1. No category

CMA Accelerated Program
Test 3
SAMPLE
Duration: 3 hours
This examination has a total of 16 pages (including a 2 page supplement) and
consists of 6 questions. Ensure that you have a complete examination paper before
starting to answer the questions.
Name:
Member # :
CMA Accelerated Program
Sample Test 3
Question 1 - Multiple Choice
(24 marks)
(43 minutes)
Please enter the answers directly on the Scantron Form in pencil. The following
information needs to be entered on the form: name and member number (in the student
number field). Note that each question is worth 1.5 marks.
1.
The difference between variable costs and fixed costs is:
a) variable costs per unit fluctuate and fixed costs per unit remain constant.
b) variable costs per unit are fixed over the relevant range and fixed costs per
unit are variable.
c) total variable costs are variable over the relevant range and fixed in the long
term, while fixed costs never change.
d) variable costs per unit change in varying increments, while fixed costs per
unit change in equal increments.
e) total variable costs can be varied by management, while fixed costs are
uncontrollable.
2.
Which one of the following costs would be classified as a period cost?
a) The wages of the workers on the shipping docks who load completed products
onto outgoing trucks
b) The wages of a worker paid for idle time resulting from a machine breakdown
in the molding operation.
c) The payments for employee (fringe) benefits paid on behalf of the workers in
the manufacturing plant.
d) The wages paid to workers for rework on defective products.
3.
ABC Company prepared the following departmental overhead cost budget for 20x3
based on 10,000 machine hours:
Variable overhead cost
$20,000
Fixed overhead cost
40,000
Total
$60,000
What would the estimated overhead rate have been if the budget had been based on
12,000 machine hours?
a) $5.00
b) $5.33
c) $5.67
d) $6.00
e) None of the above
Page 2
CMA Accelerated Program
Sample Test 3
4.
The cost accountant of the Kapp Company made the following entry for the month
of June 20x7:
Work in Process
Manufacturing Overhead
Raw Materials
50,000
2,000
52,000
Which of the following would be the most likely explanation of this entry?
a) Direct materials costing $50,000 were charged to Work in Process and $2,000
of general manufacturing overhead was allocated to specific jobs in process
during the month.
b) Direct materials costing $50,000 were charged to Work in Process and $2,000
of indirect materials was charged to the account Manufacturing Overhead but
was not allocated to specific jobs in process during the month.
c) Direct materials costing $50,000 were charged to Work in Process and $2,000
of indirect materials was charged to the account Manufacturing Overhead and
was thereby allocated to specific jobs in process during the month.
d) Direct materials costing $50,000 were charged to Work in Process and $2,000
of costs relating to goods finished during the month were charged to
Manufacturing Overhead.
5.
Darrow Company uses a predetermined overhead rate based on direct labour hours
to apply manufacturing overhead to jobs. Last year, the company worked 10,000
direct labour hours and incurred $80,000 of actual manufacturing overhead costs. If
overhead was underapplied by $2,000, the predetermined overhead rate for the
company must have been:
a) $7.80
b) $8.00
c) $8.20
d) $8.40
Page 3
CMA Accelerated Program
Sample Test 3
Use the following information to answer questions 6 – 7:
Beta Company is making plans for the introduction of a new product that it will sell for
$6 a unit. The following estimates have been made for manufacturing costs assuming
100,000 units will be produced in the first year:
Direct materials
Direct labor (20,000 hours x $6.00)
$150,000
$120,000
Manufacturing overhead costs have not yet been estimated for the new product, but
monthly data on the total production and overhead costs for the past 24 months have been
analyzed using simple linear regression. The following results were derived from the
simple regression and will provide the basis for overhead cost estimates for the new
product.
Simple Regression Analysis Results
Dependent variable-Factory overhead costs
Independent variable-Direct labor-hours
Computed values:
Intercept
Coefficient of independent variable
R2
$90,000
$2.10
.908
6.
