ACCT Exam 2

margin of safety =

(current sales - breakeven sales) x price per unit

to reach a target profit =

(target profit + fixed costs) / CM per unit

profit =

(unit CM x Q) - fixed expenses (Q = number of units) OR (CM ratio x sales) - fExp

CM ratio =

1 - vExp ratio

Domingo Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were: Materials costs $5,600 50% complete Conversion costs $1,800 20% complete A total of 6,900 units were started and 6,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Materials costs $158,800 Conversion costs $120,500 The ending inventory was 85% complete with respect to materials and 75% complete with respect to conversion costs. How many units are in ending work in process inventory in the first processing department at the end of the month?

1,200 TO = BB + TI - EB 6200 = 500 + 6900 - EB EB = 500 + 6900 -6200 EB = 1200

on July 1, the Fabrication Department had 30 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 20 canoes in process that were 40% complete with respect to conversion cost. During July, the Fabrication Department completed 81 canoes and transferred them to the Waterproofing Department.

101 equivalent units of production = units TO + equivalent units in ending WIP inventory = 81 + 1.00 x 20 = 101

Assembly $512,52051,000 machine-hours Processing orders $61,2631,800 orders Inspection $84,5891,810 inspection-hours Data concerning the company's product L19B appear below: Annual unit production and sales 570 Annual machine-hours 1,130 Annual number of orders 210 Annual inspection hours 160 Direct materials cost $51.74 per unit Direct labor cost $24.45 per unit

121.77 assembly: 512,520 / 51,000 = 10.05/MH processing orders: 61,263 / 1,800 = 34.04 inspection: 84,589 / 1,810 = 46.73 OVH L19B: assembly 10.05 x 1,130 = 11,356.50 processing 34.04 x 210 = 7,148.40 inspection 46.73 x 160 = 7,476 total = 25,981.70 DM (570 x 51.74) = 29,491.80 DL (570 x 51.74) = 13,936.50 OVH = 25,981.70 total cost = 69,410 unit product cost = 69,410 / 570 = 121.77

merone comp allocated materials handling cost to the company's two products using the data below: total exp units produced: modular homes 5,800 prefab barns 8,800 total exp material moves: modular homes 580 prefab barns 180 exp DLH/unit modular homes 780 prefab barns 280 total materials handling cost for the year is exp to be $349,400 if materials handling cost is allocated on the basis of DLHs, the total materials handling cost allocated to the prefab barns is closest to

123,200 predet OVH = 349,400 / ((780 DLH/unit x 5,800 units) + (280 DLH/unit x 8,800 units)) = 349,400 / 6,988,00 = .05 or $50 per 1,000 units materials handling cost allocated to prefab barns = $50 per 1,0000 DLH x 280 DLHs/unit x 8,800 units = 123,200

Beginning work in process inventory: Units in beginning work in process inventory 2,500 Materials costs $14,600 Conversion costs $6,700 Percent complete with respect to materials 75% Percent complete with respect to conversion 20% Units started into production during the month 11,200 Units transferred to the next department during the month 10,100 Materials costs added during the month $173,700 Conversion costs added during the month $243,700 Ending work in process inventory: Units in ending work in process inventory 3,600 Percent complete with respect to materials 90% Percent complete with respect to conversion 30% The cost per equivalent unit for materials for the month in the first processing department is closest to:

14.12 Units transferred to the next department 10,100 Ending work in process Materials: 3,600 units × 90% 3,240 Equivalent units of production 13,340 Cost of beginning work in process inventory $14,600 Costs added during the period 173,700 Total cost $188,300 Equivalent units of production 13,340 Cost per equivalent unit $14.12

merone comp allocates materials handling cost to the company's two product using the data below: total exp units prod modular homes 6,700 prefab barns 9,700 total exp material moves modular homes 670 prefab barns 270 exp DLH/unit modular homes 870 prefab barns 370 the total materials handling cost for the year is expected to be $235,450 if the materials handling cost is allocated on the basis of material moves, the total materials handling cost aloocated to the modular homes is closest to

167,821.60 activity rate = 235,450 / (670 material moves / 270 material moves) = 250.48/material move materials handling cost allocated to modular homes / 250.48/material move x 670 material moves = 167,821.60

beg WIP inventory $15,000 end WIP inventory $20,000 TO $150,000 what's the total cost accounted for?

