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1 Hashemite University Faculty of Economic and Administrative Sciences Department of Accounting- Dr Husam Al-Khadash Course: Managerial Accounting, Course No: mid-term exam Student Name: Student No.: Seat No Question 1: (4 Marks) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just completed year. Sales... $870 Purchases of raw materials... $190 Direct labor... $200 Manufacturing overhead... $230 Administrative expenses... $150 Selling expenses... $140 Raw materials inventory, beginning... $10 Raw materials inventory, ending... $40 Work in process inventory, beginning... $20 Work in process inventory, ending... $50 Finished goods inventory, beginning... $90 Finished goods inventory, ending... $130 Required: Prepare a Schedule of Cost of Goods sold

2 Question 2: (6 Marks) The following information is budgeted for Jordan Plumbing Supply Company for next quarter: April May June Sales... $110,000 $130,000 $180,000 Merchandise purchases... $85,000 $92,000 $105,000 Selling and administrative expenses... $50,000 $50,000 $50,000 All sales at Jordan are on credit. Forty percent are collected in the month of sale, 58% in the month following the sale, and the remaining 2% are uncollectible. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include $8,000 of depreciation. All other selling and administrative expenses are paid as incurred. Jordan wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at month end. Required: Prepare Jordan's cash budget for the month of May. Jordan expects to have $24,000 of cash on hand at the beginning of May.

3 Question 3: (20 Marks) Answer the following multiple-choice questions: 1. Which of the following is not an example of a variable cost? a. Rent b. Direct material c. Direct labor d. Factory supplies 2. If a company had a contribution margin of $200,000 and a contribution margin ratio of 40%, total variable costs must have been a. $300,000. b. $120,000. c. $500,000. d. $80, Star Company developed the following information for the year ended December 31, 2002: Product A Product B Total Units Sold 4,000 6,000 10,000 Sales $12,000 $27,000 $39,000 Variable costs 6,000 15,000 21,000 Contribution margin $ 6,000 $12,000 $18,000 Fixed costs 12,600 Net income 5,400 If the sales mix changes in 2003 to 5,000 units of Product A and 5,000 units of Product B. As a result of this change the company s break even point would: a. increase by 200 units. b. decrease by 200 units. c. increase by 1,200 units. d. no change. 4. If the activity level increases 10%, total variable costs will a. remain the same. b. increase by more than 10%. c. decrease by less than 10%. d. increase 10%. 5. A company, which uses the high-low method, makes a product called Redrose. The total cost for this product is consisted of three different cost types (A, B, and C). The company has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each costs type are presented below: Type A Type B Type C Total Cost per Unit 5000 units $ 4 $ 9 $ 4 $ 17 7,500 units $ 4 $ 6 $ 3 $ 13 The Cost formula that expresses the behavior of the company s total cost is: A. Y= $ 60,000 + $ 5 X B. Y= $ 20,000 + $ 13 X C. Y= $ 40,000 + $ 9 X D. Y= $ 45,000 + $ 4 X

4 6. Reese Company requires sales of $2,000,000 to cover its fixed costs of $900,000 and to earn net income of $400,000. What percent are variable costs of sales? a. 20%. b. 35%. c. 45%. d. 65%. 7. If there were 30,000 pounds of raw material on hand on January 1, also 60,000 pounds are desired for inventory at January 31, and 180,000 pounds are required for January production, how many pounds of raw material should be purchased in January? a. 150,000 pounds b. 240,000 pounds c. 120,000 pounds d. 210,000 pounds 8. In describing the cost equation, Y = a + bx, "a" is: A) the dependent variable, cost. B) the independent variable, the level of activity. C) the total fixed costs. D) the variable cost per unit of activity 9. Ideally, how many units should be produced in a just-in-time manufacturing system? A) budgeted customer demand for the current week. B) budgeted customer demand for the following week. C) actual customer demand for the current week. D) maximum production capacity for the current week. 10. A company has total fixed costs of $120,000 and a contribution margin ratio of 20%. The total sales necessary to break even are a. $480,000. b. $600,000. c. $150,000. d. $144,000.

5 Solutions Question 1 a. Schedule of cost of goods manufactured Direct materials: Raw materials inventory, beginning... $ 10 Add: Purchases of raw materials Raw materials available for use Deduct: Raw materials inventory, ending Raw materials used in production Direct labor Manufacturing overhead Total manufacturing cost Add: Work in process inventory, beginning Deduct: Work in process inventory, ending Cost of goods manufactured... $560 b. Computation of cost of goods sold Finished goods inventory, beginning... $ 90 Add: Cost of goods manufactured Goods available for sale Deduct: Finished goods inventory, ending Cost of goods sold... $520 Question 2 Answer: Cash balance, beginning... $ 24,000 Add receipts: Collections from customers ($130,000 40%) + ($110,000 58%) ,800 Total cash available before current financing ,800 Less disbursements: Merchandise purchases... 85,000 Selling and administrative ($50,000 - $8,000)... 42,000 Total disbursements ,000 Excess of cash available over disbursements... 12,800 Financing: Borrowings... 3,000 Cash balance, ending... $ 15,800 Solutions: Q3: A A A D A B D C C B

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