Showing posts with label cma tests. Show all posts
Showing posts with label cma tests. Show all posts
Saturday, December 9, 2023
Thursday, October 31, 2013
CMA ESSAY TYPE QUESTIONS
CMA ESSAY QUESTION
COST TERMS AND CONCEPTS
Q1 Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:
Cost object #1: The physical buildings and equipment
Cost object #2: The use of buildings and equipment
Cost object #3: The availability and use of manufacturing labor
The following manufacturing overhead cost categories are found in the accounting records:
a. Depreciation on buildings and equipment
b. Lubricants for machines
c. Property insurance
d. Supervisors’ salaries
e. Fringe benefits
f. Property taxes
g. Utilities
Required:
Assign each of the above costs to the most appropriate cost object.
Answer:
Cost object # 1 includes categories a, c, and f.
Cost object # 2 includes categories b and g.
Cost object # 3 includes categories d and e.
Q2 . Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.
Cost Cost Nonmanu-
Item Tracing Allocation facturing
Carpenter wages ________ ________ ________
Depreciation - office building ________ ________ ________
Glue for assembly ________ ________ ________
Lathe department supervisor ________ ________ ________
Lathe depreciation ________ ________ ________
Lathe maintenance ________ ________ ________
Lathe operator wages ________ ________ ________
Lumber ________ ________ ________
Samples for trade shows ________ ________ ________
Metal brackets for drawers ________ ________ ________
Factory washroom supplies ________ ________ ________
Answer:
Cost Cost Nonmanu-
Item Tracing Allocation facturing
Carpenter wages X
Depreciation - office building X
Glue for assembly X
Lathe department supervisor X
Lathe depreciation X
Lathe maintenance X
Lathe operator wages X
Lumber X
Samples for trade shows X
Metal brackets for drawers X
Factory washroom supplies X
Q3 Butler Hospital wants to estimate the cost for each patient stay. It is a general health care facility offering only basic services and not specialized services such as organ transplants.
Required:
a. Classify each of the following costs as either direct or indirect with respect to each patient.
b. Classify each of the following costs as either fixed or variable with respect to hospital costs per day.
Direct Indirect Fixed Variable
Electronic monitoring ______ ______ ______ ______
Meals for patients ______ ______ ______ ______
Nurses' salaries ______ ______ ______ ______
Parking maintenance ______ ______ ______ ______
Security ______ ______ ______ ______
Answer:
Direct Indirect Fixed Variable
Electronic monitoring X X
Meals for patients X X
Nurses salaries X X
Parking maintenance X X
Security X X
Q4 . Combs, Inc. reports the following information for September sales:
Sales $15,000
Variable costs 3,000
Fixed costs 4,000
Operating income $ 8,000
Required:
If sales double in October, what is the projected operating income?
Answer:
(15,000 x 2) - ($3,000 x 2) - $4,000 = $20,000
Q5 Axle and Wheel Manufacturing currently produces 1,000 axles per month. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 30
Variable manufacturing overhead 60
Fixed manufacturing overhead 40
Total manufacturing costs $330
The plant has capacity for 2,000 axles.
Required:
a. What is the total cost of producing 1,000 axles?
b. What is the total cost of producing 1,500 axles?
c. What is the per unit cost when producing 1,500 axles?
Answer:
a. [($200 + $30 + $60) x 1,000 units] + ($40 x 1,000 units) = $330,000
b. [($200 + $30 + $60) x 1,500 units] + $40,000 = $475,000
c. $475,000 / 1,500 = $316.67 per unit
Q6 The following information pertains to Ball Company:
Manufacturing costs $2,400,000
Units manufactured 40,000
Beginning inventory 0 units
39,800 units are sold during the year for $100 per unit.
Required:
a. What is the average manufacturing cost per unit?
b. What is the amount of ending finished goods inventory?
c. What is the amount of gross margin?
Answer:
a. $2,400,000 / 40,000 = $60.00
b. (40,000 – 39,800) x $60 = $12,000
c. 39,800 x ($100 - $60) = $1,592,000
Q7 . Cheaney Incorporated reports the following information.
