Accounting Midterm Examination
Q1. The following data is available for Deckler Company:
Work in Process Inventory
Balance June 1 - 15,000 units
Direct Material - 33,000 units
Direct Labor - 20,000 units
Manufacturing Overhead Applied - 20,000 units
Assume the completed production for August includes Job 317, 318, and 319 with total costs of $31,000, $18,000, and $22,000 respectively.
a. Determine the cost of unfinished jobs at August 31 and prepare a journal entry to record completed production.
b. Using journal entries, record the sale of job 317 for $45,000
Q2. Jones Company sells a single product for $32.00 per unit. Variable costs are $14.00 per unit and fixed costs are $60,000 at an operating range of 7000 to 12,000 units.
a. What is the break-even point in units?
b. How many units must be sold to earn $14,000 before income taxes?
c. How many units must be sold to earn to earn 16,000 after taxes, assuming a 30% tax rate?
Q3. Kipling Company operates a plant that reduces its own regionally marketed Super Salad Dressing. The dressing is produced in two processes: blending and bottling. In the Blending Department, all materials are added at the beginning of the process, and labor and overhead are incurred evenly throughout the process. Kipling uses the FIFO method The Work in Process -Blending Department account for January 2017 follows:
January Inventory: (4000 gallons, 75% finished) $40,000
Transferred to the Bottling department (70,000 gallons)
January charges
Direct Material: (71,000 gallons) 568,000
Direct labor: 164,000
Manufacturing Overhead: 186,000
January 31 inventory____________gallons (60% processed
a. Number of equivalent units in the January 31, inventory
b. Equivalent units for materials cost and conversion costs
c. January cost per equivalent units for materials and conversion costs
d. Cost of unites transferred to the Bottling Department
e. Cost of incomplete units in the January 31 inventory
Q4. Miter Company has $400,000 in fixed costs and sells products A & B with a product mix of 45% and 55%. Selling prices and variable costs for products A and B result in contributions margins of $10 and $5 respectively. Compute the break-even point.
5. Rocky's Automotive specializes in performing automobile safety checks After the company first year of operations, its accountant prepared the following summarized data report for the safety checks for 2016;
Sales (7000 safety checks) $700,000
Production Costs (7000 safety checks)
Direct labor 490,700
Shop Overhead;
Variable 112,160
Fixed 70,100
Operating Expenses:
Variable 21,030
Fixed 16,000
a) Prepare an income statement based on full absorption accounting
b) Prepare an income statement based on variable costing
c) Assume that you must decide quickly whether to accept a special one-time order for 20 safetychecks on local police cars for $80 per safety check. Determine the apparent profit or loss on the special order based only on these data.
Q6. Holland earned an after tax income of 200,000 last years. Fixed costs were $800,000. The selling price of each product was $180.00 of which $80 was a contribution to fixed costs. The income tax rate was 40%
a. How many products were sold last year?
b. What was the break-even point in units last year?
c. The company wishes to increase it's after tax profit by 20% next year. If the selling price and the tax rate remain unchanged, how many units must be sold?
Q7. Eastside Company incurs a total cost of $120,000 in producing 10,000 units of a component needed in an assembly of its major product. The component can be purchased from an outside supplier for $11.00 per unit. A related cost study indicates that the total cost of the component includes fixed costs equal to 50% of the variable costs involved.
a. Should East side buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis.
b. What would be your answer to the requirement if the released capacity could be used in a project that would generate $50,000 of contribution margin?
Q8. The following Amounts are available for 2016 for the Hartman Group, LLC
Administrative salaries (non factory) $85,000
Administrative Rent (non factory) 47,000
Advertising and Promotion Expense 93,000
Depreciation (Administrative) 77,000
Depreciation (Factory) 95,000
Depreciation Selling 36,000
Direct labor 325,000
Factory Rent 68,000
Factory Supplies used 23,000
Finished Goods Inventory (January 1) 61,000
Finished Goods Inventory (December 31) 63,000
Indirect Material Used 27.000
Indirect labor 44,000
Materials inventory (January 01) 30,000
Materials Inventory (December 31) 210,000
Net Delivered Cost of Materials Purchased 55,000
Sales 938,000
Sales Salaries Expense 71,000
Work in Process Inventory (January 1) 33,000
Work in Process inventory 9December 31) 29,000
Using the above data, prepared a schedule of cost of goods manufactured and sold.