Part 1: Answer the following questions (1,2,3, and 4) Q1: Choose the right answer. (20 points)

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1 Islamic university Gaza College of commerce Accounting department Final exam Managerial Accounting 60 points Sunday Mohammed Alashi Name: Id:.. Part 1: Answer the following questions (1,2,3, and 4) Q1: Choose the right answer. (20 points) 1. Benny Books sells first edition books. Benny purchases the books from his supplier for $100 a book and sells them through his website for $225 a book. Benny s fixed costs are $87,000. What is Benny s breakeven point in books? a. 268 b. 387 c. 696 d A company has total fixed costs of $200,000 and a contribution margin ratio of 20%. The total sales necessary to break even are a. $800,000. b. $1,000,000. c. $250,000. d. $240, If the cost of goods sold is less than the cost of goods manufactured, then a. Finished Goods Inventory increased during the period. b. Finished Goods Inventory decreased during the period. c. Overhead was overapplied. d. None of these answer choices are correct. 4. The cost of goods manufactured a. Is always the same as the total direct costs. b. Is recorded as a debit to the Cash or Accounts Receivable account. c. Is recorded as a debit to the Finished Goods Inventory account. d. Is also referred to as the cost of goods sold. 5. The standard cost of direct material is the a. Standard price of direct material input x standard quantity of direct material inputs b. Standard price of direct material input x actual quantity of direct material inputs c. Actual price of direct material input x standard quantity of direct material inputs d. Actual price of direct material input x actual quantity of direct material inputs. 6. Which of the following is a use of the materials purchases budget? a. It helps managers minimize the resources invested in inventory. b. It helps managers plan the quantity and timing of purchases of material. c. It helps ensure the adequate level of inventory. d. All of these answer choices are correct. 7. Which of the following is not a component of the Cash Budget? a. Cash available to spend b. Short-term financing c. Reconciliation of beginning and ending cash d. Cash disbursements 1

2 8. The flexible budget variance reflects a. How efficiently the company operated in producing a given level of sales. b. How effectively the company reached its strategic goals. c. A different volume of products than that specified in the static budget. d. All of these answer choices are correct. 9. The sales volume variance reflects a. How efficiently the company operated in producing a given level of sales. b. How effectively the company reached its strategic goals. c. A different volume of products than that specified in the static budget. d. All of these answer choices are correct. 10. The sales volume variance does not help managers understand a. The effects of price changes on actual results. b. Operational efficiency on actual results. c. Either the effects of price changes on actual results or the operational efficiency on actual results. d. None of these answer choices are correct. 11. Which of the following variances would not be investigated by a manager following the management by exception principle? a. A 10% favorable variance in raw materials price b. A 10% unfavorable variance in direct labor rates c. A 10% unfavorable variance in payroll tax expense d. An unfavorable variance that has increased by 5% in each of the last five months 12. Which of the following combinations results in irrelevant information? a. Occurs in the past and is unavoidable b. Occurs in the past and is avoidable c. Occurs in the future and is unavoidable d. All of these answer choices result in irrelevant information 13. Avoidable costs are those costs that a. Are always variable. b. Are always fixed. c. Occur only with the implementation of a particular alternative. d. None of these answer choices are correct. 14. Which of the following would not be a relevant cost in a special order of expensive clocks? a. Direct materials b. Direct labor c. Variable overhead d. Fixed overhead 15. Which of the following operations would be the most likely to accept a special order based on seasonality? a. H&R Block tax service b. Federal Express c. An attorney specializing in estate planning d. A hospital approached by a patient negotiating on the price of kidney stone surgery Q A 2

3 Q2: DANA Products Company manufactures and sells a single product. Each unit requires three feet of tubing. DANA s budgeted production is as follows: December 15,000 units January 14,000 units February 15,000 units March 12,000 units April 13,000 units DANA budgets monthly ending inventories to be equal to 20% of the following month s production needs. The January beginning inventory meets this requirement. The tubing costs $0.80 per foot. Required: Prepare the direct material purchases budget for January and February only (8 points) DANA Products Company Direct Materials Purchases Budget Item January February March 1 st Q Budgeted Production 14,000 15,000 12,000 41,000 Q3: LAYAN Company, a retailer of camping supplies has budgeted activity for January using the following data Cash sales $25,000 Credit sales (60% collected in month of sale) 380,000 Selling and administrative costs (including depreciation) 50,000 Depreciation expense 5,000 Merchandise Inventory, January 1 21,000 Merchandise Inventory, January 31 20,000 Beginning cash balance 3,000 Minimum cash balance required 2,500 Cost of goods sold is 55% of LAYAN s selling price All purchases are paid in cash Selling and administrative costs are paid in month of purchase Required: Prepare a cash budget for January Item Amount 3

