Managerial Accounting Midterm Exam

NAME Managerial Accounting Midterm Exam
The following questions are worth 1.5 points each.
1. Which of the following functions involves comparing actual results with planned
results?
A. Planning
B. Organizing
C. Controlling
D. Delegating
2. Which of the following statements represents a similarity between financial and
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managerial accounting?
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A. Both are only concerned with providing information for external users
B. Both are governed by GAAP
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C. Both draw upon data from an organization’s accounting system.
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Both rely heavily on published financial statements.
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3. Product costs are
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A. expensed when incurred

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B. classified as inventory
C. treated in the same manner as period costs
D. treated in the same manner as advertising costs
E. None of the above.
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4. Which of the following would not be classified as a product cost?
A. Direct materials
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B. Direct labor
C. Indirect materials
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D. Insurance on the manufacturing plant

E. None of the above.
5. Which of the following is a product cost?

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A. Sales commissions
B. Advertising
C. The salary of the vice president of finance
D. Direct Labor
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E. Both “A” and “D”
6. Costs that are expensed when incurred are called
A. Product costs
B. Direct costs
C. Inventoriable costs
D. Period costs
E. Indirect costs
7. Depreciation of factory equipment would be classified as:
A. period cost
B. sales cost
C. advertising cost
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D. None of the above
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8. Which of the following statements is true?
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Product costs affect only the balance sheet
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B. Product costs affect only the income statement
C. Period costs affect only the balance sheet
D. Period costs affect the balance sheet and the income statement
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E. Product costs eventually affect both the balance sheet and the income statement.
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9. Work-in-process inventory and Finished Goods Inventory is composed of:
A. Direct material and direct labor

B. Direct labor and manufacturing overhead
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C. Direct material and manufacturing overhead

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D. Direct material, only

E. Direct material, direct labor and manufacturing overhead
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10. A custom-home builder would likely utilize:

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A. job-order costing
B. process costing
C. mass customization
D. process budgeting
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E. joint costing
11. The assignment of direct labor cost to individual job is based on:
A. and estimate of the total time spent on the job

B. actual total payroll cost divided equally among all jobs in process
C. estimated total payroll cost divided equally among all jobs in process
D. the actual time spent on each job multiplied by the wage rate
E. the estimated time spent on each job multiplied by the wage rate
12. The total production cost of a job is composed of:
A. direct material and direct labor

B. direct material, direct labor, manufacturing overhead, and outlays for selling costs
C. direct material, direct labor, manufacturing overhead, and outlays for both selling
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and administrative costs.
D. None of the above
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13. Manufacturing overhead:
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A. includes direct materials, indirect materials, indirect labor and factory
depreciation
B. is easily traced to jobs
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C. includes all selling costs

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D. should not be assigned to individual jobs because it bears no obvious relationship

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to them
E. is a pool of indirect production costs that must somehow be attached to each unit
manufactured.
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14. As production takes place, all manufacturing costs are added to the:
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A. Work-in-Process Inventory account

B. Manufacturing-Overhead Inventory account
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C. Cost of Goods Sold account

D. Finished-Goods Inventory account
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E. Production Labor account
15. The process of assigning overhead costs to the job that is being worked on is
commonly called overhead elimination.
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16. An accountant recently debited Work-in-Process Inventory and credited

Manufacturing Overhead. The accountant was applying overhead to production.
17. The major disadvantage of using a predetermined overhead rate is that it provides
timely product cost information.
18. Depreciation expense can be either a product cost or period cost.

