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School of Administrative Studies
AP/ADMS 2510 3.0 Section A – Summer 2013
Mid-Term Examination, Sunday, July 7 , 12 noon – 3 pm
- Please turn off your cell phone and place cell phone, books, notes, backpacks, coats, etc. to the side, rear
or the front of the classroom before the mid-term examination commences.
- Please make sure that there is at least one empty seat between you and any other student sittingbeside you
in the same row and have out for display your 2 pieces of independent photo-identification during the
mid-term examination to facilitate verification.
- Fill in your name and student number in the section above. Answer the multiple-choice questions by
circling “only 1” choice, multiple-answer responses will not be graded. Answer the rest of the problems
in the space provided in this mid-term examination paper. To work out your answer, you can use the
mid-term examination paper. You may write with a pencil or pen. However, if you do use pencil, you will
not be able to submit your mid-term for re-appraisal.
- This is a closed book mid-term examination; no collaboration is allowed and no formula sheets are
allowed or will be provided. No additional time for lateness.
- Three hours are allowed to complete the mid-term examination (total of 100 marks).
- You are allowed the use of a simple (non-programmable) calculator. Sharing of calculators is not
permitted. Cell phones are not allowed as calculators.
- PLEASE DO NOT ASK ANY QUESTIONS from the Professor or the Invigilators. If it is necessary,
state your assumptions on the mid-term examination pages.
- If you leave early, please respect your fellow students by leaving quietly. Do not leave the room in the
final 15 minutes of the mid-term examination.
DO NOT TAKE THE MID-TERM EXAMINATION PAPER WITH YOU.
Mutliple-Choice Questions …………/ 40 marks (100 minutes)
Problem: 1 …………/ 20 marks (25 minutes)
Problem: 2 …………/ 20 marks (25 minutes)
Problem: 3 …………/ 10 marks (15 minutes)
Problem: 4 …………/ 10 marks (15 minutes)
Total Marks …………/ 100 marks (180 minutes) 1. David Company uses the weighted-average method in its process costing system. The first processing
department, the Welding Department, started the month with 20,000 units that were 80% complete with respect to
conversion costs. The conversion cost in this beginning work-in-process inventory was $123,200. An additional
65,000 units were started into production during the month. There were 19,000 units in the ending
work-in-process inventory of the Welding Department that were 10% complete with respect to conversion costs.
A total of $389,250 in conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal
2. Baker Company uses the weighted-average method in its process costing system. The Assembly Department
started the month with 8,000 units in its beginning work-in-process inventory that were 90% complete with
respect to conversion costs. An additional 95,000 units were transferred in from the prior department during the
month to begin processing in the Assembly Department. There were 11,000 units in the ending work-in-process
inventory of the Assembly Department that were 90% complete with respect to conversion costs.
What were the equivalent units of production for conversion costs in the Assembly Department for the month?
A. 94,700 units.
B. 101,900 units.
C. 98,000 units.
D. 92,000 units.
3. The Assembly Department started the month with 35,000 units in its beginning work-in-process inventory.
Additional units 472,000 were transferred in from the prior department during the month to begin processing in
the Assembly Department. There were 34,000 units in the ending work-in-process inventory of the Assembly
Department. How many units were transferred to the next processing department during the month?
A. 507,000 units.
B. 473,000 units.
C. 471,000 units.
D. 541,000 units.
4. For which of the following industries would it NOT be appropriate to use process costing?
A. Custom furniture building.
B. Oil refining.
C. Grain milling.
D. Newsprint production.
5. Assumethat thereis no beginningwork-in-process inventory, andthe endingwork-in-process inventoryis 50%
complete with respect to conversion costs. What would be the number of equivalent units of production with
respect to conversion costs under the weighted-average method?
A. The same as the units completed.
B. The same as the units started during the period.
C. Less than the units completed.
D. Less than the units started during the period. 6. Expense A is a fixed cost; expense B is a variable cost. During the current year, the activity level has increased
but is still within the relevant range. In terms of cost per unit of activity, you would expect which of the following
statements to be true?
