ACT 5704 – WEB and WEB 2

Name:

Section:

ACT 5704 – WEB and WEB 2
Cost Accounting
Summer Term, 2013
Quiz Two:
Chapters 7, 8, 10, 11; 14 – 16
100 Points

Instructions: Type your name above in the space
provided. Answer the following
multiple-choice questions by typing the best answer in the space provided
below. Do not submit the complete Quiz –
only submit this answer sheet. Each
question is worth 6 2/3 points. You may
use your textbook but you are not allowed to discuss the Quiz with anyone. Good luck!
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

Use
the following to answer questions 1 and 2:
Spacer
Company has two service departments and two operating departments. Budgeted
costs and budgeted activity in the various departments for last year are shown
below:

Custodial

Cutting

Assembly

Services

Cafeteria

Department

Department

Departmental costs………

$50,400

$28,000

$120,000

$200,000

Square feet occupied……

500

1,000

4,000

5,000

Number of employees….

10

15

75

100

Machine-hours…………….

10,000

15,000

Service
department costs are allocated to operating departments with the costs of
Custodial Services allocated on the basis of square feet of space occupied and
the costs of the Cafeteria on the basis of number of employees. The
departmental costs for the cutting and assembly departments are overhead costs.
Predetermined overhead rates in the Cutting and Assembly departments are based
on machine-hours.

1. Assume that the company uses the direct
method of allocation. The predetermined overhead rate in the Assembly
Department would be closest to:
A) $16.27
B) $15.00
C) $15.87
D) $16.00

2. Assume that the company uses the step method
of allocation with Custodial Services allocated first. The amount of Custodial
Services cost allocated to the Assembly Department would be:
A) $0
B) $28,000
C) $24,000
D) $25,200

3. Product
X-47 is one of the joint products in a joint manufacturing process. Management
is studying whether to sell X-47 at the split-off point or to process X-47
further into Xylene. The following data have been gathered:
Selling price of X-47
I.
Variable cost of processing X-47 into Xylene.
II. The
avoidable fixed costs of processing X-47 into Xylene.
III.The
selling price of Xylene.
IV.The
joint cost of the process from which X-47 is produced.
Which of the above items are relevant in a decision of
whether to sell the X-47 as is or process it further into Xylene?
A) I, II, and IV.
B) I, II, III, and IV.
C) II, III, and V.
D) I, II, III, and V.
4. Robot
Inc. has some material that originally cost $73,500. The material has a scrap
value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold
for $58,100. What would be the incremental effect on the company’s overall
profit of reworking and selling the material rather than selling it as is as
scrap?
A) -$22,000
B) -$67,600
C) $5,900
D) $51,500

5.
Candle Corporation is preparing a bid for a special order that would
require 880 liters of material R9S. The company already has 280 liters of this
raw material in stock that originally cost $6.20 per liter. Material R9S is
used in the company’s main product and is replenished on a periodic basis. The
resale value of the existing stock of the material is $5.45 per liter. New
stocks of the material can be readily purchased for $6.20 per liter. What is
the relevant cost of the 880 liters of the raw material when deciding how much
to bid on the special order?
A) $5,456
B) $5,006
C) $4,796
D) $5,456

6. Oz Corporation is a
specialty component manufacturer with idle capacity. Management would like to
use its extra capacity to generate additional profits. A potential customer has
offered to buy 2,300 units of component OTB. Each unit of OTB requires 9 units
of material G58 and 7 units of material H66. Data concerning these two
materials follow:

Material

Units in Stock

Original Cost Per
Unit

Current Market
Price Per Unit

Disposal Value
Per Unit

G58

18,940

$4.40

$4.65

$4.35

H66

15,700

$6.10

$6.50

$4.80

Material G58 is in use in many of the company’s products
and is routinely replenished. Material H66 is no longer used by the company in
any of its normal products and existing stocks would not be replenished once
they are used up.

What would be the relevant cost of the materials, in
total, for purposes of determining a minimum acceptable price for the order for
product OTB?
A) $189,890
B) $174,215
C) $168,533
D) $200,905

7. When the activity level is expected to
decline within the relevant range, what effects would be anticipated with
respect to each of the following?

Fixed
costs per unit

Variable
costs per unit

A)

Increase

Increase

B)

Increase

No
change

C)

No
change

No
change

D)

No
change

Increase

8. Shipping costs at
Columbia Mining Company are a mixture of variable and fixed components. The company shipped 8,000 tons of coal for
$400,000 in shipping costs in February and 10,000 tons for $499,000 in March. Assuming
that this activity is within the relevant range, expected shipping costs for
11,000 tons would be:
A) $548,500
B) $544,500
C) $422,222
D) $554,000

9. To allocate corporate costs to
divisions, the allocation base used should:
A) be an output unit-level base
B) combine administrative costs and
human resource management costs
C) have the best cause-and-effect
relationship with the costs
D) allocate the full costs

10. The XTRA Appliance Manufacturing Corporation
manufactures two vacuum cleaners, the Standard and the Super. The following
information was gathered about the two products:

Standard Super
Budgeted sales in units 3,200 800
Budgeted selling price $600 $1,700
Budgeted contribution margin per unit $420 $1,100
Actual sales in units 3,500 1,500
Actual selling price $650 $1,680

What
is the total sales-quantity variance in terms of the budgeted contribution
margin?
A)
$220,000 favorable
B)
$340,000 favorable
C)
$556,000 favorable
D)
$896,000 favorable

Use
the following information for Questions 11 and 12.

Jet
Equipment uses a flexible budget for its indirect manufacturing costs. For
2013, the company anticipated that it would produce 18,000 units with 3,500
machine-hours and 7,200 employee days. The costs and cost drivers were to be as
follows:

Fixed Variable Cost driver
Product handling $30,000 $0.40 per unit
Inspection 8,000 8.00 per 100 unit batch
Utilities 400 4.00 per 100 unit batch
Maintenance 1,000 0.20 per
machine-hour
Supplies 5.00 per employee day

During
the year, the company processed 20,000 units, worked 7,500 employee days, and
had 4,000 machine-hours. The actual costs for 2013 were:

Actual
costs
Product handling $36,000
Inspection 9,000
Utilities 1,600
Maintenance 1,200
Supplies 37,500

11.
The static budget overhead variances total
A)
$2,800 U
B)
$2,800 F
C)
$160 F
D)
$160 U

12.
The flexible budget overhead variances total
A)
$2,800 U
B)
$2,800 F
C)
$160 F
D)
$160 U

Use the following information for
Questions 13 – 15.
Chloe Industries manufactures one product
and uses a standard costing system. The
following relates to the production of the product for the month of
October: Budgeted Fixed Overhead
$100,000; Budgeted Variable Overhead $150,000; Budgeted Production in Units 10,000;
Actual Fixed Overhead $110,000; Actual Variable Overhead $185,000; Actual Units
Produced 11,000; Budgeted Direct Labor Hours 10,000; Actual Direct Labor Hours
11,500; Standard Number of Direct Labor Hours per Unit of Output is 1. The activity to allocate overhead is direct
labor hours.

continued
13. The variable overhead spending
(budget) variance is
A) $20,000 F
B) $12,500 F
C) $20,000 U
D) $12,500 U

14.
The fixed overhead volume variance is
A) $15,000 F
B) $10,000 F
C) $15,000 U
D) $10,000 U

15. The variable overhead efficiency
variance is
A) $10,000 F
B) $10,000 U
C) $7,500 F
D) $7,500 U