AMIS 7310

Sample Mid-term Exam

Name (Print):____________________________________________
Signature: _______________________________________
DO NOT OPEN THE EXAM UNTIL GIVEN INSTRUCTION TO DO SO!
1. You are reminded that the Code of Student Conduct upheld by The Ohio State University
and Fisher College requires you to do your own work and not give or receive assistance
on this exam.
2. The exam consists of three question types as follows:
Section

Type of
Question
Long Problem

Points Total

Question
#s
1

35

Partial
Credit
yes

Long Problem

35

yes

1 thru 5

Short Problems

15

no

1 thru 6

Multiple Choice
Problems
Total

15

no

Points Earned

100

3. You will have 90 minutes to complete this exam.

Budget your time - attempt all questions!
4. When you are done, please hand back the entire question packet.
5. Please be organized and legible in your answers to receive full credit for your work.
6. Check the exam question packet for completeness.
7. The exam is closed-book and no supplemental materials are allowed;
pencil, eraser, and calculator [only the basic functions (+, -, *, /) may be
used] are the only resources which you may use. Scratch paper is not
allowed. A timepiece may be used.
8. Do not ask questions during the exam; assume that all questions are valid
and give the answer that you reason is best.

AMIS 7310
Sample Mid-term Exam
Long (Computational) Problem 1 (35 points)
Fidelity Sound, Inc., which uses a job-order costing system, had two jobs in process at the start
of 20x1: job no. 64 ($84,000) and job no. 65 ($53,500). The following information is available:
a. The company applies manufacturing overhead on the basis of machine hours. Budgeted
overhead and machine activity for the year were anticipated to be $840,000 and 16,000
hours, respectively.
b. The company worked on four jobs during the first quarter. Direct Materials used, direct
labor incurred, and machine hours consumed were as follows:
Job
No.
64
65
66
67

Direct Material
$21,000
44,000
15,000

Direct Labor
$35,000
22,000
65,000
8,800

Machine Hours
1,200
700
2,000
500

c.

Manufacturing overhead during the first quarter included charges for depreciation
($34,000), indirect labor ($60,000), indirect materials used ($5,000), and other factory
costs ($139,500).
d. During the first quarter, Fidelity Sound completed job no. 64 and job no. 65. Also, Job
no. 65 was sold on account, producing a gross profit (margin) of $34,700 for the firm.
Required:
1. Determine the companys predetermined overhead application rate.

2. Prepare journal entries for the first quarter to record the following:
a. The issuance of direct material to production and the direct labor incurred.
b. The manufacturing overhead incurred during the quarter.
c. The application of manufacturing overhead to production.
d. The completion of jobs no. 64 and no. 65.
e. The sale of job no. 65

AMIS 7310
Sample Mid-term Exam

3. Determine the cost of jobs still in production as of March 31.

4. Did the finished-goods inventory increase or decrease during the first quarter? By how
much?

5. Was manufacturing overhead under- or overapplied for the first quarter of the year? By
how much?

AMIS 7310
Sample Mid-term Exam

Long (Computational) Problem 2 (35 points)

Bravo Company produces a chocolate almond bar. Each bar sells for $0.40. The variable costs
for each bar total $0.25. The annual fixed costs are $60,000. Last year, one million bars were
sold. The president of Bravo, not fully satisfied with the profit performance of the chocolate bar,
was considering the following options to increase the bars profitability: (Treat requirements a, b,
c and d independently)
a. Bravos sales price, variable costs and existing fixed costs for this year are expected to remain
the same as last year. The sales manager is confident that an advertising campaign will double
sales volume. If the companys presidents goal is to increase this years operating profits by
50% over last years, what is the maximum amount that could be spent on this advertising
campaign?

b. Assume that the company increases the quality of its ingredients, thus increasing variable costs
to $0.30. Answer the following questions:
i.
ii.

How much must the selling price be increased to maintain the same break-even
point [in units]?
What will the new price be if the company wants to increase the old contribution
margin ratio by 50%

AMIS 7310
Sample Mid-term Exam

c. Bravo Company has decided to increase its selling price to $0.50 per bar, with variable costs
per unit and total fixed costs remaining the same as last year. Compute the sales volume (in
units) that would be needed at the new price for the company to earn the same operating profit
as last year.

d. The sales manager is convinced that by increasing the quality of the ingredients, thus
increasing variable cost to $.30, and by advertising the increased quality through spending an
additional $100,000, sales volume could be doubled. Compute the selling price that would be
needed to achieve the goal of increasing profits by 50%.

