Sample

Mid-term Exam 2

Managerial Accounting

2016 Spring

Midterm is non-cumulative. The topics covered by this midterm exam are:
ABC, Budgeting, and Variance Analysis.

The purpose of the sample exam is to show you the format of the actual
exam.

To prepare for the exam, I urge you first work through all the lecture slides and
handouts: examples in lecture slides and handouts are sufficient to prepare final exam.

Mid-term exams will be close-book & close-notes. You can use calculator.

Note:
1.

Go to NYUClass ->Resources for Lecture slides.

2.

Go to NYUClass ->Course homepage for complete lecture video recording links.

3.

Email/question like is XXX included in the exam or do we need to know XXX have
been and will continue to be not replied for fairness: topic exemptions (if any) will be
announced to all students via NYUClass rather than to individuals.

4.

I will discuss the sample exam on Monday, 04/11 (same day HW3 is due).

1. ABC. Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies:
Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies
based on the size of the ovens and cookie molds owned by the company. Based on budgetary
projections, the information listed below is available:
Macaroon
500,000

Sugar
800,000

PER UNIT data:

Selling price

$0.80

$0.75

$0.60

Direct materials
Direct labor

$0.20
$0.04

$0.15
$0.02

$0.14
$0.02

2
1
0.5

1
1
0.5

1
1
0.5

Projected sales in units

Hours per 1000-unit batch:

Direct labor hours
Oven hours
Packaging hours

Buttercream
600,000

Total overhead costs and activity levels for the year are estimated as follows:
Activity
Direct labor
Oven
Packaging

Overhead costs
$210,000
$150,000
$360,000

Activity levels
2,400 hours
1,900 oven hours
950 packaging hours

Required:
a. Determine the activity-cost-driver rate for packaging costs.
b. Using the ABC system, for the sugar cookie:
1. compute the estimated overhead costs per thousand cookies.
2. compute the estimated operating profit per thousand cookies.
c. Using a traditional system (with direct labor hours as the overhead allocation base), for the
sugar cookie:.
1. compute the estimated overhead costs per thousand cookies.
2. compute the estimated operating profit per thousand cookies.

2. Revenue and Production budgets. (CPA, adapted) The Sabat Corporation manufactures
and sells two products: Thingone and Thingtwo. In July 2013, Sabats budget department
gathered the following data to prepare budgets for 2014:

The following direct materials are used in the two products:

Projected data for 2014 for direct materials are:

Projected direct manufacturing labor requirements and rates for 2014 are:

Required:
Manufacturing overhead is allocated at the rate of $19 per direct manufacturing labor-hour.
Based on the preceding projections and budget requirements for Thingone and Thingtwo,
prepare the following budgets for 2014:
1. Revenues budget (in dollars)
2. Production budget (in units)
3. Direct material purchases budget (in quantities)
4. Direct material purchases budget (in dollars)
5. Direct manufacturing labor budget (in dollars)
6. Budgeted finished goods inventory at December 31, 2014 (in dollars)

3. Cash budgeting: See HW3 Problem 8.27 (sent out via NYUClass group email)

4. Variance Analysis. Ultra, Inc., manufactures a full line of well-known sunglasses frames and
lenses. Ultra uses a standard costing system to set attainable standards for direct materials,
labor, and overhead costs. Ultra reviews and revises standards annually as necessary.
Department managers, whose evaluations and bonuses are affected by their departments
performance, are held responsible to explain variances in their department performance reports.
Recently, the manufacturing variances in the Delta prestige line of sunglasses have caused some
concern. For no apparent reason, unfavorable materials and labor variances have occurred. At
the monthly staff meeting, John Puckett, manager of the Image line, will be expected to explain
his variances and suggest ways of improving performance. Barton will be asked to explain the
following performance report for 2014:

Barton collected the following information:

Three items comprised the standard variable manufacturing costs in 2014:
Direct materials: Frames. Static budget cost of $35,880. The standard input for 2014 is 2.00
ounces per unit.
Direct materials: Lenses. Static budget costs of $96,720. The standard input for 2014 is 4.00
ounces per unit.
Direct manufacturing labor: Static budget costs of $140,400. The standard input for 2014 is 1 hour
per unit.
Assume there are no variable manufacturing overhead costs.
The actual variable manufacturing costs in 2014 were as follows:
Direct materials: Frames. Actual costs of $70,080. Actual ounces used were 4.00 ounces per unit.
Direct materials: Lenses. Actual costs of $131,400. Actual ounces used were 6.00 ounces per unit.
Direct manufacturing labor: Actual costs of $145,124. The actual labor rate was $14.20 per hour.
Required:
1. Calculate:
a. Selling-price variance
b. Sales-volume variance and flexible-budget variance for operating income in the format of the
analysis in Exhibit 7-2
c. Price and efficiency variances for the following:
Direct materials: frames
Direct materials: lenses
Direct manufacturing labor