THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
1. Select
the
incorrect
statement
regarding
costs
and
expenses.
A. Some
costs
are
initially
recorded
as
expenses
while
others
are
initially
recorded
as
assets.
B. Expenses
are
incurred
when
assets
are
used
to
generate
revenue.
C. Manufacturing-
related
costs
are
initially
recorded
as
expenses.
D. Non-
manufacturing
costs
should
be
expenses
in
the
period
in
which
they
are
incurred.
2. During
its
first
year
of
operations,
the
Bloomington
Cornbelters
Corporation
(BCC)
paid
$4,000
for
direct
materials
and
$8,500
for
production
workers’
wages.
Lease
payments
and
utilities
on
the
production
facilities
amounted
to
$7,500
while
general,
selling,
and
administrative
expenses
totaled
$3,000.
The
company
produced
5,000
units
and
sold
4,000
units
at
a
price
of
$7.50
a
unit.
What
was
BCC’s
net
income
for
the
first
year
in
operation?
A. $11,000
B. $7,000
C. $14,000
D. $20,000
3. Toews’
Jersey
and
Associates
incurred
$30,000
of
fixed
cost
and
$40,000
of
variable
cost
when
1,000
units
of
product
were
made
and
sold.
If
the
company’s
volume
doubles,
the
cost
per
unit
will
A. Stay
the
same
B. Double
as
well
C. Increase
but
will
not
double
D. Decrease
4. For
2013,
Bob’s
Machine
Shack
sold
100,000
units
of
its
product
for
$20
each.
The
variable
cost
per
unit
was
$12,
and
Bob’s
margin
of
safety
was
30,000
units.
What
was
the
amount
of
Bob’s
total
fixed
costs?
A. $560,000
B. $800,000
C. $1,200,000
D. $360,000
Confidential
Page 1
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
5. Here
is
some
information
about
the
Kane
Shaw
and
Crowford
Corporation’s
(KSCC)
operations.
Kane
Shaw
and
Crowford
Corporation
Direct
raw
materials
used
$17,000
Direct
labor
wages
and
salaries
$33,000
Sales
salaries
$25,000
Depreciation
on
manufacturing
equipment
$3,000
Rent
on
manufacturing
facilities
$4,000
Administrative
supplies
and
utilities
$5,000
Sales
revenue
$105,000
Units
produced
4,000
Units
sold
4,000
KSCC’s
work
in
process
inventory
at
the
beginning
of
2013
was
$12,000,
and
work
in
process
inventory
at
the
end
of
2013
was
$10,000.
KSCC’s
cost
of
goods
manufactured
in
2013
equals
A. $77,000
B. $89,000
C. $59,000
D. $52,000
6. Here
is
some
information
from
the
internal
records
of
Laxter
Pharmaceutical
Corporation.
Item
Total
contribution
margin
at
break
even
Break
even
Value
Sales
revenue
per
unit
Value
$550,000
105,000
units
$51
What
is
the
leverage
ratio
at
the
breakeven
point
if
the
leverage
ratio
is
defined
as
total
fixed
costs
divided
by
total
variable
costs?
A. 0.1145
B. 0.1375
C. 0.2157
D. 0.2750
E. None
of
these
7. Select
the
incorrect
statement
from
the
following:
A. The
cost
object
determines
whether
a
cost
is
classified
as
direct
or
indirect
B. The
same
cost
cannot
be
classified
as
both
direct
and
indirect
C. Relevant
costs
can
include
direct
and
indirect
costs
D. Direct
costs
can
display
a
fixed
or
variable
behavior
pattern
Confidential
Page 2
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
8. At
the
beginning
of
2013,
Barksdale
Corporation
estimated
that
its
total
annual
fixed
overhead
costs
amount
to
$50,000.
Further,
Barksdale
estimated
that
its
volume
of
production
would
be
2,000
units
of
product.
Based
on
these
estimates,
Barksdale
computed
a
predetermined
overhead
rate
that
was
used
to
allocate
overhead
costs
to
the
products
made
in
2013.
As
predicted,
actual
fixed
overhead
costs
did
amount
to
$50,000.
However,
actual
volume
of
production
was
only
1,800
units
of
product.
Based
on
this
information
alone,
A. Product
costs
used
for
decision-
making
in
2013
were
accurate
B. Product
costs
used
for
decision-
making
in
2013
overstated
the
costs
C. Product
costs
used
for
decision-
making
in
2013
understated
the
costs
D. The
answer
cannot
be
determined
from
the
information
provided
9. Which
of
the
following
statements
is
true?
