildcat Company has provided the
following information:
Units of Output
30,000 Units
42,000 Units
Direct materials

$180,000

$252,000

Workers wages

1,080,000

1,512,000

312,000

312,000

Supervisors salaries
Equipment depreciation

151,200

Maintenance

81,600

Utilities
Total

151,200
110,400

384,000

528,000

$2,188,800

$2,865,600

Using the high-low method and the information provided above, identify the
linear cost function equation.

Question 4. Question : (TCO 5) Kirkland Company manufactures a part for

use in its production of hats. When 10,000 items are produced, the costs per
unit are:
Direct materials
$0.60
Direct manufacturing labor

3.00

Variable manufacturing overhead

1.20

Fixed manufacturing overhead

1.60

Total

$6.40

Mike Company has offered to sell to Kirkland Company 10,000 units of the
part for $6.00 per unit. The plant facilities could be used to manufacture
another item at a savings of $9,000 if Kirkland accepts the offer. In addition,
$1.00 per unit of fixed manufacturing overhead on the original item would be
eliminated.
a.

What is the relevant per unit cost for the original part?

b.

Which alternative is best for Kirkland Company? By how much?

DeVry ACCT 434 Midterm Exam

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https://devryfinalexams.com/products/acct-434midterm-exam/