Exam 3 Review Packet – Tuesday, December 13th – 8-10am
Please read the important information below regarding Exams:
Please arrive at the classroom 10 minutes early to start the exam on time
You need to bring and show your UAlbany ID card
You need at least 2 writing utensils and a calculator
Graphing Calculators are not allowed at the exam- Please bring your own basic non-graphing calculator
The exam is 40 questions – multiple choice and True/False
Topical Outline
Chapter 7:
Know the detailed line items of the CM Income Statement
Understand the differences between Absorption Costing and Variable Costing and when each is utilized
Be able to identify and calculate period costs for Variable Costing vs Absorption Costing
Be able to identify and calculate product costs (WIP, FG, COGS) for Variable Costing and Absorption Costing
Understand and be able to calculate NOI for Absorption Costing and Variable Costing
Know which costing method follows GAAP
Know examples of product vs period costs for Variable and Absorption Costing
Know examples of variable manufacturing costs vs fixed manufacturing costs and how each is treated under Variable vs Absorption Costing
Know examples of variable period costs and fixed period costs under each Costing method
Know what costs are part of Finished Goods Inventory for Absorption costing vs Variable costing methods
Know how Net Income differs between Variable and Absorption costing given the relationships between sales units and units produced
Understand which costs are “expensed as incurred” under Absorption vs Variable costing
Chapter 8:
Be able to calculate budgeted cash collections if given credit sales and collection percentage patterns
Know the difference between Cash sales and Credit sales
Know the factors that drive the initial Sales Budget as part of the Master Budget
Be able to calculate the budgeted units of production and know the formula utilized
Be able to calculate the Expected cash borrowings to achieve a desired ending cash balance in the Cash Budget
Be able to calculate budgeted Accounts Receivable balance if given credit sales and collection percentage patterns
Know the order of line items in the Cash Budget
Know the order that Master Budget schedules are prepared and its preparers
Understand the purpose of the Master Budget and how each schedule is dependent and interrelated with all other schedules
Understand the benefits of Budgeting, when they are utilized, and requirements for public companies
Chapter 9:
Be able to create a Flexible Budget if given expense or revenue formulas
Understand why Flexible Budgets are created/utilized vs Static/Planning Budgets
Be able to calculate the Spending and Revenue Variances in a Performance Evaluation Report
Be able to identify a Revenue or Spending Variance as Favorable/Unfavorable
Know what schedules to use in creating a Performance Evaluation
Know the differences (and similarity) between a Planning and Flexible Budget and when each should be used and created
Know and understand the steps in the Variance Analysis Cycle
Know the root-cause/underlying reasons for Favorable/Unfavorable Materials Price/Quantity variances
Know what STANDARDS are (definition)
Be able to calculate DMQV (direct materials quantity variance)
Be able to calculate DMPV (direct materials price variance)
Know how standards are set/by whom
Know what steps an organization may take after receiving variance explanations
Computational Questions
Danny Corp is preparing its cash budget for May. The budgeted beginning cash balance is $13,750. Budgeted cash receipts from Customers during the month is estimated to be $279,000, and cash disbursements in the amount of $315,000. Danny Corp has a desired ending cash balance of $30,000 minimum. How much should Danny Corp budget to borrow in the month of May? What is the surplus (excess) or deficiency (shortage)?
The following credit sales were budgeted for Palen Inc.
July $312,000
August $249,500
September $156,000
October $95,000
Palen Inc has indicated the following collection patterns for credit sales: 70% in the month of the sale, 20% in the month following the sale, 10% in the second month following the sale.
What amount of estimated cash collections should be entered on the cash Budget for the month of September?
What should Palen Inc record as its Budgeted Accounts Receivable Balance in its pro forma balance sheet for month-end September?
Calculate the Net Operating Income for Lester Holdings using Variable Costing when 8,000 units are produced. At Lester Holdings, variable manufacturing costs are $80 per unit, fixed manufacturing overhead costs are $32,000, and Selling and Administrative expenses are fixed during the period for $15,000. Sales are 3,200 units at a sales price of $100 per unit.
Calculate the Net Operating Income for Lester Holdings using Absorption Costing when 8,000 units are produced. At Lester Holdings, variable manufacturing costs are $80 per unit, fixed manufacturing overhead costs are $32,000, and Selling and Administrative expenses are fixed during the period for $15,000. Sales are 3,200 units at a sales price of $100 per unit.
Use the following data below for Earthlings Inc. to answer costing questions:
Selling Price: $137
Units in Beginning inventory: 0
Units produced: 1,430
Units sold: 1,400
Units in ending inventory: 30
Variable cost per unit:
Direct Materials: $41
Direct Labor: $7.50
Variable Manufacturing Overhead: $15
Variable Selling and administrative: $7.50
Fixed costs:
Fixed manufacturing overhead: $56,000
Fixed selling and administrative: $14,500
Calculate the total period cost for the month under Variable Costing.
Calculate the Variable Costing unit product cost.
Calculate NOI under Variable and Absorption Costing
Katy’s lawn service has created the following cost formula for its operating costs: $1,350 per month and $55 per lawn. In June, Katy’s estimated that it would service 150 lawns in July. In August, Katy’s reviewed its July results. Actual costs were $10,150 and Katy’s serviced 155 lawns. What was the spending variance for July? Was it favorable or unfavorable?
What was the total estimated operating cost for July’s planning/static budget? What is the purpose of creating the planning/static budget?
Katy earned a total of $17,450 in August. She estimated she would charge $95 per lawn and she mowed 215 lawns. What was Katy’s revenue variance for August and was if favorable or unfavorable?
Calculate the Direct Materials Price Variance and the Direct Materials Quantity Variance given the data below:
Actual production
27,500 units
Materials:
Standard price per ounce
$6.50
Standard ounces per completed unit
8
Actual ounces purchased and used in production
228,000 Total ounce.
8.29 ounces per unit
Actual price paid for materials
$1,504,800 Total Cost
$6.6 per ounce
What are the possible reasons for the variances calculated above?