A. Any
cost
connected
to
a
cost
object
is
a
direct
cost,
regardless
of
what
the
cost
is
B. Costs
that
do
not
have
a
strong
cause-
and-
effect
relationship
with
a
cost
driver
are
called
direct
costs
C. A
cost
driver
is
used
to
allocate
a
direct
cost
when
there
is
a
cause-
and-
effect
relationship
between
the
cost
and
the
cost
object
D. Fixed
costs
that
do
not
have
a
definitive
cost
driver
are
allocated
using
an
allocation
base
that
distributes
a
rational
share
of
the
cost
to
each
product
E. None
of
these
10. Dr.
Meredith
Gray,
chief
of
outpatient
clinics
at
Lexington
Hospital
System
(LHS),
has
received
an
offer
from
an
HMO
which
wishes
to
use
available
capacity
at
LHS’s
Otter
Peak
Clinic.
Here
is
some
information
about
the
clinic’s
current
costs
and
billings
and
the
offer.
At present, the average cost per visit at the clinic is $65 at a
projected volume of 10,000 visits. The variable cost per visit is
$30. The clinic bills and receives an average of $60/visit.
The HMO guarantees 5,000 visits and is willing to pay $50 per
visit. Accepting the offer will increase the clinic’s variable costs
by $2/HMO visit (no change in variable cost for current patients);
the fixed costs will increase by $120,000.
Dr.
Gray
asks
for
an
answer
to
two
questions:
If
it
accepts
the
offer,
will
LHS
have
a
net
incremental
B-
Benefit
or
L-
Loss?
Circle
one:
B/L
[you’ll
be
able
to
enter
B
or
L
in
Balckboard]
What
is
the
$
amount
of
the
incremental
benefit
or
loss?
Answer:
_______________
[enter
as
a
positive
number,
no
dollar
sign,
no
commas]
Confidential
Page 3
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
Use
the
following
project
quarterly
amounts
at
Universal
Uniforms
Corporation
(UUC)
for
the
next
three
questions.
UUC
stocks
inventory
of
uniforms
which
it
buys
from
suppliers.
UUC
customers
buy
uniforms
for
their
employees.
Uniform
Uniforms
Corporation
(UUC)
Budget
Information
Q1
Q2
Q3
Q4
Estimated
Revenue
($)
2,317,500
2,832,500
3,090,000
2,060,000
Cost
of
Goods
sold
($)
1,509,545
1,845,000
2,008,500
1,339,000
Ending
inventory
($)
1,200,000
1,110,000
1,340,000
1,150,000
11. The
receivables
collection
policy
at
UUC
is
to
collect
60%
of
current
sales
in
the
current
period
and
the
remaining
40%
in
the
next
period.
Beginning
receivables
in
Q1
is
$450,000.
Which
of
the
following
statements
is
true?
A. Q3
ending
receivables
were
$1,236,000
B. Q3
ending
receivables
were
$1,133,000
C. Q3
ending
receivables
were
$3,090,000
D. Q3
ending
receivables
were
$2,987,000
12. UUC
estimates
its
quarterly
selling,
general,
and
admin
(SGA)
costs
to
have
two
components
–
a
fixed
component
of
$30,000
and
a
variable
component
with
a
rate
of
15%
of
revenue.
The
company
pays
90%
of
its
SGA
costs
in
the
quarter
incurred
and
the
remaining
10%
in
the
next
quarter.
What
should
be
the
SGA
expense
budget
in
Q2?
A. $261,750
B. $409,388
C. $454,875
D. $686,625
13. UUC’s
policy
is
to
pay
80%
of
its
total
accounts
payable
to
suppliers
(beginning
accounts
payables
+
cost
of
inventory
purchased)
each
quarter.
The
Q2
beginning
accounts
payable
to
suppliers
was
$280,000.
Which
of
the
following
statements
regarding
Q2’s
pro
forma
financial
information
is
true?