What percentage of variation in the overhead costs is explained by the independent
variable?
a) 86.5%
b) 90.8%
c) 95.3%
d) 97.6%
7.
What is the estimated total product cost per unit for the first year, assuming 100,000
units of the new product will be produced and sold?
a) $5.70
b) $4.80
c) $4.02
d) $3.12
Page 4
CMA Accelerated Program
Sample Test 3
8.
A company increased the selling price for its product from $1.00 to $1.10 a unit
when total fixed expenses increased from $400,000 to $480,000 and variable
expense per unit remained unchanged. How would these changes affect the breakeven point?
a) The break-even point in units would increase
b) The break-even point in units would decrease
c) The break-even point in units would remain unchanged
d) The effect cannot be determined from the information given
9.
A company has provided the following data:
Sales
Sales price
Variable cost
Fixed cost
3,000 units
$70 per unit
$50 per unit
$25,000
If the dollar contribution margin per unit is increased by 10%, total fixed cost is
decreased by 20%, and all other factors remain the same, net income will:
a) increase by $61,000
b) increase by $20,000
c) increase by $3,500
d) increase by $11,000
10.
ABC Company has a cash balance of $9,000 on April 1. The company must
maintain a minimum cash balance of $6,000. During April expected cash receipts
are $45,000. Expected cash disbursements during the month total $52,000. What
amount will the company need to borrow during April?
a) $2,000
b) $4,000
c) $6,000
d) $8,000
Page 5
CMA Accelerated Program
Sample Test 3
11.
Avril Company makes collections on sales according to the following schedule:
30% in the month of sale
60% in the month following sale
8% in the second month following sale
The following sales are expected:
January
February
March
$100,000
120,000
110,000
What should be the budgeted cash collections in March?
a) $105,000
b) $110,000
c) $110,800
d) $113,000
12.
You have just won the lottery and will receive $ 1,500 per year forever. What is the
present value of this infinite stream of cash flows given an 8% discount rate?
a) $13,419.54
b) $ 3,721.60
c) $30,000.00
d) $21,428.57
e) $18,750.00
13.
Your brother-in-law borrowed $1,000 from you 10 years ago and then disappeared.
Yesterday he returned and expressed a desire to pay back the loan, including the
interest accrued. Assuming that you had agreed to charge him 7%, and assuming
that he wishes to make five equal annual payments beginning in one year, how
much would your brother-in-law have to pay you annually in order to
extinguish the debt? (Assume that the loan continues to accrue interest at 7% per
year.)
a) $480
b) $389
c) $301
d) $279
e) $101
Page 6
CMA Accelerated Program
Sample Test 3
14.
Killnum Corp. announces that the dividend starting next period will be $5.00 per
share rather than the originally expected $2.50 per share. From then on, it is
expected that dividends will resume the historical constant growth of 5% per year.
What would you expect to happen to the price of their stock? Ignore any tax effects.
a) The price will likely rise by less than 100%
b) The price will likely double
c) The price will likely fall
d) The price will remain unchanged
e) The price will likely rise and then fall since the dividend growth rate goes
from 100% back down to 5%
15.
By spreading our investment funds across a large number of risky assets, we can
virtually eliminate the following type of risk.
16.
I.
II.
III.
IV.
unsystematic
market
systematic
nondiversifiable
a)
b)
c)
d)
e)
I only
II only
III only
IV only
II, III, and IV only
Which of the following is a true statement?
I.
II.
III.
a)
b)
c)
d)
e)
Page 7
The value of a perpetual bond will not change from one year to
the next, unless market interest rates change.
The value of a finite-lived bond currently selling at par will not
change from one year to the next, unless market interest rates
change.
The value of a finite-lived bond currently selling at a discount
from par will change from one year to the next, even if market
interest rates remain unchanged.
I only
I and II only
I and III only
II and III only
I, II, and III
CMA Accelerated Program
Sample Test 3
Question 2 – Short Answers
(29 marks)
(53 minutes)
a.
