UNIVERSITY OF TORONTO
RSM 222 H1S
MIDTERM EXAM, Winter 2011
Part I: 9 A number of Selection Questions (three marks every, 27 marks in whole) :
Please circle the one finest reply for the multiple-choice questions.
1. Which of the next objects could be included as a part of manufacturing unit overhead in a microcomputer producer?
a. the price of reminiscence chips
b. wage of laptop assemblers
c. depreciation of laptop assemblers
d. wage of selling director
e. the entire above
2. Inventoriable prices
a. embrace solely the prime prices of producing a product.
b. embrace solely the conversion prices of producing a product.
c. are expensed when merchandise change into a part of completed items stock.
d. are thought to be property earlier than the merchandise are bought.
e. Not one of the above.
three. As soon as the break-even level is reached
a. The overall contribution margin adjustments from damaging to optimistic.
b. Internet earnings will improve by the unit contribution margin for every merchandise bought.
c. Variable prices will stay fixed in whole
d. The contribution margin ratio begins to lower
e. Not one of the above
four. Miller manufactures desks. Throughout the best month of the yr, three,500 desks are manufactured at a complete price of $84,400. In its slowest month, Miller makes 1,100 desks at a price of $46,000. February is an everyday month. Miller plans to make 2,000 items. What's the whole variable prices for Fabruary?
e. Not one of the above.
5. Winsor Inc. has deliberate to extend manufacturing unit supervisor wage by 10%. If promoting costs and all different price are held fixed, the break-even level
a. decreases at price greater than 10%
b. decreases at a price decrease than 10%.
c. will increase at price greater than 10%
d. will increase at a price decrease than 10%.
e. Not one of the above.
6. The next data pertains to Glow Ltd.
Gross sales $125,000
Price of products bought 56,000
Working bills 25,500
Completed items, starting stock 15,000
Completed items, ending stock 15,000
Direct materials 10,500
Direct labour 19,000
What's Glow’s price of products manufactured?
e. Not one of the above
7. Exercise primarily based costing could also be used through which of the next situations?
a. For promoting and administrative bills.
b. For service associated enterprise.
c. Each a and b.
d. Nether a nor b.
eight. The method of selecting amongst competing options known as
b. Determination making
d. Efficiency analysis
e. Not one of the above.
9. Which of the next assertion is true?
I. A value driver is an element that causally impacts prices.
II. A value hierarchy is a categorization of prices into totally different price swimming pools on the idea of
the several types of price drivers or totally different levels of problem in figuring out
a. Solely I
b. Solely II
c. Each I and II
d. Neither I nor II
Part II. Quick Reply Questions (18 marks)
1. Ruth Reed, divisional controller and authorized administration accountant, was upset by a latest memo she acquired from the divisional supervisor, Paul Chesser. Ruth was scheduled to current the division’s monetary efficiency at headquarters in a single week. Within the memo, Paul had given Ruth some directions for this upcoming report. Specifically, she has been advised to emphasise the numerous enchancment within the division’s earnings over final yr. Ruth, nevertheless, didn’t imagine that there was any actual underlying enchancment within the division’s efficiency and was reluctant to say in any other case. She knew that the rise in earnings was due to Paul’s aware resolution to provide for stock.
Paul had satisfied his plant managers to provide greater than they knew they may promote. Paul argued that by doing so reported earnings would bounce. He identified two vital advantages. First, by growing earnings, the division may exceed the minimal stage wanted so that each one the managers would qualify for the annual bonus. Second, by assembly the budgeted revenue stage, the division could be higher in a position to compete for a lot wanted capital. Ruth had objected however had been overruled. Essentially the most persuasive counterargument was that the rise in stock could possibly be liquidated within the coming yr because the economic system improved. Nevertheless, Ruth thought of this occasion unlikely. Based mostly on previous expertise, she imagine that it will take at the least two years of improved market demand earlier than the productive capability of the division was exceeded.
Reply the next questions:
a. (four marks) Why does the revenue improve when the division produces for extra stock?
b. (four marks) In chapter 1, moral requirements for administration accountant have been listed. Establish any requirements that apply on this state of affairs. Based mostly on this, focus on what ought to Ruth do?
Ought to she adjust to the directive to emphasise the rise in earnings? If not, what choices does she have?
2. DEF firm has the next price knowledge for 2010. The info is collected earlier than the disposition of under- or over-applied overhead.
Work in Course of Stock $60,000
Completed Items Stock $80,000
Price of Items Bought $200,000
Precise overhead $150,000
Utilized overhead $130,000
a. (2 marks) How a lot is the under-applied or overapplied overhead for 2010?
b. (four marks) Assume that the quantity is vital, put together the journal entry to get rid of the quantity.
three. (four marks) Present two explanation why overhead may be under-applied/over-applied for DEF firm in 2010.
