YESHIVA UNIVERSITY Sy Syms School of Business EXAM I (VERSION BOSTON)

ACC 2403 COST ACCOUNTING I Name:

MURGIE KRISHNAN SPRING 2008 I.D.#: ______________

Notes: 1. It is very important to write your name very legibly in PRINT. Unless your exam is very neat and legible, you will not get partial credit. 2. Any act of cheating, or helping to cheat, will result immediately in an overall course grade of F. 3. Discipline during the exam is very important. 4. The last page of this exam contains a formula sheet, an exact copy of the formula sheet distributed earlier.

I (15 points) Schedules of Cost of Goods Manufactured and Sold Evans Inc., had the following activities during 2007: Direct materials: Beginning inventory Purchases Ending inventory Direct manufacturing labor Manufacturing overhead Depreciation of office equipment Marketing and distribution costs Beginning work-in-process inventory Ending work-in-process inventory Beginning finished goods inventory Ending finished goods inventory Sales Revenue Required: a. Prepare a Schedule of Cost of Goods Manufactured (9 points) and Sold (3 points) for Evans Inc in proper form, and an Income Statement (3 points), for 2007. (Proper labeling is important to get partial credit.) Answer: $ 40,000 123,200 20,800 32,000 24,000 123,600 30,000 1,600 8,000 48,000 32,000 300,000

II (10 Points) Job Costing Basics Hill Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine-hours in the Machining Department and on the basis of direct labor cost in the Assembly Department. At the beginning of 20X5, the following estimates were provided for the coming year: Direct labor-hours Machine-hours Direct labor cost Manufacturing overhead costs Machining 10,000 dlh 100,000 mh $ 80,000 $250,000 Assembly 90,000 dlh 5,000 mh $720,000 $360,000

The accounting records of the company show the following data for Job #845 still incomplete: Direct labor-hours Machine-hours Direct material cost Direct labor cost Manufacturing overhead costs Machining 50 dlh 170 mh $2,700 $ 400 $450 Assembly 120 dlh 10 mh $1,600 $ 900 $400

Required: a. Compute the manufacturing overhead allocation rate for each department. b. Compute the total balance in Work-in-Process for Job #845 to date.

Answer:

III (40 points) Process Costing System Dutch Cheese is a manufacturer using two direct materials, DM1 and DM2, besides incurring conversion costs. DM1 is added at the start of the process; DM2, at the end of the process. Conversion costs are added evenly through the process. Inspection is at the end of the process. Spoilage beyond 1000 units is considered abnormal. The information for March is as follows: Beginning work in process Units started Units completed Ending work in process Beginning work-in-process DM1 Beginning work-in-process DM2 Beginning work-in-process conversion DM1 added during month DM2 added during month Conversion costs added during month 10,000 20,000 25,000 2,000 units units units units

$ 6,000 $ 1,000 $ 2,600 $20,000 $14,000 $24,200

Beginning work in process was half complete. Ending work in process was 60% complete. Required: Assume the FIFO method. Prepare (a) (6 points) a process time line (b) (30 points) neatly labeled schedules showing computations of equivalent units, cost per equivalent unit, and assignment of costs. (c) (4 points) Provide the journal entry for the units completed during the month.

Answer: PRODUCTION COST WORKSHEET Equivalent units computation

Cost per equivalent unit

Assignment of costs

(IV) (30 points) Cost-Volume-Profit Analysis Bobs Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows: Unit Selling Price Contribution margin ratio Common fixed costs are $30,000. Required: (a) (15 points) What is the breakeven point in units, for each type of shirt, assuming the sales mix is 3:1 in favor of men's shirts? (b) (3 points) What is the operating income, assuming the sales mix is 3:1 in favor of men's shirts, and sales total 10,000 shirts? (c) (3 points) If fixed costs increase to $50,000, and other parameters stay the same, by how much should the unit variable cost of Mens Shirts change, for the firm to still make the same operating income as in (b) above. (d) (2 points) Compute the operating leverage (for the original data) when sales total 10,000 shirts. (e) (2 points) What is the margin of safety (in units) in (b) above. (f) (5 points) If the tax rate is 30%, what is the (a) (2 points) breakeven point (b) (3 points) quantity needed to achieve a target net income of $2000? Mens $30 20% Boys' $20 40%

ACC 2403 Cost Accounting Formula Sheet

Direct Materials (DM): DM Used = Beginning Inventory (DM) + Purchases (DM) Ending Inventory (DM) Manufacturing Costs Incurred = DM used + Direct labor (DL) + Manufacturing Overhead (also known as Indirect Manufacturing Costs) Cost of Goods Manufactured (COGM): COGM = Beg Work-in-Process (WIP) + Manufacturing Costs Incurred Ending WIP Cost of Goods Sold (COGS): COGS = Beg Inventory of Finished Goods (FG) + COGM Ending Inventory of FG Prime Costs = DM + DL Conversion Costs = DL + manufacturing overhead When overheads are allocated using a predetermined rate: WIP Control (cost of a job) = DM used + DL + Allocated Manufacturing Overhead Budgeted Rate = Budgeted Total Cost/Budgeted Total Value of Allocation Base Allocated Cost = Budgeted Rate x Actual Value of Allocation Base Equivalent units computations: For weighted average all costs incurred to date are aggregated; FIFO only costs incurred in the current period are counted. Operating income: Let = operating income, p = unit selling price, v = unit variable cost, Q = total output quantity (units), F = fixed cost, then

= ( p v) * Q F

and

=(

pv ) *( pQ) F p

Margin of safety (units) = budgeted or actual sales (units) breakeven sales (units) Margin of safety percentage = (margin of safety in dollars) / (budgeted or actual revenues) Degree of operating leverage = total contribution margin/ operating income