SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 1: (1 Point)

La Patisserie is a small bakery that provides cakes and breads to small grocery shops in the town of Soquel, California. It is housed in a single
building. The ovens and mixing areas occupy 65% of the space, 5% is used for storing and mailing marketing literature and the rest is occupied by
the office staff. The bakery operates 360 days per year, 8 hours per day. It employs two cake bakers who are paid $22 per hour and two bread
bakers who are paid $12 per hour and has a small staff of helpers who account for 30% of the other employee salaries. Approximately 60% of its
materials, flour, eggs, sugar and oil, are used for cakes; the remaining 40% are used for bread. Indirect manufacturing costs are allocated to
products on the basis of direct labor hours. During the current year, it started and completed 108,000 cakes and 144,000 loaves of bread at a
selling price of $6 per unit and $1.50 per unit respectively.

Annual costs incurred by La Patisserie:

Flour, Eggs, Sugar and Oil $140,300

Office staff salaries 89,500
Rent utilities and insurance 124,700
Baker's wages 214,000
Salaries of other employees 106,000
Sales commissions (5% of revenue) 50,000
Delivery cost to customers 4,500
Other baking material & supplies 23,900
Office equipment & supplies 15,250
Total cost $768,150

What is the total manufacturing overhead cost for this period?

o $350,755
o $112,855
o $136,755
o $186,755
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 2: (1 Point)

When production levels are expected to increase within a relevant range, what effects would be anticipated with respect to each of the following?

Fixed Costs (per Unit) Variable Costs (per Unit)

(A) increase no change
(B) decrease increase
(C) decrease no change
(D) no change increase

o A above
o B above
o C above
o D above
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 3: (1 Point)

Fisher, Inc. recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records.

Cost of goods sold $50,000

Work in process inventory, January 1, 2007 12,500
Work in process inventory, December 31, 2007 10,500
Selling and Administrative Expenses 10,000
Net Income 15,000
Factory overhead 10,000
Direct materials inventory, January 1, 2007 12,000
Direct materials inventory December 31, 2007 5,000
Cost of goods manufactured 58,000
Finished goods inventory, January 1, 2007 17,000

Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The CFO of Fisher, Inc. has asked you to recalculate the
following accounts and to report to him by the end of the day.

What should be the amount of net sales?

o $68,500
o $70,000
o $72,500
o $75,000

Question 4: (1 Point)

Consider the following for the Franklin Street Manufacturing:

Change in finished goods inventory $685 decrease

Change in work-in-process inventory $350 increase
Total manufacturing costs $1,600

What are the cost of goods manufactured and cost of goods sold, respectively?
o $ 915, $1,935
o $ 915, $1,950
o $2,285, $2,635
o $1,250, $1,935
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 5: (1 Point)

The Gym Company produces weights in different sizes and sells them to gym equipment distribution companies who in turn sell them to various gyms
such as Boston Sports Club or Gold's Gym. The manufacturing plant occupies 70% of the total buildings and grounds. Approximately 80% of the utilities
are for the manufacturing plant. External vendors provide all of the materials and supplies. The sales force is paid entirely on commissions. Advertising
spending is set by contract at beginning of the year. At full capacity, the plant is capable of producing 500,000 units per year. This year, The Gym
Company manufactured and sold 400,000 units. Information on their costs is listed in the table below.

Item 1-Jan-2006 31-Dec-2006 During the Year

Raw materials inventory $60,000 $20,000
Work-in-process inventory 72,000 88,000
Finished goods inventory 40,000 50,000
Total manufacturing costs $1,310,250
Goods available for sale 1,334,250
Cost of goods sold 1,284,250
Purchases of raw materials $164,500
Marketing salaries 236,500
Non factory administrative salaries 235,000
Factory maintenance staff salaries 154,000
Direct labor ?
Building rental 250,000
Advertising 148,000
Utilities (Electricity, water, phone...) 120,000
Indirect labor 110,000
Sales commissions (5% of sales) 98,400
Factory equipment depreciation 365,000

Assume total fixed costs (product and period) were $1,250,000 and variable costs (product and period) per unit were $3.50 in 2006. Projected unit volume
in 2007 is 480,000 units. Assuming The Gym Company's cost structure remains the same as in 2006, the total cost (product and period) per unit in 2007
will be:

o $6.63
o $6.00
o $6.10
o Some other amount
o Cannot be determined
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 6: (1 Point)

(Not a repeat question.) The Gym Company produces weights in different sizes and sells them to gym equipment distribution companies who in
turn sell them to various gyms such as Boston Sports Club or Gold's Gym. The manufacturing plant occupies 70% of the total buildings and
grounds. Approximately 80% of the utilities are for the manufacturing plant. External vendors provide all of the materials and supplies. The sales
force is paid entirely on commissions. Advertising spending is set by contract at beginning of the year. At full capacity, the plant is capable of
producing 500,000 units per year. This year, The Gym Company manufactured and sold 400,000 units. Information on their costs is listed in the
table below.