On January 31, 20x1, Job #101 was the only job in process with accumulated costs of:
Direct materials $2,000
Direct manufacturing labor 1,000
Manufacturing overhead 1,000
Total $4,000
During February, Job #102 and Job #103 were started and the following costs were added:
Job #101 Job #102 Job #103
Direct materials $4,000 $5,000 $6,000
Direct manufacturing labor 1,000 2,000 3,000
Manufacturing overhead 2,000 3,000 4,000
Total $7,000 $10,000 $13,000
On February 28, 20x1:
Job #101 was completed and sold for $20,000.
Job #102 was completed but not sold.
Job #103 remains in production.
Required:
Using the above information, determine the following amounts:
a. Work-in-process inventory on February 1, 20x1.
b. Work-in-process inventory on February 28, 20x1.
c. Finished goods inventory on February 28, 20x1.
d. Cost of goods manufactured for February.
e Cost of goods sold for February.
f. Gross margin for February.
Answer:
a. $4,000
b. Job #103 $13,000
c. Job #102 $10,000
d. (Job #101 $11,000) + (Job #102 $10,000) = $21,000
e. Job #101 $11,000
f. $20,000 - $11,000 = $9,000
Q8 . Evans Inc. had the following activities during 20x1:
Direct materials:
Beginning inventory $ 40,000
Purchases 123,200
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Beginning work-in-process inventory 1,600
Ending work-in-process inventory 8,000
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000
Required:
a. What is the cost of direct materials used during 20x1?
b. What is cost of goods manufactured for 20x1?
c. What is cost of goods sold for 20x1?
d. What amount of prime costs was added to production during 20x1?
e. What amount of conversion costs was added to production during 20x1?
Answer:
a. $40,000 + $123,200 - $20,800 = $142,400
b. $142,400 + $32,000 + $24,000 + $1,600 - $8,000 = $192,000
c. $192,000 + $48,000 - $32,000 = $208,000
d. $142,400 + $32,000 = $174,400
e. $32,000 + $24,000 = $56,000
Q9 . Helmer Sporting Goods Company manufactured 100,000 units in 20x3 and reported the following costs:
Sandpaper $ 32,000 Leasing costs - plant $ 384,000
Materials handling 320,000 Depreciation - equipment 224,000
Coolants & lubricants 22,400 Property taxes - equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance - equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/x3 384,000 Direct materials, 12/31/x3 275,200
Finished goods, 1/1/x3 672,000 Sales revenue 12,800,000
Finished goods, 12/31/x3 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/x3 96,000 Sales salaries 576,000
Work-in-process, 12/31/x3 64,000 Advertising costs 480,000
Administration costs 800,000
Required:
a. What is the amount of direct materials used during 20x3?
b. What manufacturing costs were added to WIP during 20x3?
c. What is cost of goods manufactured for 20x3?
d. What is cost of goods sold for 20x3?
Answer:
a. $384,000 + $3,136,000 - $275,200 = $3,244,800
b. $3,244,800 + $2,176,000 + $32,000 + $320,000 + $22,400 + $275,200 + $384,000 + $224,000 + $32,000 + $16,000 = $6,726,400
c. $6,726,400 + $96,000 - $64,000 = $6,758,400
d. $6,758,400 + $672,000 - $1,280,000 = $6,150,400
Friday, October 11, 2013
CMA ESSAY QUESTIONS VARIABLE ABSORPTION AND THOROUGH COSTING
CMA PRACTICE ESSAY TYPE QUESTIONS VARIABLE ABSORPTION AND THOROUGH COSTING
SOLVE THE QUESTIONS AND EMAIL TO MYCOMPANION30@HOTMAIL.COM TO GET IT CHECKED AND RECEIVE THE SOLVED SOLUTION
Q7 The following data are available for Ruggles Company for the year ended September 30, 20x4.