170,000 cost of end WIP 20,000 cost of units TO 150,000 total cost 170,000

schister systems' cost-volume-profit analysis: sales 365,000 vExp 219,000 CM 146,000 fExp 113,000 Net Op Inc 33,000 what is total CM if sales volume increases by 20%

175,200 CM ratio = 146,000 / 365,000 = .4 sales increase = 365,000 x .2 = 438,000 nCM = 438,000 x .4 = 175,200

product Q1: exp prod 2,800 DLH/unit 6.8 total DLH 19,040 product D5: exp prod 1,300 DLH/unit 3.8 total DLH 23,980 labor (DLH): est OVH 170,482 exp activity 19,040 prod Q1 4,940 prod D5 23,980 total exp act testing (tests): 66,909 OVH exp activity 1,300 prod Q1 1,200 prod D5 2,500 total order size (MH) est OVH 222,825 exp activity 5,600 prod Q1 5,500 prod D5 11,100 total 460,216 total MOH if the company allocates all of its OVH based on DLHs using traditional costing method, the predet OVH rate is

19.19/DLH predet OVH = 460,216 / 23,980 = 19.19/DLH

company with a 20% CM ratio fixed exp of 40,000 sales of 300,000 net income = ?

20,000 CM = .2(300,000) = 60,000 60,000 - 40,000 = 20,000

beg inventory 900 units materials costs 6000 50% complete 2200 20% complete 7300 units TI 6600 units TO materials cost 159200 conversion cost 120900 ending inv was 85% complete in respect to materials and 75% complete in respect to conversion costs the cost per equivalent unit for materials for the month is closest to:

20.75 units TO 6600 end WIP (materials: 1600 x 85%) 1360 equiv units 7960 cost of beg WIP 6000 costs added 159200 total cost 165200 equivalent units 7960 cost per equivalent unit 20.75

rovinksy corp contribution format income statement: sales (6,500 units) 403,000 vExp 273,000 CM 130,000 fExp 103,500 Net Op Inc 26,500 if the company sells 6,400 units, its net op inc should be

24,500 Sales/unit = 403,000 / 6,500 = 62/unit 62 x 6,400 = 396,800 CM ratio = 130,000 / 403,000 = .32 nCM = .32 x 396,800 = 128,000 nNet Op Inc = 128,000 - 103,500 = 24,500 OR selling = 62/unit vExp/unit = 273,000 / 6,500 = 42/unit unit CM = 62 - 42 = 20/unit profit = (unit CM x Q) - fExp profit = (20 x 6,400) - 103,500 = 24,500

product u6: exp prod 760 DLH/unit 9.6 total DLH 7296 DL rate 27.70/DLH DM cost/unit 250.5 considering adopting an activity-based costing unit: labor related (DLH): est OVH 202138 exp activity 7296 total exp activity 14787 production orders (orders): est OVH 73340 exp activity 1400 total exp activity 2700 order size (MHs) est OVH 1021108 exp activity 6600 total exp activity 13500 what is the difference in unit product cost?

3.59 predet OVH = 1,296,586 / 14,787 = 87.68/DLH DL = 9.6 x 27.7 = 265.92 MOH = 9.6 x 87.68 = 841.73 DM + DL + MOH = 250.50 + 265.92 + 841.73 = 1,358.15/unit activity rates: labor rate = 202,138 / 14,787 = 13.67 prod orders = 73,340 / 2,700 = 27.16 order size = 1,021,108 / 13,500 = 75.64 labor = 13.67 x 7296 = 99,736.32 prod orders = 27.16 x 1,400 = 38,024 order size = 75.64 x 6,600 = 499,224 total = 636,984.32 OVH cost/unit = 636,984.32 / 760 = 838.14 DM + DL + MOH = 250.5 + 265.92 + 838.14 = 1,354.56 1,358.15 - 1,354.56 = 3.59

walbin corp beg WIP inventory 20,500 (mat 100% and conv 30%) cost in beg WIP $26,200 TO 58,000 cost/equivalent unit 2.10 for materials and 3.80 for conversion costs total cost of the units completed and TO was

342,200 units TO 58,000 materials 58,000 conversion cost per equivalent unit $2.10 materials $3.80 conversion cost of units TO 121,800 materials 220,400 conversion total = 342,200

jilk inc's CM ratio is 61% and fExp are 50,000. what is the best estimate of net op inc when sales are 142,000?

