Accounting 611 – Midterm Exam-Spring 2014 2023 Business Finance

2023 Problem 1 Using the following information find the unknown amounts Assume each set of information is an independent

**Problem 1**

Using the following information find the unknown amounts. Assume each set of information is an independent case.

a. Merchandise Inventory

Purchases

Cost of goods sold

Beginning balance

Ending balance

$210,000

223,000

41,000

?

b. Direct Materials

Beginning balance

Ending balance

Purchases

Direct materials used

c. Work-in-process Inventory

Ending balance

Cost of goods manufactured

Beginning balance

Current manufacturing costs

$ 22,000

21,000

8,000

?

d. Finished Goods Inventory

Cost of goods manufactured

Ending balance

Cost of goods sold

Beginning balance

$62,000

20,000

61,000

?

$ 7,000

14,000

48,000

?

**Problem 2**

Sprint Manufacturing Company produces two products, X and Y. The following information is presented for both products:

X

Y

Selling price per unit

$30

$20

Variable cost per unit

20

5

Total fixed costs are $292,500.

Required:

a. Calculate the contribution margin for each product.

b. Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y.

c. Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y.

**Problem 3**

Rachel’s Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:

Product

Standard

Deluxe

Overhead costs

Number of

Setups

3

7

Number of

Components

30

50

$40,000

Number of

Direct Labor Hours

650

150

$120,000

Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.

a. What is the total amount of overhead costs assigned to the standard model?

b. What is the total amount of overhead costs assigned to the deluxe model?

Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.

c. What is the total amount of overhead costs assigned to the standard model?

d. What is the total amount of overhead costs assigned to the deluxe model?**Problem 4**

Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000 units.

The cost of placing an order is $80 and the cost of carrying one unit in inventory for one year is $25.

Required:

a. Use the economic-order-quantity model to determine the optimal order size.

b. Determine the reorder point assuming a lead time of 10 days and a work year of 250 days.

c. Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units.**Problem 5**

The following data are available for Ruggles Company for the year ended September 30, 2011.

Sales:

Expected and actual production:

Manufacturing costs incurred:

Variable:

Fixed:

Nonmanufacturing costs incurred:

24,000 units at $50 each

30,000 units

$525,000

$372,000

Variable:

Fixed:

Beginning inventories:

$144,800

$77,400

none

Required:

a. Determine operating income using the variable-costing approach.

b. Determine operating income using the absorption-costing approach.**Problem 6**

Jerry’s TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.

Sales (1,000 televisions)

$ 900,000

Cost of goods sold

400,000

Store manager’s salary per year

70,000

Operating costs per year

157,000

Advertising and promotion per year 15,000

Commissions (4% of sales)

36,000

Part 1. What was the variable cost per unit sold for 2011?

A) $36

B) $436

C) $678

D) $400

Part 2 What were total fixed costs for 2011?

A) $678,000

B) $436,000

C) $242,000

D) $227,000

Part 3 What are the estimated total costs if Penny’s expects to sell 3,000 units next year?

A) $1,550,000

B) $1,332,000

C) $1,671,000

D) $1,453,000

Part 4 Which cost estimation method is being used by Jerry’s TV and Appliance Store?

A) the industrial engineering method

B) the conference method

C) the account analysis method

D) the quantitative analysis method

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