Sales: 24,000 units at $50 each
Expected and actual production: 30,000 units
Manufacturing costs incurred:
Variable: $525,000
Fixed: $372,000
Nonmanufacturing costs incurred:
Variable: $144,800
Fixed: $77,400
Beginning inventories: none
Required:
a. Determine operating income using the variable-costing approach.
b. Determine operating income using the absorption-costing approach.
c. Explain why operating income is not the same under the two approaches.
Q8 . Bobby Smith and Sons Company was concerned that increased sales did not result in increased profits for 20x3. Both variable unit and total fixed manufacturing costs for 20x2 and 20x3 remained constant at $20 and $2,000,000, respectively.
In 20x2, the company produced 100,000 units and sold 80,000 units at a price of $50 per unit. There was no beginning inventory in 20x2. In 20x3, the company made 70,000 units and sold 90,000 units at a price of $50. Selling and administrative expenses were all fixed at $100,000 each year.
Required:
a. Prepare income statements for each year using absorption costing.
b. Prepare income statements for each year using variable costing.
c. Explain why the income was different each year using the two methods. Show computations.
Q9 Ernsting Bottling Works manufactures glass bottles. January and February operations were identical in every way except for the planned production.
January had a production denominator of 35,000 units.
February had a production denominator of 36,000 units.
Fixed manufacturing costs totaled $126,000.
Sales for both months totaled 45,000 units with variable manufacturing costs of $4 per unit. Selling and administrative costs were $0.40 per unit variable and $60,000 fixed. The selling price was $10 per unit.
Required:
Compute the operating income for both months using absorption costing.
Q10 . Calvin Enterprises produces a specialty statue item. The following information has been provided by management:
Actual sales 150,000 units
Budgeted production 160,000 units
Selling price $34 per unit
Direct manufacturing costs $9 per unit
Fixed manufacturing costs $5 per unit
Variable manufacturing costs $4 per unit
Variable administrative costs $2 per unit
Required:
a. What is the cost per statue if absorption costing is used?
b. What is the cost per statue if "super-variable costing" is used?
c. What is the total throughput contribution?
Q11 Wallace’s Wrench Company manufactures socket wrenches.
· For next month, the vice president of production plans on producing 4,400 wrenches per day.
· The company can produce as many as 5,000 wrenches per day, but are more likely to produce 4,500 per day.
· The demand for wrenches for the next three years is expected to average 4,250 wrenches per day.
· Fixed manufacturing costs per month total $336,600.
· The company works 20 days a month.
· Fixed manufacturing overhead is charged on a per wrench basis.
Required:
a. What is the theoretical fixed manufacturing overhead rate per wrench?
b. What is the practical fixed manufacturing overhead rate per wrench?
c. What is the normal fixed manufacturing overhead rate per wrench?
d. What is the master-budget fixed manufacturing overhead rate per wrench?
Q12 Sutton Hot Dog Stand sells hot dogs for $1.35. Variable costs are $1.05 per unit with fixed production costs of $90,000 per month at a level of 400,000 units. Fixed administrative costs total $30,000. Sales average 400,000 units per month, with production of 400,000 hot dogs.
Required:
a. What are breakeven unit sales under variable costing?
b. What are breakeven unit sales under absorption costing if she sells everything she prepares?
c. What are breakeven unit sales under absorption costing if average sales are 498,000 and planned production is changed to 500,000?
SOLVE THE QUESTIONS AND EMAIL TO MYCOMPANION30@HOTMAIL.COM TO GET IT CHECKED AND RECIEVE THE SOLVED SOLUTION
CMA ESSAY QUESTIONS VAR/ABS/THROUGHPUT COSTING
CMA PRACTICE ESSAY TYPE QUESTIONS VARIABLE ABSORPTION AND THOROUGH COSTING
Q1 For 20x4, Nichols, Inc. had sales of 75,000 units and production of 100,000 units. Other information for the year included:
Direct manufacturing labor $187,500
Variable manufacturing overhead 100,000
Direct materials 150,000
Variable selling expenses 100,000
Fixed administrative expenses 100,000
Fixed manufacturing overhead 200,000
There was no beginning inventory.
Required:
a. Compute the ending finished goods inventory under both absorption and variable costing.
b. Compute the cost of goods sold under both absorption and variable costing.