36,620 nCM = 142,000 x .61 = 86,620 nNet Inc = 86,620 - 50,000 = 36,620

saada corp beg WIP inventory 6,900 -> 20% transferred in 62,200 end WIP 10,400 -> 60% the cost per equivalent unit for conversion cost was 6.15 how much conversion cost was assigned to the units TO

361,005 TO = 6,900 + 62,200 - 10,400 = 58,700 58,700 x 6.15 = 361,005

Alpha Corporation reported the following data for its most recent year: sales, $610,000; variable expenses, $305,000; and fixed expenses, $244,000. The company's degree of operating leverage is closest to:

5.00 Contribution margin = Sales - Variable expenses= $610,000 - $305,000 = $305,000 Profit = Contribution margin - Fixed expenses= $305,000 - $244,000 = $61,000 Degree of operating leverage = Contribution margin ÷ Net operating income= $305,000 ÷ $61,000 = 5.00

derst inc sells a book for 40 and vExp are 31/book. current volume of 60,000 books to breakeven. given this data, the fExp total:

540,000 unit CM = selling price/unit - vExp/unit unit CM = 40 - 31 = 9 unit sales to breakeven = fExp / unit CM 60,000 = fExp / 9 fExp = 60,000 x 9 = 540,000

bims corp uses weighted-avg method assembly dept: beg inventory 2600 units -> 70% comp additional 62,500 units added end inventory 21,000 -> 60% comp what were the equiv units for conversion costs

56,700 TO = BB + TI - EB TO = 2600 + 62,500 - 21,000 = 44,100 44,100 + (21,000 x .6) = 56,700

awtis corp has a margin of safety of 25% of sales. the breakeven point is 320,400 and the vExp are 45% of sales. what is the act profit?

58,740 CM ratio = 1 - vExp ratio CM ratio = 55% breakeven = fExp / CM ratio 320,000 = fExp / .55 fExp = 320,000 x .55 = 176,220 margin of safety in $ = total act sales - breakeven sales margin of safety % = margin of safety in $ / total act sales margin of safety % = 1 - breakeven sales / total act sales -> total act sales = breakeven sales / (1 - margin of safety %) total act sales = 320,000 / (1 - .25) = 427,200 profit = (CM ratio x sales) - fExp = (.55 x 427,200) - 176,220 = 58,740

Mcdale Inc. produces and sells two products. Data concerning those products for the most recent month appear below: Product I49V: $51,000 sales 13,900 vExp Product Z50U: $56,000 sales $26,760 vExp The fixed expenses of the entire company were $39,050. The break-even point for the entire company is closest to:

62,984 CM ratio = Contribution margin ÷ Sales = $66,340 ÷ $107,000 = 0.62 Dollar sales to break even = Fixed expenses ÷ CM ratio = $39,050 ÷ 0.62 = $62,984

moyas corp sells a product for 20/unit. last year sales were 255,000 and net inc was 69,000. if fExp totaled 84,000, the breakeven point in unit sales was

7,000 unit sales = 255,000 / 20 = 12,750 units breakeven = fExp / CM/unit CM/unit = unit sales - unit vExp vExp = 255,000 (69,000 + 84,000) = 102,000 CM ratio = (255,000 - 102,000) / 255,000 = .6 CM/unit = 20*.6 = 12/unit breakeven = 84,000 / 12 = 7,000

sorin inc contrinbution format income statement: sales (4,000 units) 112,000 vExp 47,040 CM 64,960 fExp 46,800 Net Op Inc 18,160 if the comp sells 4,700 units, the total CM should be

76,328 CM ratio = 64,960 / 112,000 = .58 sales/unit = 112,000 / 4,000 = 28 sales = 28 x 4,700 = 131,600 nCM = 131,600 x .58 = 76,328

Newham Corporation produces and sells two products. In the most recent month, Product R10L had sales of $28,000 and variable expenses of $10,480. Product X96N had sales of $41,000 and variable expenses of $18,500. The fixed expenses of the entire company were $46,030. The break-even point for the entire company is closest to:

79,362 Product R10L 28,000 sales 10,480 vExp 17,520 CM Product X96N 41,000 sales 18,500 vExp 22,500 CM Total 69,000 sales 28,980 vExp 40,020 CM CM ratio = Contribution margin ÷ Sales = $40,020 ÷ $69,000 = 0.58 Dollar sales to break even = Fixed expenses ÷ CM ratio = $46,030 ÷ 0.58 = $79,362

ferkil corp has a product selling price of $30. fExp are 63,000. company must sell 7,000 units to breakeven. with a target profit of 13,500, what should the sales in units be

8,500 units to breakeven = fExp / unit CM 7,000 u = 63,000 / unit CM unit CM = 63,000 / 7,000 = 9/unit unit sales to attain target profit = (target profit + fExp) / unit CM =(13,500 + 63,000) / 9 per unit = 76,500 / 9 = 8,500

darden corp uses weighted-avg method in its process costing system welding dept: beg inventory 18,200 -> 10% comp conv cost $16,700 additional 85,000 units end inventory 18,000 -> 70% comp total of 837,880 in conv costs the cost per equiv unit is