Jersey Company has a process costing system in which it uses the weighted average
method. The equivalent units of production for conversion costs for the month were
47,500 units. The beginning inventory consisted of 15,000 units, 60% complete
with respect to conversion costs. The ending inventory consisted of 10,000 units,
75% complete with respect to conversion costs. What is he number of units started
and completed during the month? (3 marks)
b.
Hagler's Toupees has the following machine hours and production costs for the last
six months of last year:
Month
July
August
September
October
November
December
Machine Hours
15,000
13,500
11,500
15,500
14,800
12,100
Production Cost
$12,330
$10,300
$ 9,580
$12,080
$11,692
$ 9,922
If Hagler expects to incur 14,000 machine hours in January, what will be the total
production cost estimate using the high-low method? (3 marks)
Page 8
CMA Accelerated Program
Sample Test 3
c.
A company has identified the following overhead costs and cost drivers for the
coming year.
Overhead
Item
Cost
Driver
Budgeted
Cost
Machine setup
Inspection
Material handling
Engineering
No. of setups
No. of inspections
No. of material moves
Engineering hours
$ 20,000
130,000
80,000
50,000
$280,000
Budgeted
Activity
Level
200
6,500
8,000
1,000
The following information was collected on three jobs that were completed during
the year.
Direct materials
Direct labor
Units completed
No. of setups
No. of inspections
No. of material moves
Engineering hours
Job 101
Job 102
Job 103
$5,000
$2,000
100
1
20
30
10
$12,000
$ 2,000
50
2
10
10
50
$8,000
$4,000
200
4
30
50
10
Budgeted direct labor cost was $100,000 and budgeted direct material cost was
$280,000.
i.
If the company uses activity-based costing, how much overhead cost should
be allocated to Job 101? (3 marks)
ii.
If the company uses activity-based costing, compute the cost of each unit of
Job 102. (4 marks)
iii.
If the company uses one overhead cost pool and allocates overhead on the
basis of direct labour dollars, compute the cost of each unit of Job 103.
(3 marks)
Page 9
CMA Accelerated Program
Sample Test 3
d.
Spivey Company has two service departments and two producing departments.
Budgeted costs and budgeted activity in the various departments for 20x1 are
shown below:
Overhead costs
Square metres of
space occupied
Number of employees
Machine-hours
Custodial
Services
Cafeteria
Cutting
Department
Assembly
Department
$126,000
$70,000
$300,000
$500,000
1,000
2,000
8,000
10,000
20
30
150
200
40,000
60,000
Service Department costs are allocated to producing departments with the costs of
Custodial Services allocated first on a basis of square metres of space occupied.
The costs of the Cafeteria are then allocated on a basis of number of employees.
Predetermined overhead rates in the Cutting and Assembly Departments are based
on machine-hours.
e.
i.
Assume that the company uses the direct method of allocation. What would
the predetermined overhead rate for 20xl in the Assembly Department be?
(3 marks)
ii.
Assume that the company uses the step method of allocation. Custodial
services are allocated first. What would the amount of cost allocated from the
cafeteria to the cutting department be? (3 marks)
Superior Industries' sales budget shows quarterly sales for the next year as follows:
Quarter
First
Second
Third
Fourth
Sales (units)
10,000
8,000
12,000
14,000
Company policy is to have a finished goods inventory at the end of each quarter
equal to 20% of the next quarter's sales. What should be the budgeted production
for the second quarter? (3 marks)
f.
The dividend on Soviet Motors common stock will be $6 in 1 year, $6.50 in 2
years, and $6.68 in 3 years. Afterwards the dividend will grow at the modest rate of
1%. Assuming you require a 10% return on your investment, how much would you
be willing to pay for a share of this stock? (4 marks)
Page 10
CMA Accelerated Program
Sample Test 3
Question 3
(8 marks)
(18 minutes)
Air Extracts, Inc., manufactures nitrogen, oxygen, and hydrogen from a joint process.
