Faculty of Liberal Arts & Professional Studies;
School of Administrative Studies
ADMS2510 3.0 Mid-Term Examination #2
Sunday 27 rd November 2011: 10am - noon
Instructors: Alison Beavis, John Parkinson Location: Section: A
Instructions: a. b. c. d. e. f. g.
CLH I E I L D F L
Day/time Tuesday 4-7 Thursday 4-7 Monday 7-10 Wednesday 4-7 Internet section (separate exam) Friday 11.30 -2.30 Monday 4-7
You must complete the Scantron sheet with a pencil. Put your name and student number at the top of the Scantron sheet provided. This is a closed book examination and no collaboration is allowed. There are of 50 questions in total; they are equally weighted. Answer all the questions on the Scantron sheet provided. Use the back of a page of the question paper for rough workings. Place your photo identification on your desk during the examination to facilitate verification.
Name: - - - - - - - - - - - Date: 1. In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost. A) True B) False 2. Under variable costing, the unit product cost contains some fixed manufacturing overhead cost. A) True B) False 3. When the number of units in work~in-process and finished goods inventories increase, absorption costing operating income will typically be greater than variable costing operating income. A) True B) False 4. Sales volume is the only driver of operating income under absorption costing. A) True B) False 5. Since variable costing emphasizes costs by behaviour, it works well with cost-volume profit analysis. A) True B) False 6. Under variable costing, it may be possible to report a positive operating income even if the company sells less than the break-even volume of sales. A) True B) False 7. During the most recent year, Evans Company had operating income of $90,000 using absorption costing and $84,000 using variable costing. The fixed manufacturing overhead application rate was $6 per unit. There were no beginning inventories. If 22,000 units were produced last year, what were the sales for last year? A) 15,000 units. B) 21,000 units. C) 23,000 units. D) 28,000 units.
8. Last year, fixed manufacturing overhead costs were $30,000, variable production costs were $48,000, fixed selling and administration costs were $20,000, and variable selling administrative expenses were $9,600. There was no beginning inventory. During the year, 3,000 units were produced and 2,400 units were sold at a price of $40 per unit. Under variable costing, what would be the operating income (loss)? A) $6,000. B) $4,000. C) ($2,000). D) ($4,400). 9. At the end oflast year, Lee Company had 30,000 units in its ending inventory. Every year, Lee Company's variable production costs are $10 per unit, and its fixed manufacturing overhead costs are $5 per unit. The company's operating income for the year was $12,000 higher under variable costing than under absorption costing. Given these facts, what must have been the number of units of product in inventory at the beginning of the year? A) 27,600 units. B) 28,800 units. C) 32,400 units. D) 42,000 units. 10. The total fixed manufacturing overhead costs of Cay Company are $100,000, and the total variable selling costs are $80,000. Under variable costing, how should these costs be classified? Period Costs A) $0 B) $80,000 C) $100,000 D) $180,000 Product Costs $180,000
11. The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements. A) True B) False 12. A continuous or perpetual budget is one that covers a 12-month period, but is constantly adding a new month onto the end of the 12-month period as the current month is completed. A) True B) False
13. Sales forecasts are drawn up after the cash budget has been completed because it is only at that time that the funds...