8.738 TO = BB + TI - EB = 18,200 + 85,000 - 18,000 = 85,200 units transferred to the next dept 85,200 end WIP (18,000 x 70%) 12,600 equiv units of production 97,800 cost of beg WIP 16,700 costs added 837,880 total cost 854,580 equiv units of production 97,800 cost/equiv unit (854,580 / 97,800) = 8.738

sabv corp's breakeven in sales is $980,000 and its vExp are 70% of sales . if the comp lost $48,000 last year, sales must have been

820,000 vExp = 980,000 x .7 = 686,000 fExp = 980,000 - 686,000 = 294,000 OR CM ratio = 1 - vExp ratio (.7) = .3 dollar sales to breakeven = fExp / CM ratio 980,000 = fExp / .3 -> fExp = 980,000 x .3 = 294,000 profit = (CM ratio x sales) - fExp -48,000 = (.3 x sales) - 294,000 -> sales = (fExp - profit) / CM ratio sales = (294,000 - 48,000) / .3 = 820,000

Domingo Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 1,400 units. The costs and percentage completion of these units in beginning inventory were: Materials costs $6,500 50% complete Conversion costs $2,700 20% complete A total of 7,800 units were started and 7,100 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Materials costs $159,700 Conversion costs$121,400 The ending inventory was 85% complete with respect to materials and 75% complete with respect to conversion costs. What are the equivalent units for conversion costs for the month in the first processing department?

8675 units TO 7100 end WIP conversion: 2100 x 75% = 1575 equivalent units 8675

paceheco corp uses weighted avg method molding dept: beg WIP inventory 5,650 -> 70% conversion transferred in 59,550 transferred out 57,350 end WIP inventory 7,850 -> 40% conversion cost assigned to beg WIP was $35,108 and 559,804 added during the period cost per equivalent unit for conversion costs:

9.835 units transferred 57,350 end WIP conversion (7,850 x 40%) = 3,140 equivalent units of production 60,490 cost of beg WIP inventory 35,108 costs added 559,804 total cost 594,912 equivalent units of production 60,490 cost per equivalent unit 9.835

last year Easton corp reported sales of 760,000, CM ratio of 20%, and net loss of 28,000. based on this info, breakeven point was

900,000 breakeven = f exp / CM/unit or ratio CM = .2 x 760,000 = 152,000 CM = sales - vExp 152,000 = 760,000 - vExp vExp = 608,000 fExp = 152,000 + 28,000 = 180,000 breakeven = fExp / CM/unit or ratio breakeven = 180,000 / .2 = 900,000

% change in net operating income

= degree of operating leverage x % change in sales

factory grounds management and utilities maintenence would be considered a

FACILITY level activity

product testing and research and development would be considered a

PRODUCT level activity

costs to be accounted for

cost of beg WIP + costs added

costs accounted for

cost of end WIP + cost TO

activity rate =

estimated OVH cost / total expected activity

which of the following products is most likely to be produced in a process costing system

event chairs, pencils, plastic food containers; anything routine

breakeven =

fixed exp / CM per unit

overhead applied under activity-based costing

for each cost pool: est OVH / total exp activity = activity rate

if a question asks for total cost

ovh + dl + dm

what is the correct order of inventory accounts by cost flow?

raw materials -> WIP dept 1 -> WIP dept 2 -> finished goods

units transferred to the next department =

units in beginning work in process + units started into production - units in ending work in process (TO=BB+TI-EB)

beg WIP inventory 1,300 materials costs 13,400 conversion costs 5,500 % complete mat 75% % complete conv 20% units started 10,000 units transf 8,900 mat $ added 172,500 conv $ added 242,500 end WIP inventory 2,400 % complete mat 90% % complete conv 30% what is the cost per equivalent unit for materials?

units transf 8,900 end WIP mat (2400x90%) = 2,160 8900 + 2160 = 11,060 equiv units = 11,060 cost of beg WIP 13,400 costs added 172,500 total costs (13,400 + 172,500) = 185,900 equiv units 11,060 cost per unit (total/equiv) = 16.81

equivalent units of production =

units transferred to the next department or to finished goods + equivalent units in ending work in process inventory

equivalent units of production

units transferred to the next dept + (end WIP x conversion %)

if a question asks for the overhead

use est total ovh / total DLH