Each gas can be liquified and sold for more. Data on the process are as follows:
Units produced
Joint costs
Sales value at split-off
Additional costs to liquify
Sales value if liquified
a
Nitrogen
8,000
$30,000a
(c)
7,000
70,000
Oxygen
4,000
(a)
(d)
$ 5,000
30,000
Hydrogen
2,000
(b)
$15,000
3,000
20,000
Total
14,000
$ 60,000
100,000
15,000
120,000
This amount is the portion of the total joint cost of $60,000 that had been
allocated to nitrogen.
Required
a)
b)
Which method was used to allocate the joint costs. Restrict your choices to the
following three methods: (i) physical units, (ii) sales value at split off and (iii) net
realizable value. Explain your choice.
Determine the values for the lettered spaces. Show your calculations.
Question 4
(9 marks)
(16 minutes)
The Colbert Company’s capital structure at December 31, 20x4 is as follows:
$30,000,000 Bonds Payable, 6%, maturing on December 31, 20x18. Interest is
paid semi-annually.
100,000 Preferred shares, par value $100 each, 5%.
1,000,000 Common Shares.
The bonds are currently yielding 6.8%. The market price of the preferred and common
shares is $62.50 and $32 respectively. The firm’s beta is 1.5, the risk free rate is 2% and
the expected market rate of return is 14%. The tax rate is 40%.
Required –
Calculate the Colbert Company’s weighted average cost of capital
Page 11
CMA Accelerated Program
Sample Test 3
Question 5
(10 marks)
(18 minutes)
Lee Company manufactures chemical additives for industrial applications. As the new
cost accountant for Lee, you have been assigned the task of completing the production
cost report for the most recent period. Lee uses the FIFO method of process costing.
The following information pertains to the most recent period:
Beginning WIP inventory:
75% complete as to materials
70% complete as to conversion costs
16,000 units
Units started into production this period:
27,000 units
Ending WIP inventory:
60% complete as to materials
50% complete as to conversion costs
10,000 units
Costs in beginning inventory: $32,000 materials; $64,000 conversion costs
Current period costs: $252,000 materials; $440,000 conversion costs
There was no spoilage during the period.
Required
a.
b.
Page 12
What is the total cost of units completed during the period. (Round the cost per
equivalent unit to 4 decimal places; round the total costs to the nearest dollar.)
Calculate the cost of ending work-in-process.
CMA Accelerated Program
Sample Test 3
Question 6
(10 marks)
(18 minutes)
Last night, 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 complete his report for head office
by the end of today. She wants you to give her the numbers she needs for her report. She
can provide you with some fragments of information she has been able to salvage:
Beg
Direct Materials
25,000
Beg
Work in Process
15,000
Finished Goods
400,000
End
55,000
End
Cost of Goods
Sold
Beg
Manufacturing
Overhead
0
Transferred
Out
50,000
Wages Payable
10,000
Beg
20,000
End
Other information:
•
•
•
•
•
•
total direct materials requisitions for the month were $180,000
a total of 10,000 direct-labour hours were worked during the month at an average
wage of $15 per hour
overhead is applied to production at $10 per direct labour hour
on May 31, there was 1 job, #XL235, left in Work in Process. It included $4,000
of direct materials and had received 20 direct labour hours to date (it started on
May 30).
actual manufacturing overhead expenses for May were 95,000
there are no indirect materials or indirect labour charges in the month of May
Required a.
b.
c.
d.
e.
f.
g.
Page 13
Material purchases during May.
Cost of work in process inventory at the end of May.
Amount paid for direct labour force in May.
Cost of goods sold for May.
Over/under applied overhead in May
Cost of goods transferred from Work in Process to Finished Goods in May.
Cost of finished goods inventory at the beginning of May.
