ACCT3310 Fall 20xx Exam #1 Dr. Bailey

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1 Sample exam for Spring 2014 students. The purposes of this practice exam are (1) to familiarize you with my testing style, and (2) to allow you to pre-test yourself after you have studied and feel ready. Please note the following before you proceed: The wrong way to use this exam: Go over the questions, look at the answers, and feel that you are prepared to handle the question on the real exam. It will not be on the actual exam, although you may see something similar. The right way to use this exam: After seriously studying the chapter and working the homework, so that you feel comfortable with the material, take this exam, allowing yourself one hour of uninterrupted time. If you miss one, don t just note the correct answer; study the topic or learning objective to better deal with this type of question. Note that some questions relate to Ch. 3, which will not be on our Exam 1. I have marked these with a star o (see #8 for example). Save them until you are preparing for the next exam. There are 64 points related to Ch 1 & 2 (and 36 related to Ch. 3), so your score is the (number of points earned)/64. ACCT3310 Fall 20xx Exam #1 Dr. Bailey Your Name Important Instructions (may be modified for Spring 2014) 1. Clearly circle the letter response on multiple-choice, as well as responding on the bubble sheet 2. Be sure to show your work on all numerical problems. Correct numbers will not count without supporting calculations! 3. There are 21 questions. Be sure your exam includes them all 4. You may have only these items on your desk: Pencils & erasers. (Do not use ink pens.) A free-standing, nonprogrammable calculator with only basic functions (+, -, *, /, ). Not your cellphone. Not a programmable calculator. If you paid over $5 it s probably not OK. The exam NOTHING ELSE! o No other paper. Possession of any paper other than the exam (even a gum wrapper) will result in a grade of zero for the exam. o No drinks, except a water bottle with no label. o No phones or other personal items. o No caps, visors or hats are allowed. Initial here to acknowledge your understanding of these instructions: Points for each item are shown as,, etc. 1. Cost drivers are A. activities that cause costs to increase as the activity increases. B. accounting techniques and practices used to control costs. C. accounting reimbursements used to evaluate whether performance is proceeding according to plan. D. a mechanical basis, such as machine hours, computer time, or factory square footage, used to assign costs to activities. 2. The field of accounting that depends on generally accepted accounting principles (GAAP) is called A. cost accounting. B. financial accounting. C. managerial accounting. D. responsibility accounting. E. International accounting.

2 3. How would a 5% sales commission paid to sales personnel be classified in a manufacturing company? A. Fixed, period cost. B. Fixed, product cost. C. Variable, period cost. D. Variable, product cost. 4. Which of the following statements is (are) true? (1). An asset is a cost that will be matched with revenues in a future accounting period. (2). Opportunity costs are recorded as intangible assets in the current accounting period. A. Only (1) is true. B. Only (2) is true. C. Both (1) and (2) are true. D. Neither (1) or (2) are true. 5. The term gross margin for a manufacturing firm refers to the excess of sales over: A. cost of goods sold, excluding fixed indirect manufacturing costs. B. all variable costs, including variable marketing and administrative costs. C. cost of goods sold, including fixed indirect manufacturing costs. D. variable costs, excluding variable marketing and administrative costs. E. total manufacturing costs, including fixed indirect manufacturing costs. 6. Which of the following best distinguishes an opportunity cost from an outlay cost? A. Opportunity costs are recorded, whereas outlay costs are not. B. Outlay costs are speculative in nature, whereas opportunity costs are easily traceable to products. C. Opportunity costs have very little utility in practical applications, whereas outlay costs are always relevant. D. Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows. 7. Which one of the following costs is classified as a period cost? (CIA adapted) A. The wages of the workers on the shipping docks who load completed products onto outgoing trucks. B. The wages of a worker paid for idle time resulting from a machine breakdown in the molding department. C. The payments for employee (fringe) benefits paid on behalf of the workers in the manufacturing plant. D. The wages paid to workers for reworking defective products that failed the quality inspection upon completion. 8. Which of the following statements is true? A. An increase in an organization's tax rate will cause an increase in its break-even point. B. After-tax operating profits are equal to the before-tax operating profits divided by (1 tax rate) C. If an organization's before- and after-tax operating incomes are $10,000 and 7,000, respectively, then its tax rate is 70% D. An increase in an organization's tax rate will cause a decrease in its break-even point. E. None of the above