A. The
estimated
cost
of
purchases
=
$1,755,000;
ending
accounts
payable
=
$407,000
B. The
estimated
cost
of
purchases
=
$645,000;
ending
accounts
payable
=
$185,000
C. The
estimated
cost
of
purchases
=
$1,800,000;
ending
accounts
payable
=
$407,000
D. The
estimated
cost
of
purchases
=
$1,755,000;
ending
accounts
payable
=
$185,000
Confidential
Page 4
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
14. The
Scooby
Doo
Corporation
has
budgeted
the
following
information
for
June:
Cash
Budgeting
Parameters
Cash
receipts
$542,000
Beginning
cash
balance
$10,000
Cash
payments
$560,000
Desired
ending
cash
balance
$50,000
If
there
is
a
cash
shortage,
the
company
borrows
money
from
the
bank.
All
cash
is
borrowed
at
the
beginning
of
the
month
in
$1,000
increments
and
interest
is
paid
monthly
at
1%
on
the
first
day
of
the
following
month.
The
company
had
no
debt
before
June
1st.
The
amount
of
interest
paid
on
July
1
would
be
A. $800
B. $580
C. $500
D. $442
15. My
Back
Aches
Corporation
expects
to
begin
operating
on
January
1.
On
that
day,
it
plans
to
purchase
$25,000
of
depreciable
equipment,
with
salvage
value
of
$1,000
and
estimated
life
of
4
years.
The
company’s
master
budget
contained
the
following
operating
expense
budget:
Expenses
Budget
January
Salary
Expense
$18,000
Sales
commissions,
5%
of
sales
$15,000
Utilities
$1,400
Depreciation
Expense
$500
Rent
$3,600
Miscellaneous
$900
Total
operating
expenses
$39,400
February
$18,000
$16,000
$1,400
$500
$3,600
$900
$40,400
March
$18,000
$12,000
$1,400
$500
$3,600
$900
$36,400
All
expense
items
requiring
cash
payment
are
paid
in
the
month
in
which
they
are
recognized.
The
amount
of
net
depreciable
assets
appearing
on
the
company’s
March
31
pro
forma
balance
sheet
is
A. $6,000
B. $19,000
C. $23,500
D. $22,500
Confidential
Page 5
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
16. The
Please
Don’t
Break’Em
Company
manufactures
and
sells
two
lines
of
china.
During
the
most
recent
accounting
period,
the
Faux
line
and
the
Traditional
Line
sold
15,000
and
2,000
units,
respectively.
The
company’s
most
recent
financial
statements
are
shown
below:
Sales
Less:
costs
of
goods
sold
(all
direct
costs
of
each
line)
Gross
Profit
Less:
Operating
expenses
SG&A
(all
direct
costs
of
each
line)
Corporate
level
facility
expenses
(fixed
allocated
costs)
Net
Income
(loss)
Faux
$800,000
$620,000
$180,000
$30,000
$26,000
Traditional
$200,000
$140,000
$60,000
$35,000
$26,000
$124,000
($1,000)
Based
on
this
information,
the
company
should
A. Eliminate
the
Traditional
line
because
it
is
operating
at
a
loss
B. Keep
the
Traditional
line
because
it
contributes
$25,000
to
total
profitability
C. Keep
the
Traditional
line
because
it
contributes
$55,000
to
total
profitability
D. Keep
the
Traditional
line
because
it
contributes
$50,000
to
total
profitability
17. Kifer
and
Kifer
has
been
using
the
same
machines
to
make
its
name
brand
clothing
for
the
last
five
years.
A
cost
efficiency
consultant
has
suggested
that
production
costs
may
be
reduced
by
purchasing
more
technologically
advanced
machinery.
The
old
machines
cost
the
company
$200,000.
The
old
machines
presently
have
a
book
value
of
$120,000
and
a
market
value
of
$12,000.
The
are
expected
to
have
a
five-
year
remaining
life
and
zero
salvage
value.
The
new
machines
would
cost
the
company
$100,000
and
have
operating
expenses
of
$18,000
a
year.
The
new
machines
are
expected
to
have
a
five-
year
useful
life
and
no
salvage
value.
The
operating
expenses
associated
with
the
old
machines
are
$30,000
a
year.
The
new
machines
are
expected
to
increase
quality,
justifying
a
price
increase,
and
thereby
increasing
sales
revenue
by
$10,000
a
year.
Select
the
true
statement.