CMA Accelerated Program
Sample Test 3
Question 7
(10 marks)
(18 minutes)
Auflager Company produces a single product. The projected income statement for the
coming year is as follows:
Sales (50,000 units @ $40)
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating income
$2,000,000
1,100,000
900,000
765,000
$ 135,000
Required a.
b.
c.
d.
e.
f.
Page 14
Compute the unit contribution margin and the units that must be sold to break
even. Suppose that 30,000 units are sold above break-even. What is the profit?
Compute the contribution margin ratio and the break-even point in dollars.
Suppose that revenues are $200,000 greater than expected. What would the total
profit be?
Compute the margin of safety.
Compute the operating leverage. Compute the new profit level if sales are 20
percent higher than expected.
How many units must be sold to earn a profit equal to 10 percent of sales?
Assume the tax rate is 40 percent. How many units must be sold to earn an aftertax profit of $180,000?
CMA Accelerated Program
Supplement of Formulae and Tables
Formulae
1.
CAPITAL STRUCTURE
a)
After-Tax Marginal Cost of Debt:
(1 ! T ) I
k b = k (1 ! T ) or
F
where
k = interest rate
T = corporate tax rate
I = annual interest payment on debt
F = face value of debt
b)
Cost of Preferred Shares:
kp =
where
c)
Dp
NPp
Dp = stated annual dividend payment on shares
NPp = net proceeds on preferred share issue
Cost of Common Equity:
i)
Cost of Common Shares (Capitalization of Dividends with Constant Growth
Rate):
ke =
D1
+g
NPe
where
ii)
D1 = dividend expected for period 1
NPe = net proceeds on common share issue
g
= annual long-term dividend growth rate
Cost of Retained Earnings:
k re = re =
D1
+g
Pe
where
= market price of a share
= expected return on common equity
Pe
re
iii) Capital Asset Pricing Model:
(
R j = R f + " j Rm ! R f
where
)
Rj = expected rate of return on security j
Rf = risk-free rate
Rm = expected return for the market portfolio
! j = beta coefficient for security j (measure of systematic risk)
d)
Weighted Average Cost of Capital:
! B$
! P$
! E$
k = # & kb + # & k p + # & ke
"V%
"V%
"V%
where
2.
a)
B
P
E
V
PRESENT VALUE OF TAX SHIELD FOR AMORTIZABLE ASSETS
Present Value of Total Tax Shield from CCA for a New Asset
Present Value =
b)
= amount of debt outstanding
= amount of preferred shares outstanding
= amount of common equity outstanding
= B + P + E = total value of firm
CdT ! 2 + k $ CdT ! 1 + 0.5k $
#
&
#
&=
d + k " 2(1 + k ) % d + k " 1 + k %
Present Value of Total Tax Shield from CCA for an Asset that is Not Newly
Acquired
! dT $
Present Value = UCC#
&
" d +k%
c)
Present Value of Total Tax Shield Lost From Salvage
Present Value =
Sn
n
(1+ k )
Sn
! dT $
! dT $
, depending on cashflow assumptions
#
& or
n '1 #" d + k &%
" d +k%
(1+ k )
Notation for above formulae:
C
= net initial investment
UCC = undepreciated capital cost of asset
Sn
= salvage value of asset realized at end of year n
T
= corporate tax rate
k
= discount rate or time value of money
d
= maximum rate of capital cost allowance
n
= total life of investment
Sample Test 3
Test 3 SOLUTION
Question 1
1.
b
2.
a
A is a period cost since these workers are handling a product that is
completely manufactured, i.e. they have nothing to do with the manufacturing
of the product. B, C and D all relate to product costs for costs involved in the
manufacture of the product, either directly or indirectly.
3.
b
Total overhead rate = Variable overhead rate + fixed overhead rate
= (20,000 ÷ 10,000) + (40,000 ÷ 12,000)
= 2.00 + 3.33
= $5.33
4.
b
5.
a
6.
b
7.
c
Direct materials: $150,000 / 100,000
Direct labour: $120,000 / 100,000
Fixed overhead: $90,000 / 100,000
Variable overhead: $2.10 x .2 hours
8.
d
We would need to know the variable cost per unit.