3 9. Inventoriable costs: A. include only the prime costs of manufacturing a product. B. include only the conversion costs of providing a service. C. exclude fixed manufacturing costs. D. are regarded as assets until the units are sold. E. are regarded as expenses when the costs are incurred. 10. Which of the following would not cause the breakeven point to change? A. Sales price increases. B. Fixed costs decreases. C. Sales volume decreases. D. Variable costs per unit increases. E. Product mix shifts towards the cheaper products. 11. If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the breakeven point respectively? CM% BEP A. Decreased Increased B. Increased Decreased C. Decreased Decreased D. Increased Increased 12. Expense A is a fixed cost expense, B is a variable cost. During the current year the volume of output has decreased. In terms of cost per unit of output, we would expect that A. expense A has remained unchanged. B. expense B has decreased. C. expense A has decreased. D. expense B has remained unchanged. 13. Operating leverage refers to the extent to which an organization's cost structure is made up of: A. differential costs. B. opportunity costs. C. fixed costs. D. relevant costs. E. product costs. 14. Cajun Connection is a fast-food restaurant. Their average meal sells for $4.75 and has variable costs of $1.85. Fixed costs currently are $9500/month, but management is considering a new cost structure. Total salaries would be reduced by $1000/month, and a new sales commission would be offered averaging $0.15/meal. Employees like the plan, and management believes they would try harder to increase business. At what number of meals served would management be indifferent between the new and existing cost structures? Answer: $ Show work below:

4 15. Define the term value added activity : 16. You have been provided with the following information: If sales decrease by 500 units, how much will fixed expenses have to be reduced to maintain the current operating profit of $6,000? 17. Given the following information: What would expected net income be if the company experienced a 10 percent increase in fixed costs and 10 percent increase in sales volume? Answer: $ Show work below: 18. The AZ Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The BV Company has approached AZ with an offer to buy 20,000 utensils at $0.75 each. AZ sells its utensils wholesale for $0.85 each; the average cost per unit is $0.83, of which $0.12 is fixed costs. If AZ were to accept BV's offer, what would be the effect on AZ's operating profits?

5 19. The president of AMG Enterprises is considering expanding sales by producing three different versions of their product. Each will be targeted by the marketing department to different income levels and hence will be produced from three different qualities of materials. After reviewing the sales forecasts, the sales department feels that for every item of A sold, 4 of M can be sold and 8 of G can be sold. The following information has been assembled by the sales department and the production department. The fixed costs associated with the manufacture of these three products are $75,000 per year. Required: Determine the number of units of each product that would be sold at the breakeven point. Clearly label your answers pts The cost accountant for the Larsen Manufacturing Company has provided you with the following information for the month of July 20xx: Required: Compute the following per unit items, assuming the company produced 6,000 units and sold 5,000 units at a price of $ per unit. Show calculations in the brackets. (a) Total variable cost/unit: { (b) Variable inventoriable cost/unit: { (c) Full absorption cost/unit: { (d) Full cost/unit: { (e) Contribution margin/unit: { (f) Gross margin/unit: {

6 pts The Matter Manufacturing Company provided you with the following information for the fiscal year ended December 31, 2005: Required: (a) Compute the total manufacturing costs incurred during (b) Compute the cost of goods manufactured during 20xx. (c) Compute the cost of goods sold during 20xx. (d) Compute the total prime costs for 20xx. (e) Compute the total conversion costs for 20xx.