A. The
company
will
be
$28,000
better
off
over
the
5-
year
period
if
it
keeps
the
old
equipment
B. The
company
will
be
$40,000
better
off
over
the
5-
year
period
if
it
keeps
the
old
equipment
C. The
company
will
be
$22,000
better
off
over
the
5-
year
period
if
it
replaces
the
old
equipment
D. The
company
will
be
$12,000
better
off
over
the
5-
year
period
if
it
replaces
the
old
equipment
Confidential
Page 6
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
18. Contribution
margin
would
be
one
of
the
most
important
measurements
used
in
evaluating
the
performance
of
a(an)
A. Cost
center
B. Profit
center
C. Investment
center
D. Organizational
center
19. Here
is
Chicago
Cricket
Corporation’s
(CCC)
static
budget
prepared
for
a
volume
of
sales
of
20,000
units.
Static
Budget
20X1
Sales
Revenue
$200,000
Less
variable
costs
Manufacturing
costs
$70,000
SG&A
costs
$40,000
Less:
fixed
costs
Manufacturing
costs
$22,000
SG&A
costs
$17,000
Operating
Income
$51,000
What
is
the
volume
variance
of
operating
income
if
CCC
produces
and
sells
18,000
units
in
20X1?
Answer:
_______________
[Enter
a
positive
number
(whether
the
variance
is
favorable
or
unfavorable),
no
$
signs,
no
commas]
Is
the
volume
variance
F=Favorable
or
U=Unfavorable.
Circle
one:
F/U
[you’ll
be
able
to
enter
F
or
U
in
Blackboard]
20. The
I
Am
Running
Out
of
Creative
Names
Company’s
static
budget
is
based
on
a
planned
activity
level
of
25,000
units.
Later,
the
company’s
management
accountant
prepared
a
budget
based
on
30,000
units.
The
company
actually
produced
and
sold
29,000
units.
In
evaluating
its
performance,
management
should
compare
the
company’s
actual
revenues
and
costs
which
of
the
following
budgets?
A. A
budget
based
on
29,000
units
B. A
budget
based
on
30,000
units
C. A
budget
based
on
25,000
units
D. Either
A
or
C
Confidential
Page 7
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
21. Select
the
correct
statement
concerning
the
human
factor
of
performance
evaluation.
A. Variances
should
not
be
used
to
single
out
managers
for
punishment
B. Variances
must
be
analyzed
carefully
to
ensure
that
they
are
fully
understood
C. Just
because
a
cost
variance
is
labeled
as
favorable
doesn’t
necessarily
mean
that
the
manager
should
be
commended
for
a
job
well
done.
D. All
of
these
Use
the
values
of
the
following
parameters
used
at
Harman
Hospital’s
Pediatric
Section
for
the
next
two
questions.
Harman
Hospital:
Schedule
of
Pediatric
Section
Nursing
Costs
–
June
20X1
Item
Budgeted
Actual
Patient
days
600
624
RN
hours
per
patient
day
6
8
Hourly
pay
rate
RNs
$40
$45
22. What
is
the
flexible
budget
variance
for
nursing
labor
at
Harman
Hospital’s
pediatric
section?
A. $74,880U
B. $5,750U
C. $80,640F
D. $74,880F
E. $5,760F
23. What
is
the
per
unit
usage
variance
of
nursing
labor
at
Harman’s
pediatric
section?
A. $30U
B. $40U
C. $80U
D. $30F
E. $40F
24. Desired
Products
provided
the
following
selected
information
about
its
consumer
products
division
for
2012:
Desired
ROI
10%
Net
Income
$150,000
Residual
Income
$50,000
Based
on
this
information,
the
division’s
investment
amount
(amount
of
operating
assets)
was
A. $700,000
B. $1,000,000
C. $4,000,000
D. $20,000,000
Confidential
Page 8
9/1/13
THE
GEORGE
WASHINGTON
UNIVERSITY
–
Fall
2013
Final
Exam
25. Watch
More
Movie
Chains
has
invested
in
Italian
snack
bars
for
their
stores,
where
individual
pizzas
are
prepared
and
sold.
The
investment
cost
the
company
$45,000.
The
company
expects
a
sales
volume
for
the
new
product
to
be
12,000
pizzas
a
year.
Variable
materials,
preparation,
and
marketing
costs
are
expected
to
be
$1.50
a
unit
and
fixed
costs
are
estimated
at
$15,000
a
year.
Based
on
a
desired
12%
ROI,
what
should
Watch
More
Movies
charge
as
the
selling
price
per
pizza?
A. $4.50
B. $2.75
C. $3.20
D. $5.20
Confidential
Page 9
9/1/13