Answer:
a. Absorption Variable
Direct materials $150,000 $150,000
Direct manufacturing labor 187,500 187,500
Variable manufacturing overhead 100,000 100,000
Fixed manufacturing overhead 200,000 0
Total $637,500 $437,500
Unit costs:
$637,500/100,000 units $6.375
$437,500/100,000 units $4.375
Ending inventory:
25,000 units x $6.375 $159,375
25,000 units x $4.375 $109,375
b. Cost of goods sold:
75,000 x $6.375 $478,125
75,000 x $4.375 $328,125
Difficulty: 2 Objective: 1
Q2 . Bruster Company sells its products for $66 each. The current production level is 25,000 units, although only 20,000 units are anticipated to be sold.
Unit manufacturing costs are:
Direct materials $12.00
Direct manufacturing labor $18.00
Variable manufacturing costs $9.00
Total fixed manufacturing costs $180,000
Marketing expenses $6.00 per unit, plus $60,000 per year
Required:
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.
Answer:
a. Absorption-costing income statement:
Sales (20,000 x $66) $1,320,000
Cost of goods sold (20,000 x $46.20*) 924,000
Gross margin $396,000
Marketing:
Variable (20,000 x $6) $120,000
Fixed 60,000 180,000
Operating income $216,000
* $12.00 + $18.00 + $9.00 + ($180,000/25,000) = $46.20
b. Variable-costing income statement:
Sales (20,000 x $66) $1,320,000
Variable costs:
Cost of goods sold (20,000 x $39*) $780,000
Marketing (20,000 x $6) 120,000 900,000
Contribution margin $420,000
Fixed costs:
Manufacturing $180,000
Marketing 60,000 240,000
Operating income $180,000
* $12.00 + $18.00 + $9.00 = $39
Difficulty: 2 Objective: 2
Q3 . Ireland Corporation planned to be in operation for three years.
· During the first year, 20x1, it had no sales but incurred $120,000 in variable manufacturing expenses and $40,000 in fixed manufacturing expenses.
· In 20x2, it sold half of the finished goods inventory from 20x1 for $100,000 but it had no manufacturing costs.
· In 20x3, it sold the remainder of the inventory for $120,000, had no manufacturing expenses and went out of business.
· Marketing and administrative expenses were fixed and totaled $20,000 each year.
Required:
a. Prepare an income statement for each year using absorption costing.
b. Prepare an income statement for each year using variable costing.
Answer:
a. Absorption-costing income statements:
20x1 20x2 20x3
Sales $0 $100,000 $120,000
Cost of goods sold 0 80,000 80,000
Gross margin $0 $20,000 $40,000
Marketing and administrative 20,000 20,000 20,000
Operating income $(20,000) $ 0 $20,000
b. Variable-costing income statements:
20x1 20x2 20x3
Sales $ 0 $100,000 $120,000
Variable expenses 0 60,000 60,000
Contribution margin $ 0 $40,000 $60,000
Fixed expenses:
Manufacturing $40,000 $ 0 $ 0
Marketing and administrative 20,000 20,000 20,000
Total fixed $60,000 $20,000 $20,000
Operating income $(60,000) $20,000 $40,000
Difficulty: 3 Objective: 2
Q4 . Jarvis Golf Company sells a special putter for $20 each. In March, it sold 28,000 putters while manufacturing 30,000. There was no beginning inventory on March 1. Production information for March was:
Direct manufacturing labor per unit 15 minutes
Fixed selling and administrative costs $ 40,000
Fixed manufacturing overhead 132,000
Direct materials cost per unit 2
Direct manufacturing labor per hour 24
Variable manufacturing overhead per unit 4
Variable selling expenses per unit 2
Required:
a. Compute the cost per unit under both absorption and variable costing.
b. Compute the ending inventories under both absorption and variable costing.
c. Compute operating income under both absorption and variable costing.
