Proctored Final Examination
Part A: Solve the following problems on the answer paper provided. Each
problem is worth 20 points.
1. Factory overhead for the Praeger Company has been estimated as
variable overhead $122,000
Variable overhead $90,500
Budgeted direct labor hours 50,000
for the month was 75 percent of the budget, and actual factory overhead totaled
a. Calculate the predetermined
factory overhead rate.
b. Calculate the under- or over applied
2. Blaine Corporation uses a standard cost system and has established
the following standards for one unit of product.
Quantity Standard Price Standard Cost
Direct materials 10 pounds $2.50
per pound $25.00
labor .25 hour $10.00 per hour 2.50
During October, the company purchased 240,000 pounds of material at a
total cost of $588,000. The total factory wages for October were $50,350.
During October, 21,000 units of product were manufactured using 212,000 pounds
of material and 5,300 direct labor hours.
a. Compute the material
quantity and labor efficiency variances.
b. Compute the material price
and labor rate variances.
c. Indicate whether each of the
above variances is favorable or unfavorable.
3. Information for the month of May concerning Department A, the first
stage of the production cycle, is as follows:
Beginning work in process……………..
Equivalent units based on average cost method
Ending work in process………………..
Material costs are added at the beginning of the process. The ending
work in process is 80 percent complete as to conversion costs. How would the
total costs accounted for be distributed using the average cost method?
Part B: Answer each of the following questions in two to four sentences.
Each answer is worth 4 points.
1. What is the primary difference between the term unit cost,as
commonly used in a process cost system, and the term job cost,as
commonly used in a job order cost system?
2. An employee who manufactures goods for her employer earns $14 an hour
for regular wages. She’s paid time and a half for all hours worked in excess of
40 hours per week. In a recent week, she worked 48 hours.
How much of her gross pay that week was direct labor?
How much was indirect labor?
3. A company has $50,000 in fixed costs and sells one product with a
of $15 per unit. If variable costs are $5 per unit,
what is this company’s break-even sales in units?
4. For a manufacturing firm, what is the difference between cost of
goods manufacturedand cost of goods sold?
5. What are factory overhead costs, and what distinguishes them from other
6. What are the advantages and disadvantages of a stable production policy
for a company that has greatly fluctuating sales during the year?
7. When is it necessary to use separate equivalent production figures in
computing the unit costs of materials, labor, and overhead?
8. How does a just-in-time inventory system differ from more traditional
approaches to costing?
9. What factors should a service firm consider in deciding whether to use
direct labor dollars or direct labor hours in charging overhead to jobs?
10. Is a favorable variance necessarily good? Explain.