Part III. four Issues (55 Marks)
1. Job Costing (13 marks)
Orange Inc. is a producing agency that makes use of regular job-order costing. On January 1, the
starting of its fiscal yr, the corporate had the next stock balances: Uncooked materials
$ 20,000; Work in course of $25,000; Completed items $30,000.
The corporate applies overhead price to jobs on the idea of machine-hours labored. For the
present yr, the corporate estimated that it will work 75,000 machine-hours and incur
$450,000 in manufacturing overhead price. The next transactions have been recorded for the yr:
1. Uncooked supplies have been bought on account, $410,000.
2. Uncooked supplies have been requisitioned to be used in manufacturing, $380,000 ($360,000 direct
supplies and $20,000 oblique supplies).
three. The next prices have been incurred for worker companies: direct labor, $75,000; oblique
labor, $110,000; gross sales commissions, $90,000; and administrative salaries, $200,000.
four. Gross sales journey prices have been $17,000.
5. Utility prices within the manufacturing unit have been $43,000.
6. Promoting prices have been $180,000
7. Depreciation was recorded for the yr, $350,000 (80% pertains to manufacturing unit operations, and
20% pertains to promoting and administrative actions).
eight. Insurance coverage expired through the yr, 10,000 (70% associated to manufacturing unit operations, and the
remaining 30% pertains to promoting and administrative actions).
9. Manufacturing overhead was utilized to productions. Attributable to decrease than anticipated
demand for its merchandise, the corporate labored 70,000 machine-hours through the yr.
10. Items costing $880,000 to fabricate in response to their job price sheets have been
accomplished through the yr
Required ( A - C): (Present your calculation utilizing T-Account)
A) (6 marks) Decide the quantity of over or below utilized overhead for the yr
B) (four marks) Decide the ending stock steadiness of work-in-process.
C) (three marks) Decide the quantity of Promoting, Common & Administrative Prices for the yr.
2. Course of Costing (12 Marks)
Halifax Salt firm course of salt and accounts for manufacturing utilizing weighted common course of
costing methodology. Direct materials is added firstly of manufacturing however labor and overhead prices
are incurred evenly all through. The next knowledge pertain to operations for February:
Starting WIP (75% full) eight,000 kg
Began in February 200,000 kg
Ending WIP (25% full) 20,000 kg
The fee data is offered beneath:
Direct materials Conversion
Starting WIP $four,000 $2,282
Incurred in February $48,000 $20,878
Calculate the associated fee transferred out to completed items stock and the worth of the ending WIP.
three. Price-Quantity-Revenue Evaluation (15 marks)
The ABC firm produces two merchandise. The advertising division expects that the corporate
can promote 1,000 items of standard product and 1,100 items of luxurious product every month. The corporate supplies the next data:
Unit gross sales worth $210 $300
Unit variable price $110 $130
Month-to-month mounted price for FIVE machines used to fabricate each merchandise is $150,000. It takes 1
machine hour to provide common product and a pair of hours to provide luxurious product. Every machine
has a capability of 600 hours/month.
a. What's the most revenue that the corporate could make in January?
b. The advertising division found out in January that the purchasers are prepared to purchase
luxurious product at worth $350. Ought to the corporate revise its manufacturing plan in February?
What could be the revenue with the brand new plan?
four. ABC Downside (15 Marks)
The River Firm manufactures a wide range of status boardroom chairs. Its job-costing system
makes use of an exercise primarily based method. There are two direct price classes (direct supplies and direct
labour) and three oblique price swimming pools. The fee swimming pools signify the next three actions.
Actions Budgeted prices for
Price driver used as
Price allocation price
Supplies dealing with $200,000 Components $zero.25
Chopping 2,000,000 Components 2.50
Meeting 2,000,000 Direct labour hours 25.00
Two kinds of chairs have been produced in February, 2011, the manager char and the chairman chair.
Their portions, direct materials prices, and different knowledge for February are as follows:
Models produced Direct materials
Variety of elements Direct labour
Govt Chair 5,000 $600,000 100,000 7,500
Chairman Chair 100 25,000 three,500 500
The upstream actions to manufacturing (R&D and design) and downstream actions
(advertising, distribution, and buyer serve) are analyzed, and the unit prices for these actions
Upstream Actions Downstream Actions
Govt Chair $60 $110
Chairman Chair 146 236
The direct manufacturing labour price is $20 per hour. Assume no starting or ending stock.
1) Compute the unit manufacturing prices of the manager chair and the chairman chair.
Govt Chair Chairman Chair
2) The corporate sells the manager chair on the worth $500 and the chairman chair on the worth $1,200. What's the revenue for the corporate in February?