Question

1. Which of the following is true of the weighted average method of process costing?

   	A.	If there is no ending work in process, it results in the same amount of cost for completed units as the FIFO method does.
   	B.	In computing equivalent units of production, it considers all work done during the previous periods.
   	C.	In computing the cost per equivalent unit of production, it considers only costs incurred in the current period.
   	D.	It better matches ending inventory costs with current costs than the FIFO method.
   	E.	It results in higher net income than the FIFO method.

2 points   

QUESTION 53

1. For a given process/department, if there is no beginning work-in-process, both the weighted average and first-in first out (FIFO) methods of process costing result in the same amount for which of the following?

   I. Equivalent units of production for materials

   II. Cost per equivalent unit for conversion

   III. Cost of completed units

   IV. Cost of ending work-in-process

   	A.	I, II, III, and IV
   	B.	I and II
   	C.	I, III, IV
   	D.	II and IV
   	E.	I and III

2 points   

QUESTION 54

1. The Sanding Department had 10,000 units in its beginning work-in-process inventory that were 60% complete with respect to conversion. 80,000 units were started during the period. The department finished and transferred out 70,000 units. And there were 20,000 units in the ending work-in-process that were 10% complete with respect to conversion.

   Assume that the first-in first-out method is used. What were the equivalent units (EU) of production for conversion?

   	A.	78,000
   	B.	72,000
   	C.	68,000
   	D.	66,000

2 points   

QUESTION 55

1. True Company uses the First-In First-Out method of process costing. The following information is given for the company's Milling Department:   

   	units	% complete for Materials	% complete for Conversion		Costs incurred
   Beginning Work in process	200	30%	40%			Materials	Conversion
   Units started	500				Beginning Work in process	$1,500	$1,600
   Units completed	600
   Ending Work in process	100	20	50		During Current Period	$13,440	$17,100

     The following additional information is given:

   Cost per equivalent unit for Material: $24

   Cost per equivalent unit for Conversion: $30

   Cost of ending work in process: $1,980

       The cost of 600 complete units is:

   	A.	$25,330
   	B.	$21,600
   	C.	$33,800
   	D.	$31,660
   	E.	$28,560

2 points   

QUESTION 56

1. Which of the following would not cause the break-even point to increase?

   	A.	Fixed cost increases.
   	B.	Variable costs per unit increases.
   	C.	contribution margin per unit decreases.
   	D.	Sales price increases.
   	E.	Contribution margin ratio decreases.

2 points   

QUESTION 57

1. If the sales units go up by 40%,

   	A.	Contribution margin goes up by 40%.
   	B.	Variable expenses go up by 60%.
   	C.	Net operating income goes up by 40%.
   	D.	Operating leverage goes up by 60%.
   	E.	Total expenses go up by 40%.

2 points   

QUESTION 58

1. At a break-even point of 1,000 units sold, White Corporation's Sales are $16,000; variable expenses are $12,000; contribution margin is $4,000; and fixed expenses are $4,000. Unit sales price is $16. Unit variable expense is $12, and unit contribution margin is $4.  What will the Corporation's net operating income be at a volume of 1,001 units?  

   	A.	$8,000
   	B.	$12
   	C.	$604
   	D.	$16
   	E.	$4

2 points   

QUESTION 59

1. XYZ Company sells a single product for $100 each. The variable expense per unit is $70.  It is now selling 10,000 units. Currently, its operating leverage is 3 and its contribution margin ratio is 0.3 (30%).

   The company’s fixed costs are a step cost, and they are:   

   Sales and production units up to 12,000 12,001 to 20,000

   Fixed Expenses $100,000 $140,000

   If the company sales increase by 50% or by 5,000 units (i.e., sell $500,000 more), the company’s income will:

   	A.	increase by $110,000.
   	B.	increase by $150,000.
   	C.	decrease by $40,000.
   	D.	increase by 50%.
   	E.	increase by 150%.

2 points   

QUESTION 60

1. The following data are given for a cost of Green Company.

   Production units Cost in total

   100 $500

   200 $700

   What kind of cost is the above cost?

   	A.	Fixed
   	B.	Variable
   	C.	Mixed
   	D.	Direct
   	E.	Discretionary

2 points   

QUESTION 61

1. The cost of a precious metal is: $30 per gram for first 100 grams, after which $40 per gram.

   Which of the following graphs best depicts the cost of the metal. The horizontal axis represents activity level and the vertical axis represents cost in total.

   	A.	Graph (A)
   	B.	Graph (B)
   	C.	Graph (C)
   	D.	Graph (D)
   	E.	Graph (E)

2 points   

QUESTION 62

1. Frank Company operates a cafeteria for its employees. The number of meals served each week over the last six weeks and the total costs of operating the cafeteria are given below:

   Week	Meals served (X)	Cafeteria costs (Y)
   1	1,500	$4,800
   2	1,600	$5,080
   3	1,750	$5,280
   4	1,200	$4,000
   5	1,650	$5,100
   6	1,900	$5,400
   7	1,850	$5,500

   Based on the high-low method of analysis, the variable cost per meal served (“b” in Y = a+ bX) and fixed cost in total (“a” in Y = a + b X) would be estimated at:

   	A.	$2.00 and $1,000, respectively
   	B.	$2.00 and $1,600, respectively
   	C.	$2.50 and $1,000, respectively
   	D.	$2.14 and $1,308, respectively
   	E.	$2.14 and $1,729, respectively

Answer 1

52. B.

Reason: Weighted Average Method considers costs incurred in the previous periods as well as costs in the current period.

53. A. I, II, III and IV

The only difference between FIFO and Weighted Average Method is the consideration of the beginning inventory. SInce there is no beginning inventory in the question, all costs will be the same under both the methods.

54. D. $66,000

EU = (10,000*40%) + [(80,000-20,000)*100%] + (20,000*10%)

= 4,000 + 60,000 + 2,000

= $66,000

55. D. $31,660

Cost = [1,500 + 1,600 + (200*70%*24) + (200*60%*30)] + [(400*24) + (400*30)]

= 3,100 + 3,360 + 3,600 + 9,600 + 12,000

= $

56. D. Sales price increase

When Sales price increases, variable costs remains at the same percentage, contribution margin per unit increases, thereby decreasing the Break Even Point.

57. A. Contribution Margin goes up by 40%

When Sales goes up by a certain percentage, variable expenses as well as contribution margin per unit goes up by the same percentage.

58. E. $4

Net Operating Income = (1001*4) - 4,000 = 4004 - 4,000 = $4

59. A. $110,000

Existing Income = (10,000 * 30) - 100,000 = 300,000 - 100,000 = $200,000

Increased Income = [15,000*(100-70) - 140,000] = 450,000 - 140,000 = $310,000

Increase in Income = 310,000 - 200,000 = $110,000

60. C. Mixed Cost

Mixed Costs are costs that contacin both a variable element of cost as well as an element of fixed cost.

61. Graph not available in the question.

Step Fixed Cost are costs which remain constant upto a certain level of activity and then increase and again remain constant for the next level of activity.

62. B. $2.00 and $1,600

b = (High Cost - Low Cost) / (High Activity - Low Activiy)

b = (5,400 - 4,000) / (1,900 - 1,200)

b = 1,400 / 700

b = $2

y = a + bX

5,400 = a + 2(1,900)

5,400 = a + 3,800

5,400 - 3,800 = a

a = $1,600