Cost Accounting II (ACTE 2304). Final Exam. 2nd, 2014/15

The Islamic University-Gaza

Faculty of Commerce

Department of Accounting

FINALEXAMINATION

SEMESTER 2

(Incomplete)

2014/2015

COST ACCOUNTING II (ACTE 2304)

Dr. Hisham Madi

DATE: 24/05/2015

TIME ALLWOED: 2 (HOURS)

PLEASE READ THE FOLLOWING INSTRUCTIONS

  • Use the Answer Booklet provided to you to answer the questions, and do not forget to write your name and student number in the specified space on the cover of the Answer Booklet and on the Question Paper.
  • Please indicate the question number on top of each page of your answer Booklet.
  • This examination question paper CANNOT be taken out of the examination hall.
  • All workings must be clearly shown

Name:

ID:

QUESTION(14 Marks)

Choose the Best Answer

1.A favorable variance indicates that ______.

  1. budgeted costs are less than actual costs
  2. actual revenues exceed budgeted revenues
  3. actual operating income is less than the budgeted amount
  4. budgeted contribution margin is more than the actual amount

2.In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ______.

  1. allocated costs
  2. budgeted costs
  3. fixed costs
  4. variable costs

3.Which of the following is true of absorption costing?

  1. It expenses marketing costs as cost of goods sold.
  2. It treats direct manufacturing costs as a period cost.
  3. It includes fixed manufacturing overhead as an inventoriable cost.
  4. It treats indirect manufacturing costs as a period cost

4.The gross-margin format is used for ______.

  1. variable costing income statement
  2. mixed costing income statement
  3. absorption costing income statement
  4. standard costing income statement

5.Which of the following statements best define splitoff point in joint costing?

  1. It is the point at which managers decide to discontinue one or more of the products.
  2. It is the point at which the managers decide to outsource some of its production processes.
  3. It is the juncture in a joint production process when two or more products become separately identifiable.
  4. It is the juncture at which decisions determining joint costs of various products to be produced are taken.

6.______is the differentiating factor while classifying a product as a main product or byproduct.

  1. Number of units per processing period
  2. Weight or volume of outputs per period
  3. Percentage of total sales value
  4. Joint costs incurred up to the splitoff point

7.Which of the following statements is true of the production method of accounting for byproducts?

A.It makes no journal entries until the byproduct is sold.

B.It is the preferred method because of the matching principle.

C.It records revenues of the byproduct in the income statement as revenue.

D.It adds revenues of the byproduct to the cost of goods sold in the income statement.

8.If there was no beginning work in process and no ending work in process under the weighted-average process costing method, the number of equivalent units for direct materials, if direct materials were added at the start of the process, would be ______.

  1. More than the units started or transferred in during the period
  2. Equal to the units completed during the period
  3. Less than the units completed during the period
  4. Equal to total of units started and units completed during the period

9.The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ______.

A.Physical measures such as quantity are clear bases for allocating cost than other measures

B.Physical measures are more difficult to calculate

C.Revenues are usually the best indicators of the benefits received

D.Revenues always remain consistent over short-run

10.Scrap is ______.

  1. Units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units
  2. Products of a joint production process that have low total sales values relative to the total sales value of the main product
  3. Residual material that results from manufacturing a product
  4. Units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices

11.The Peric Manufacturing Shop produces motorcycle parts. Typically, 12 pieces out of a job lot of 1,000 parts are normal spoiled goods. Costs are assigned at the inspection point, $40.00 per unit. Spoiled pieces may be disposed at $8.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 3,000 good parts.

Which of the following journal entries would be correct if the spoilage occurred due to specifications required for Job 101?

  1. Work-in-Process Control96

Materials Control96

  1. Materials Control96

Work-in-Process Control96

  1. Materials Control288

Work-in-Process Control288

  1. Work-in-Process Control288

Materials Control 288

12.Which of the following statements is true of conversion costs?

  1. In process costing, they include all the factors of production.
  2. They include all manufacturing costs including direct materials, direct labor, and other direct and indirect manufacturing costs.
  3. In process costing, they are usually considered to be added evenly throughout the production process.
  4. They include only direct materials and exclude all other manufacturing and non-manufacturing costs.

13.When the amount of scrap is material and the scrap is sold immediately after it is produced, which of the following is the journal entry if the scrap attributable to a specific job is sold on account?

  1. Scrap RevenuesXX

Accounts PayableXX

  1. Work-in-Process ControlXX

Accounts Receivable XX

  1. Accounts ReceivableXX

Work-in-Process Control XX

  1. Work-in-Process ControlXX

Accounts Payable XX

14.An assumption of the FIFO process-costing method is that ______.

  1. the units in beginning inventory are not necessarily assumed to be completed by the end of the period
  2. the units in beginning inventory are assumed to be completed first
  3. ending inventory will always be completed in the next accounting period
  4. no calculation of conversion costs is possible

Question 2(10 Marks)Convad Company is one of the world’s leading corn refiners. It produces two joint products—corn syrup and corn starch—using a common production process. In July 2012,Convad reported the following production and selling-price information

Corn Syrup / Corn Starch / Joint Costs
Joint costs (costs of processing corn to splitoff point) / $325,000
Separable cost of processing beyond splitoff point / $375,000 / $93,750
Beginning inventory / 0 / 0
Production and Sales (cases) / $12,500 / $6,250
Ending Inventory / 0 / 0
Selling price per case / $50 / $25

Required:

Allocate the $325,000 joint costs using net realizable value method (NRV)

QUESTION 3(26 Marks)

The Kim Company is a furniture manufacturer with two departments: molding and finishing. The company uses the weighted-averagemethod of process costing. In August, the following data were recorded for the finishing department:

Number of Units / Percentage of Completion
Work-in-Process, Beginning / 12,500 / 25%
Transferred-in / 87,500
Completed / 62,500
Work-in-Process, Ending / 25,000 / 95%
Direct Materials / Direct Labor / Manufacturing Overhead
Costs Added During May / $819,000 / $794,500 / $770,000
Transferred-in / Direct Materials / Conversion
Work-in-Process, Beginning Costs / $103,625 / ?? / $52,500
Total Costs
Transferred-in Units During May / $809,375

Conversion costs are added evenly during the process. Direct material costs are added when production is90% complete. The inspection point is at the 80% stage of production. Normal spoilage is 10% of all goodunits that pass inspection. Spoiled units are disposed of at zero net disposal value

Required:

a)For May, summarize & assign total costs to account for.

b)Prepare the necessary journal entries at May 31.

With Best Wishes

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