9.
d
Increase in TCM: 3,000 x $20 x 10%
Decrease in fixed costs: $25,000 x 20%
10.
b
9,000 + 45,000 - 52,000 - 6,000 = 4,000
11.
d
(100,000 x 8%) + (120,000 x 60%) + (110,000 x 30%) = 113,000
12.
e
$1,500 / .08 = $18,750
13.
a
Today he owes you: N = 10, I = 7, PV = 1000, Solve for FV = $1,967.15
Payments: N = 5, I = 7, PV = 1967.15, Solve for PMT = $480
Page 15
Applied overhead = $80,000 - 2,000 = $78,000
POR = $78,000 / 10,000 = $7.80
1.50
1.20
0.90
0.42
$4.02
$6,000
5,000
$11,000
CMA Accelerated Program
Sample Test 3
14.
b
15.
a
16.
e
Assume that the rate of return (Ke) is 10%. The price of the stock before =
$2.50 / (0.10 - 0.05) = $50; the price after will be $5.00 / (0.10 - 0.05) = 100.
The price doubles.
Question 2
a.
Units transferred out = 47,500 - (10,000 x 75%) = 40,000
Units started = 40,000 - 15,000 Op WIP = 25,000
b.
Variable cost = (12,080 - 9,580) ÷ 4,000 = $0.625
Fixed cost = 12,080 - (15,500 x 0.625) = 2,392.50
2,392.50 + (14,000 x 0.625) = $11,142.50
c.
i.
Machine setup: $20,000 / 200 = $100 per setup
$100 x 1
Inspection: $130,000 / 6,500 = $20 per inspection
$20 x 20
Material Handling: $80,000 / 8,000 = $10 per move
$10 x 30
Engineering: $50,000 / 1,000 = $50 per hour
$50 x 10
ii.
Direct Materials
Direct labour
Machine setups: $100 x 2
Inspection: $20 x 10
Material handling: $10 x 10
Engineering: $50 x 50
iii.
Direct Materials
Direct Labour
Overhead: 2.8 x 4,000
Page 16
$100
400
300
500
$1,300
$12,000
2,000
200
200
100
2,500
17,000
÷ 50 units
$340
$8,000
4,000
11,200
23,200
÷ 200 units
$116
CMA Accelerated Program
Sample Test 3
d.
i.
Assembly dept overhead costs
Allocation from Custodial: $126,000 x 10/18
Allocation from Cafeteria: $70,000 x 200/350
ii.
Custodial: $126,000 x 2/20
$500,000
70,000
40,000
$610,000
÷ 60,000 MH
$10.17
Cafeteria
70,000
12,600
82,600
Cafeteria:$82,600 x 150/350
$35,400
e.
Sales
Desired ending inventory: 12,000 x 20%
Less opening inventory: 8,000 x 20%
f.
P3 = D3(1+g) / (r-g) = 6.68(1.01) / (.10 - .01) = 74.96
PV of D1: N = 1, I = 10, FV = 6, Solve for PV = $5.45
PV of D2: N = 2, I = 10, FV = 6.50, Solve for PV = $5.37
PV of D3: N = 3, I = 10, FV = 6.68, Solve for PV = $5.02
PV of P3: N = 3, I = 10, FV = 74.96, Solve for PV = $56.32
Sum of PV’s = $72.16
Page 17
Cutting
8,000
2,400
-1,600
8,800
CMA Accelerated Program
Sample Test 3
Question 3
a)
b)
Which method was used to allocate the joint costs?