Answer:
a. Absorption Variable
Direct manufacturing labor ($24/4) $ 6.00 $ 6.00
Direct materials 2.00 2.00
Variable manufacturing overhead 4.00 4.00
Fixed manufacturing overhead ($132,000/30,000) 4.40 ___0
Total cost per unit $16.40 $12.00
b. Absorption Variable
Beginning inventory $0 $0
Cost of goods manufactured:
30,000 x $16.40 $492,000
30,000 x $12.00 _______ $360,000
Cost of goods available for sale $492,000 $360,000
Cost of goods sold:
28,000 x $16.40 $459,200
28,000 x $12.00 _______ $336,000
Ending inventory $ 32,800 $ 24,000
Answer:
c. Absorption-costing income statement:
Sales (28,000 x $20) $560,000
Cost of goods sold (28,000 x $16.40) 459,200
Gross margin 100,800
Less:
Variable selling and administrative $56,000
Fixed selling and administrative 40,000 96,000
Operating income $ 4,800
Variable-costing income statement:
Sales (28,000 x $20) $560,000
Variable COGS (28,000 x $12) $336,000
Variable selling expenses (28,000 x $2) 56,000 392,000
Contribution margin 168,000
Fixed costs:
Manufacturing $132,000
Selling and administrative 40,000 172,000
Operating income $ (4,000)
Difficulty: 2 Objective: 2
Q5 . Johnson Realty bought a 2,000-acre island for $10,000,000 and divided it into 200 equal size lots.
As the lots are sold, they are cleared at an average cost of $5,000.
Storm drains and driveways are installed at an average cost of $8,000 per site.
Sales commissions are 10 % of selling price.
Administrative costs are $850,000 per year.
The average selling price was $160,000 per lot during 20x2 when 50 lots were sold.
During 20x3, the company bought another 2,000-acre island and developed it exactly the same way. Lot sales in 20x3 totaled 300 with an average selling price of $160,000. All costs were the same as in 20x2.
Required:
Prepare income statements for both years using both absorption and variable costing methods.
Answer:
Cost per site: Absorption Variable
Land cost $10,000,000/200 sites $50,000 $0
Clearing costs 5,000 5,000
Improvements 8,000 8,000
Total $63,000 $13,000
Absorption-costing income statements: 20x2 20x3
Sales $8,000,000 $48,000,000
Cost of goods sold:
50 x ($50,000 + $8,000 + $5,000) 3,150,000
300 x ($50,000 + $8,000 + $5,000) ________ 18,900,000
Gross margin $4,850,000 $29,100,000
Variable marketing 800,000 4,800,000
Fixed administrative 850,000 850,000
Operating income $3,200,000 $23,450,000
Variable-costing income statements: 20x2 20x3
Sales $8,000,000 $48,000,000
Variable expenses:
Cost of operations:
50 x $13,000 650,000
300 x $13,000 3,900,000
Selling expenses 800,000 4,800,000
Contribution margin $6,550,000 $39,300,000
Fixed expenses:
Land 10,000,000 10,000,000
Administrative 850,000 850,000
Operating income $(4,300,000) $28,450,000
Difficulty: 3 Objective: 2
Q6 . Megredy Company prepared the following absorption-costing income statement for the year ended May 31, 20x4.
Sales (16,000 units) $320,000
Cost of goods sold 216,000
Gross margin $104,000
Selling and administrative expenses 46,000
Operating income $ 58,000
Additional information follows:
Selling and administrative expenses include $1.50 of variable cost per unit sold. There was no beginning inventory, and 17,500 units were produced. Variable manufacturing costs were $11 per unit. Actual fixed costs were equal to budgeted fixed costs.
Required:
Prepare a variable-costing income statement for the same period.
Answer:
Sales $320,000
Variable expenses:
Manufacturing cost of goods sold1 $176,000
Selling and administrative2 24,000 200,000
Contribution margin $ 120,000
Fixed expenses:
Fixed factory overhead3 $43,750
Fixed selling and administrative4 22,000 65,750
Operating income $ 54,250
1 16,000 units x $11 = $176,000
2 16,000 units x $1.50 = $24,000
3 [($216,000/16,000 units) - $11] x 17,500 units = $43,750
4 $46,000 - $24,000 = $22,000
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