19. The completion of production would require a company to debit Finished Goods
Inventory and credit to Cost of Goods Sold.
20. Under or overapplied manufacturing overhead at year-end is mostly charged to

finished goods inventory.
21. The source document for direct labor charged to a job would be a material requisition
form.
22. A budget is not used relative to calculating a predetermined overhead rate.
23. A company that provides a service such as financial planning would have no use for
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accounting information to make managerial decisions.
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24. Managerial accounting has more of an external focus than an internal focus.
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25. An appropriate cost driver or allocation base (which will be used to allocate
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manufacturing overhead) for a company that uses a significant amount of machinery
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and equipment in their production of inventory would be labor hours.
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Problem 1 20 points
Orlando Manufacturing had the following data for the period just ended:
Work in process, Jan. 1 $ 17,000

Work in process, Dec 31 35,000
Finished Goods, Jan. 1 64,000
Finished Goods, Dec. 31 65,000
Direct Materials Used 140,000
Direct Labor 260,000
Factory Depreciation 70,000
Sales 945,000
Selling and Gen & Admin Exp 178,000
Factory Utilities 35,000
Indirect Materials 19,000
Indirect Labor 38,000
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Income Tax rate= 20%
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Required:
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A. Calculate Orlando’s Cost of Goods Manufactured.
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B. Calculate Orlando’s Cost of Goods Sold.
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C. Prepare an Income Statement
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Problem 2 10 points
ABC Company is a Custom Kitchen Firm. The following costs were incurred in the firm’s
project to install a new kitchen for a restaurant:
Direct Material $22,000
Direct Labor 44,000
The firm’s budget for the year included the following estimates:
Budgeted Overhead $425,000
Budgeted Direct Labor $250,000
Overhead is applied to jobs by using a predetermined overhead rate that uses direct labor dollars
as the base. Actual Direct Labor during the year was $210,000 and actual overhead for the year
was $392,000.
Required:
A. Determine the total cost (this will include the big three) to install the kitchen (using the
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application of the predetermined overhead rate).
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B. Calculate the under or over applied overhead for this project. Hint: compute the actual
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overhead rate for the year. The information to compute the actual overhead rate for the
year are given above.
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Problem 3 10 points
The XYZ Company had the following information relative to utility costs for FY 2013:
Hours of Utility Usage Utility Costs

January 550 $2600
Feb 560 $2750
March 600 $3100
April 540 $2850
May 575 $2900
June 700 $3200
Required:
A. Based on the information above develop a formula using the High-Low Method to
calculate variable component of the Utility costs.
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B. Calculate the Fixed Costs at either the high or low activity level.
C. Predict what the fixed and variable costs would be at 655 hours of utility usage.
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Problem 4 10 points
The XYY Company manufactures and sells three products: X,Y,and Z. The annual fixed costs
are $2,000,000 and the data about the three products is as follows:
X Y Z
Sales mix in units 50% 25% 25%
Selling Price per unit $280 $460 $600
Variable cost per unit $100 $320 $360
a. Determine the weighted-average unit contribution margin.
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b. Determine the break even volume in units for each product.
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c. Determine the total number of units to be sold to obtain a profit of $220,000.

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d. Compute the break even in units if the variable costs per unit for each product increased by10%.
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Essay 10 points
How can managerial accounting information be useful in managing an organization and

enhancing profitability?
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NAME Managerial Accounting Midterm Exam

The following questions are worth 1.5 points each.

2. Which of the following statements represents a similarity between financial and

A. expensed when incurred

4. Which of the following would not be classified as a product cost?

D. Insurance on the manufacturing plant

5. Which of the following is a product cost?

6. Costs that are expensed when incurred are called

7. Depreciation of factory equipment would be classified as:

9. Work-in-process inventory and Finished Goods Inventory is composed of:

A. Direct material and direct labor

C. Direct material and manufacturing overhead

D. Direct material, only

10. A custom-home builder would likely utilize:

A. and estimate of the total time spent on the job

12. The total production cost of a job is composed of:

A. direct material and direct labor

C. includes all selling costs

D. should not be assigned to individual jobs because it bears no obvious relationship

A. Work-in-Process Inventory account

C. Cost of Goods Sold account

E. Production Labor account

16. An accountant recently debited Work-in-Process Inventory and credited

18. Depreciation expense can be either a product cost or period cost.

20. Under or overapplied manufacturing overhead at year-end is mostly charged to

22. A budget is not used relative to calculating a predetermined overhead rate.

Work in process, Jan. 1 $ 17,000

Hours of Utility Usage Utility Costs

c. Determine the total number of units to be sold to obtain a profit of $220,000.

How can managerial accounting information be useful in managing an organization and

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