•
not physical units since Nitrogen does not represent 50% of the units
produced
•
not NRV since Nitrogen’s NRV = 63,000 ÷ Total NRV of 105,000 ≠ 50%
•
sales value at split off is the only remaining possibility
c->
d->
a->
b->
$100,000 x 50% = $50,000
$100,000 - 50,000 - 15,000 = $35,000
$60,000 x 35% = $21,000
$60,000 x 15% = $9,000
Question 4
Bonds
N = 28
I = 3.4
CPT PV = 27,854,560
PMT = 900,000
FV = 30,000,000
KD = 6.8(.6) = 4.08%
Preferreds
P = 100,000 x $62.50 = $6,250,000
KP = 5 / 62.50 = 8%
Common
E = 1,000,000 x $32 = $32,000,000
KE = 2 + 1.5(14-2) = 20%
WACC = (27,855 / 66,105)*4.08 + (6,250 / 66,105)*8% + (32,000 / 66,105)*20%
= 12.2%
Page 18
CMA Accelerated Program
Sample Test 3
Question 5
a.
Units transferred out: 16,000 + 27,000 - 10,000 = 33,000
Calculation of Equivalent Units:
Materials
EU to complete opening WIP:
16,000 x 25%
16,000 x 30%
Units started and completed
33,000 - 16,000
EU in ending WIP:
10,000 x 60%
10,000 x 50%
Conversion
Costs
4,000
4,800
17,000
17,000
6,000
27,000
5,000
26,800
Unit costs:
Materials: $252,000 / 27,000 = $9.3333
Conversion costs = $440,000 / 26,800 = $16.4179
Total cost = $9.3333 + $16.4179 = $25.7512
Cost of units transferred out:
Costs in opening WIP
Costs to complete opening WIP
Materials: 4,000 x $9.3333
Conversion costs: 4,800 x $16.4179
Cost of units started and completed
17,000 x $25.7512
b.
$37,333
78,806
116,139
212,139
437,770
$649,909
$96,000 Op WIP + 692,000 Costs Added - 649,909 Cost of units transferred out = $138,091
OR:
Page 19
$96,000
Materials: 6,000 x 9.3333
Conversion costs: 5,000 x 16.4179
$56,000
82,090
$138,090
CMA Accelerated Program
Sample Test 3
Question 6
a.
180,000 Requisitions - 25,000 Op Inv + 55,000 End Inv = $210,000
b.
Job #XL235:
Direct materials
Direct labour: 20 hours x $15
Overhead: 20 hours x $10
$4,000
300
200
$4,500
c.
10,000 Wages Pay Beg + 150,000 Direct Labour - 20,000 Wages Pay end = $140,000
d.
$400,000 Amount transferred out of finished goods inventory
e.
Actual overhead incurred
Applied overhead: 10,000 direct labour hours x $10
Overapplied overhead
f.
Beginning WIP
Direct materials
Direct labour
Manufacturing overhead applied
Less ending WIP
g.
$400,000 Transferred out - 440,500 Transferred in + 50,000 End inv = 9,500
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$95,000
100,000
$5,000
$15,000
180,000
150,000
100,000
-4,500
$440,500
CMA Accelerated Program
Sample Test 3
Question 7
a.
CM = $900,000 ÷ 50,000 units = $18 per unit
Breakeven point = $765,000 / 18 = 42,500 units
Operating income at 30,000 units above breakeven: 30,000(18) = $540,000
b.
CM Ratio = $18/40 = 45%
Breakeven point in $ = $765,000 / .45 = $1,700,000
Total profit if revenues are $200,000 greater than expected:
$135,000 + (200,000 x .45) = $225,000
c.
Margin of safety = $2,000,000 - 1,700,000 = $300,000
d.
DOL = CM / Operating Income = $900,000 / 135,000 = 6.667
If Sales increase 20%, operating income will increase 20%(6.667) = 133.333%
New operating income = $135,000 (2.3333333) = $315,000
e.
Let x = number of units
18x - 765,000 = 40x(.10)
14x = 765,000
x = 54,643 units
f.
(180,000/.6 + 765,000) / 18 = 59,168 unit
Page 21
CMA Accelerated Program