A. Expense A has remained unchanged.
B. Expense B has decreased.
C. Expense A has decreased.
D. Expense B has increased.
7. Which costs will change with a decrease in activity within the relevant range?
A. Total fixed costs and total variable costs.
B. Unit fixed cost and total variable costs.
C. Unit variable cost and unit fixed cost.
D. Unit fixed cost and total fixed costs.
8. Which of the following is an example of a discretionary fixed cost?
B. Taxes on real estate.
C. Management training.
D. Amortization of buildings and equipment.
9. Which of the following is an example of a committed fixed cost?
A. A training program for salespersons.
B. Executive travel expenses.
C. Property taxes on the factory building.
D. New product research and development.
10. In describing the cost formula equation Y = a + bX, which of the following statements is correct?
A. The X term is the dependent variable.
B. The a term is the fixed component.
C. In the high-low method, the b term equals change in activity divided by change in costs.
D. As the X term increases, the Y term decreases.
11. Which of the following costs/expenses is included in product costs under both absorption costingand variable
A. Supervisory salaries.
B. Equipment depreciation.
C. Variable manufacturing costs.
D. Variable selling expenses.
12. Which of the following is normally included in product cost under the variable costing method?
A. Direct materials cost, direct labour cost, but NOT manufacturing overhead cost.
B. Direct materials cost, direct labour cost, and variable manufacturing overhead cost.
C. Prime cost but NOT conversion cost.
D. Prime cost and all conversion cost. 13. Which of the following statements is true for a firm that uses variable costing?
A. The unit product cost changes as a result of changes in the number of units manufactured.
B. Both variable selling costs and variable production costs are included in the unit product cost.
C. Operating income moves in the same direction as sales.
D. Operating income is greatest in periods when production is highest.
14. The term "gross margin" for a manufacturing company refers to the excess of sales over which of the
A. Cost of goods sold, excluding fixed manufacturing overhead.
B. All variable costs, including variable selling and administrative expenses.
C. Cost of goods sold, including fixed manufacturing overhead.
D. Variable costs, excluding variable selling and administrative expenses.
15. What is the costing method that can be used most easily with break-even analysis and other
A. Variable costing.
B. Absorption costing.
C. Process costing.
D. Job-order costing.
16. Human resource management is an example of an activity at which of the following levels?
A. Unit-level activity.
B. Product-level activity.
C. Batch-level activity.
D. Organization-sustaining activity.
17. Which of the following would be classified as a product-level activity?
A. Machine setup for a batch of a standard product.
B. Cafeteria facilities available to and used by all employees.
C. Human resource management.
D. Advertising a product.
18. Why may departmental overhead rates NOT correctly assign overhead costs?
A. Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or
quantity of materials.
B. Because of the high correlation between direct labour hours and the incurrence of overhead costs.
C. Because of the over-reliance on volume as a basis for allocating overhead costs where products differ
regarding the number of units produced, lot size, or complexity of production.
D. Because of the difficulties associated with identifying cost pools for the first stage of the allocation process.
19. Which of the following statements about overhead allocation based on volume alone is correct?
A. It is a key aspect of the activity-based costing model.
B. It will systematically overcost high-volume products and undercost low-volume products.
C. It will systematically overcost low-volume products and undercost high-volume products.
D. It must be used for external financial reporting. 20. What is a transaction driver?
A. An event that causes a transaction to begin.
B. A measure of the amount of time required to perform an activity.
C. An event that causes a transaction to end.
D. A simple count of the number of times an activity occurs.
21. Which of the following is defined as the difference between total sales in dollars and total variable expenses?
A. Margin of safety.
B. Operating income.
C. The gross margin.
D. The contribution margin.
22. Brasher Company manufactures and sells a single product that has a positive contribution margin. If the
selling price and variable expenses both decrease by 5% and fixed expenses do not change, then what would be
the effect on the contribution margin per unit and the contribution margin ratio?
A. Decrease Decrease
B. Decrease No change
C. No change Decrease
D. No change No change
23. The contribution margin ratio always increases when which of the following occurs?
A. Variable expenses as a percentage of sales increase.
B. Variable expenses as a percentage of sales decrease.
C. Break-even point increases.
D. Break-even point decreases.
24. If the fixed expenses of a product increase while variable expenses and the selling price remain constant,
what will happen to the total contribution margin and the break-even point?
A. Increase Decrease