School of Accounting and Finance
The University of Waterloo
December 13, 2012
4:00 – 6;30 pm
1. You are permitted to consult your one page, double sided examination study sheet when completing this examination. Under no circumstances are you permitted to consult any other materials. You may use a calculator, but not a laptop or tablet.
2. If you have a question please ask the proctor. Under no circumstance is it acceptable for you to communicate with another student for any reason.
3. When you leave the examination you should hand in the UW answer booklet in which you have answered the examination questions. Do not hand in the examination questions or your rough work booklet. Make sure your name and id number are on any loose pages and your full name is on the answer booklet
4. Suggested Time and Grade Distribution on this Examination
Question One (10 marks)
A sales budget for the first five months of 2013 is given for a particular product line manufactured by Arthur Guthrie Co
Sales Budget in Units
The inventory of finished products at the end of each month is to be equal to 25% of the sales estimate for the next month. On January 1, there were 2,700 units of product on hand. No work is in process at the end of any month.
Each unit of product requires two types of materials in the following quantities:
Material A – 4 units
Material B – 5 units
Materials equal to one half of the next month’s production are to be on hand at the end of each month. This requirement will be met on December 31st, 2012.
a) Prepare a budget showing the quantities of each type of material to be purchased each month for the first quarter of 2013
Question Two (20 marks)
KLM Industries use weighted-average process costing to determine the cost of goods manufactured. The firm began the current year with 20,000 units in process, 75% complete. Work was begun on an additional 90,000 units during the period. The period ended with 8,000 units in process, 40% complete. Materials are added at the beginning of the process, labour when the units are 50% complete, and overhead is incurred uniformly. Units are inspected when they are 20% complete. Rejected units are sold for scrap at $0.10 each. Normally, 2% of the units inspected are expected to be rejected. Costs attached to beginning work-in-process were $80,000 for materials, $120,000 for labour, and $150,000 for overhead. Current costs for the period were $371,000 for materials, $475,000 for labour and $865,280 for overhead. One hundred thousand good units were completed and transferred out during the period.
a) Prepare a cost of production report for this department using weighted average process costing using the vertical format (as taught in class, not in the text) b) Prepare journal entries to record the activities for the month
Question Three (22 marks)
Phizer-Plow Pharmaceuticals is a major seller of cold remedies. Its product line consists of aspirin, cough lozenges, cold capsules and a nasal spray. The firm manufactures only the cold capsules in Puerto Rico. The other products are purchased from firms which specialize in the manufacture of those products:
For the first quarter of 2012, management of Phizer-Plow prepared the following master budget:
Aspirin 10,000 cases
Lozenges 20,000 cases
Capsules 20,000 cases
Spray 5,000 cases
Cost of purchased products:
Caffeine 40,000 grams
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