RSM222 Midterm

Topics: Variable cost, Costs, Fixed cost Pages: 8 (1583 words) Published: April 16, 2015
1. Which of the following companies would be most likely to use a job-order costing system rather than a process costing system? I. Shipbuilding
II. Crude oil refining

2. At the end of a period, after overhead has been applied to all jobs, manufacturing overhead has a credit balance of $900. We say that overhead is: a. Correctly applied
b. Overapplied
c. Underapplied
d. None of the above

3. Using the variable costing method, which of the following costs are assigned to inventory? a. Variable factory overhead costs and variable selling and admin costs b. Variable factory overhead costs

c. Variable selling and admin costs
d. Neither

4. Which of the following statements is true?
I. When completed units are sold, work in process inventory account is credited II. The journal entry required to record indirect labour costs includes a debit to factory overhead account

5. Which of the following statements is true?
a. Beginning finished goods inventory appears on the COG manufactured schedule b. In some cases, under applied overhead is closed out to cost of goods sold c. A and B
d. Neither

6. Which of the following best describes the function of managerial accounting within an organization? a. It has its primary emphasis on the future
b. It is required by regulatory bodies such as the Ontario Securities Commission c. It focuses on the organization as a whole, rather than on the organization’s segments d. It places more emphasis on precision of data than financial accounting does

1. What are fixed costs, if contribution margin is positive and breakeven is one unit? Using this cost structure, what is the operating leverage if they sell 2 units?

2. Abel Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 200 units and of Product B is 300 units. Selling price for A is $160/unit and B is $100/unit. There are two activity cost pools, with estimated total costs and expected activity as follows:

Activity cost pool
Estimated total cost
Expected activity

Product A
Product B
Total
Activity 1
$16,660
600
100
700
Activity 2
$18,450
1,100
700
1800

Which product is more profitable? (i.e. would Abel prefer to sell one more unit of product A or B)? Show calculations.

3. In homework 1, you were assigned to work on problems related to the case “Cambridge Hospital Community Health Network.” Please answer the following questions: a. In general, under what circumstances are ABC systems typically implemented? What are the main benefits of using ABC? b. Why did Cambridge Hospital undertake the ABC study, why did the study start in the PCU?

4. Prince Company’s total overhead costs at various levels of activity are presented below:

Month
Machine hours
Total overhead costs
September
100,000
$388,000
October
80,000
$340,400
November
135,000
$485,600
December
140,000
$483,200

Assume that overhead cost above consists of utilities, supervisory salaries, depreciation, and maintenance. The breakdown of these costs at the 80,000 machine hour level of activity in October is as follows:

Utilities (variable)
$104,000
Supervisory salaries and depreciation (fixed)
$120,000
Maintenance (mixed)
$116,400
Total overhead costs
$340,400

The company wants to breakdown the maintenance cost into its variable fixed cost elements

a. Estimate how much of the $483,200 of overhead cost in December is maintenance cost.

b. Using the high-low method, estimate a cost formula for maintenance

1. The sprinkler system at Plant A was accidentally set off. The ensuing deluge destroyed most of the cost records in Plant A for the month just completed (May). The plant manager has come to you in a panic – she has to...
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