AMIS 7310
Sample Mid-term Exam

Section 2 Short Problems (3 points each)

1. Brabec Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 19,700 hours. At the end of the
year, actual direct labor-hours for the year were 17,700 hours, the actual manufacturing
overhead for the year was $392,940, and manufacturing overhead for the year was
underapplied by $35,400. What was the estimated manufacturing overhead at the beginning of
the year that was used in the predetermined overhead rate calculation?
Answer: ____________

2. Extron, Inc., has only variable costs and fixed costs. A review of the company's records
disclosed that when 100,000 units were produced, fixed manufacturing costs amounted to
$200,000 and the cost per unit manufactured totaled $5. On the basis of this information,
how much cost would the firm anticipate at an activity level of 97,000 units?
Answer: ____________

3. Missar Company's direct labor cost is 40 percent of its prime cost and 25 percent of its
conversion cost. If manufacturing overhead was $150,000 during the month of May, the
direct materials cost for the month of May was:
Answer: ____________

4 Weiss Corporation produces two models of wood chairs, Colonial and Early American. The
Colonial sells for $60 per chair and the Early American sells for $80 per chair. Variable costs
for each model are as follows:
Variable cost per unit

Colonial
$44

Early American
$56

Total fixed costs are $39,600 per month. Expected monthly sales are: Colonial, 1,800 units;
Early American, 600 units. If the sales mix is as expected, what would be the sales (in
dollars) of Colonial and Early American at the break-even point?
Answer: Colonial____________

Early American____________

AMIS 7310
Sample Mid-term Exam

5.

James Company has a margin of safety percentage of 20%. The break-even point is $200,000
and the variable expenses are 45% of sales. Given this information, what is the net operating
income?
Answer: $________________

Section 3 - Multiple Choice Questions (3 points each)

Identify the letter of your choice that best completes the statement or answers the question.
1. Sharp Companys records show that overhead was overapplied by $10,000 last year. This
overapplied overhead was closed out to the Cost of Goods Sold account at the end of the
year. In trying to determine why overhead was overapplied by such a large amount, the
company has discovered that $6,000 of depreciation on factory equipment was charged
to administrative expense in error. Given the above information, which of the following
statements is true?
a. Manufacturing overhead was actually overapplied by $16,000 for the year.
b. The companys operating income is understated by $6,000 for the year.
c. Under the circumstances posed above, the error in recording depreciation would have
no effect on operating income for the year.
d. The $6,000 in depreciation should have been charged to Work in Process rather than
to administrative expense

AMIS 7310
Sample Mid-term Exam

2. In producing cellular phones, Sonya Company incurs three different costs (XX, YY, and ZZ).
Per unit costs for two different activity levels are as follows:
5,000 phones
7,500 phones

Type XX
$8
$8

Type YY
$18
$12

Type ZZ
$8
$6

Total
$34
$26

The cost function that expresses the behavior of Sonyas total costs is:
a.
b.
c.
d.

Y = $ 40,000 + $26X
Y = $ 45,000 + $18X
Y = $ 90,000 + $ 8X
Y = $120,000 + $10X

3. Montgomery Company has a variable selling cost. If sales volume increases, how will the
total variable cost and the variable cost per unit behave?

a.
b.
c.
d.
e.

4.

Total
Variable
Variable Cost
Cost Per Unit
Increase
Increase
Increase
Remain constant
Increase
Decrease
Remain constant
Decrease
Decrease
Increase

If a firm has a negative contribution margin, to reach the breakeven point:

a. Fixed expenses must be decreased.
b. Sales volume must be decreased.
c. Sales volume must be increased.
d. Variable expenses must be increased.
e. None of the above changes will result in the firm reaching the breakeven point.

AMIS 7310
Sample Mid-term Exam

5.

Tressel Company's variable expenses are 60% of sales. At a $400,000 sales level, the degree of
operating leverage is 5. If sales increase by $40,000, the new degree of operating leverage will
be (rounded):
a.
b.
c.
d.

3.67
2.86
5.25
5.00

AMIS 7310
Sample Mid-term Exam

Exam 1 Solutions
Computational Problem 1
1. $52.50 per MH
2.

3. $264,050
4. $203,000 increase
5. $7,500 under applied
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AMIS 7310
Sample Mid-term Exam

Computational Problem 2
a. $105,000
b. $.05; $.6857
c. 600,000 units
d. $.4475

Short Problems
1. $397,940
2. $491,000
3. $75,000
4. 99,000;44,000
5. $27,500

Multiple Choice
1. c
2. d
3. b
4. e
5. a

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