4 Q4: MAYAR s Style manufactures dining room tables for both home and restaurant locations. MAYAR, the company s controller, developed the following standard costs for each 48-foot table. Ms. Clair developed these standards based on the company manufacturing 1,200 tables per month. Standard Price Standard Quantity Standard Cost Direct materials $45.00/linear foot 5 linear feet $ Direct labor $18.50 per DLH 12 DLH Variable overhead $16.20 per DLH 12 DLH Fixed overhead $28.60 per DLH 12 DLH Total standard cost per table $ At the end of the current month, MAYAR reported the following operational results: The company actually manufactured 1,100 tables during the month. 5,900 linear feet of direct materials were purchased during the month at a total cost of $258,420. 5,400 linear feet of direct materials were used to manufacture the tables. 13,400 direct labor hours were worked at a total cost of $242,880. Actual variable overhead was $234,600. Actual fixed overhead was $410,500. Required (14 points) a. Calculate the direct material price and quantity variance for the month. b. Calculate the direct labor rate and efficiency variance for the month. c. Calculate the variable overhead spending and efficiency variance for the month. d. Calculate the fixed overhead spending variance for the month. 4

5 a. Direct materials variance b. Direct labor variance c. Variable overhead variance d. Fixed Overhead Spending Variance.. 5

6 Part 2: Answer two questions of the following only Q5: JOLLY Distributors has two divisions Northern and Southern. The divisions have provided the following financial information: Northern Southern Sales $150,000 $210,000 Variable costs 95, ,000 Common fixed costs 65,000 75,000 Operating income ($ 10,000) $ 25,000 JOLLY s executives are considering the elimination of the Northern division. If the division is eliminated, the common fixed costs will remain unchanged. Given these data, should the Northern division be eliminated? Why? Northern Southern Total Without Northern Comment: Q6: JOLLY, Inc. uses 2,000 units of Part 8G3 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $15 per part. If JOLLY chooses to purchase the part from the outside supplier, one half of it s the fixed manufacturing overhead will be eliminated. JOLLY s standard unit cost of producing the part is listed below. Direct material $6 Direct labor $4 Variable manufacturing overhead $2 Fixed manufacturing overhead $4 Total unit cost $16 Required: Ignoring qualitative factors, should JOLLY continue to make the parts internally or purchase them from the outside supplier? Why? Item Make Buy 6

7 Comment: Q7: JOLLY Manufacturing Company produces three products in its Dallas factory. Data relating to the products are given below: Product A Product B Product C Unit selling price $80 $70 $60 Variable manufacturing costs $52 $50 $46 Variable selling costs $4 $4 $4 Hours required per unit 2 ½ 1 Demand per period 3,000 4,000 2,600 A total of 8,200 hours are available in the Dallas facility. Required: a. How many hours will be required to satisfy the demand for all three products? b. How much of each product should be produced to maximize Hold s operating income? a. Product A Product B Product C b. Product A Product B Product C.. 7

8 Q8: JOLLY Enterprises reported the following data for May. Beginning balance, Raw Materials $45,000 Inventory Beginning balance, Work in Process 52,000 Inventory Beginning balance, Finished Goods 62,000 Inventory Ending balance, Raw Materials Inventory 47,000 Purchase of raw materials 92,000 Direct labor 48,000 Manufacturing overhead 42,000 Cost of Goods Manufactured 200,000 Cost of Goods Sold 220,000 Required: a. How much direct materials were used in production? b. What were the total manufacturing costs for the month of May? c. What was the ending balance in the Finished Goods Inventory account? Bonus: discuss the following: (1point).. Bonus: Discuss two new information you got when you study this course. (1 point) With best wishes Mohammad Alashi 8