Item 1-Jan-2006 31-Dec-2006 During the Year

Raw materials inventory $60,000 $20,000
Work-in-process inventory 72,000 88,000
Finished goods inventory 40,000 50,000
Total manufacturing costs $1,310,250
Goods available for sale 1,334,250
Cost of goods sold 1,284,250
Purchases of raw materials $164,500
Marketing salaries 236,500
Non factory administrative salaries 235,000
Factory maintenance staff salaries 154,000
Direct labor ?
Building rental 250,000
Advertising 148,000
Utilities (Electricity, water, phone...) 120,000
Indirect labor 110,000
Sales commissions (5% of sales) 98,400
Factory equipment depreciation 365,000

The average product cost per unit, as defined by GAAP, of products produced in manufacturing in 2006 was:

o $3.28
o $3.21
o $3.24
o Some other amount
o Cannot be determined
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 7: (1 Point)

The following information pertains to the August manufacturing activities of Griss Co.:

Beginning work-in-process (BWIP) $12,000

Ending work-in-process (EWIP) 10,000
Cost of goods manufactured (CGM) 97,000
Direct materials issued to production 20,000

Factory overhead is assigned at 150% of direct labor. What was the August manufacturing overhead?
o $30.000
o $47,400
o $45,000
o $31,600
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 8: (1 Point)

(Not a repeat question.) La Patisserie is a small bakery that provides cakes and breads to small grocery shops in the town of Soquel, California. It
is housed in a single building. The ovens and mixing areas occupy 65% of the space, 5% is used for storing and mailing marketing literature and
the rest is occupied by the office staff. The bakery operates 360 days per year, 8 hours per day. It employs two cake bakers who are paid $22 per
hour and two bread bakers who are paid $12 per hour and has a small staff of helpers who account for 30% of the other employee salaries.
Approximately 60% of its materials, flour, eggs, sugar and oil, are used for cakes; the remaining 40% are used for bread. Indirect manufacturing
costs are allocated to products on the basis of direct labor hours. During the current year, it started and completed 108,000 units of cakes and
144,000 units of bread at a selling price of $6 per unit and $1.50 per unit respectively.

Annual costs incurred by La Patisserie:

Flour, Eggs, Sugar and Oil $140,300

Office staff salaries 89,500
Rent utilities and insurance 124,700
Baker's wages 214,000
Salaries of other employees 106,000
Sales commissions (5% of revenue) 50,000
Delivery cost to customers 4,500
Other baking material & supplies 23,900
Office equipment & supplies 15,250
Total cost $768,150

Assume that the manufacturing overhead charged to cakes is $80,000. What is the direct product cost per cake using GAAP accounting rules?
o $2.69
o $1.95
o $2.42
o $1.99
 SME 2001 MANAGERIAL ACCOUNTING (MAC) – QUIZ #1

Question 9: (1 Point)

A trucking business is considering whether to give up its contracted delivery routes and rent the trucks to people who want to move themselves.
In this decision, the amount that is currently earned from using the trucks on contract delivery routes is called a(n):
o Opportunity Cost
o Conversion Cost
o Sunk Cost
o Differential (incremental) cost

Question 10: (1 Point)

(Not a repeat question.) Precision Harness Company makes wire harnesses for high end sound recording equipment used by sound and movie
studios. The following are the beginning and end of year inventory balances:

Beg. Bal. End Bal.

Raw Materials $55,000 $15,000
Work-in-Process 150,000 ?
Finished Goods 50,000 80,000

During the current year, the following transactions occurred:

• Raw material worth $40,000 was purchased
• Direct labor used was $60,000
• Manufacturing overhead of $115,000 was incurred during the period
• Sales commissions of $20,000 were paid
• Cost of goods completed (manufactured) and transferred to finished goods were $310,000

What is the amount of Work-in-Process inventory at the end of the year?

o $ 95,000
o $115,000
o $ 55,000
o $ 75,000