University of Louisiana,
Lafayette - ACCT 526 Mid
Term Exam.
,Question 1
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ULL Co. produces and sells 2,000 units of its product for $30 per unit in one year. The product's
cost is $13 per unit, with selling and administrative expenses totaling $3,000. What is ULL Co.'s
gross margin?
a. $60,000
b. $31,000
c. $57,000
d. $34,000
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Gross margin is calculated as revenue minus cost of goods sold (COGS).
Revenue = $30 x 2,000 = $60,000
COGS = $13 x 2,000 = $26,000
Gross margin = $60,000 - $26,000 = $34,000
The correct answer is: $34,000
Question 2
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With beginning work-in-process inventory at $110,000, ending work-in-process inventory at
$140,000, cost of goods manufactured at $500,000, and direct materials used at $150,000, what
are the conversion costs?
a. $300,000
b. $380,000
c. $350,000
d. $340,000
Feedback
Using the formula: Direct Labor + Manufacturing Overhead + Direct Materials + Beginning WIP
- Ending WIP = COGM. The unknown variable "X" represents the conversion costs.
X + $150,000 + $110,000 - $140,000 = $500,000
X + $120,000 = $500,000
X = $380,000
The correct answer is: $380,000
Question 3
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Which of the following is most likely to be a prime cost?
a. Salary of carpenter in a wood furniture shop
, b. Electricity to run a factory
c. Salary of a company's CEO
d. Frying oil in a restaurant
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Prime costs include direct materials and direct labor. The salary of a carpenter in a wood
furniture shop is considered direct labor.
The correct answer is: Salary of carpenter in a wood furniture shop
Question 4
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Trust Company allocates overhead based on direct labor hours. The estimated overhead is
$850,000, machine hours are 150,000, and direct labor hours are 40,000. During February, Trust
logs 4,000 direct labor hours and 12,000 machine hours. What is the predetermined overhead
rate?
a. $21.25 per direct labor hour
b. $20.00 per direct labor hour
c. $2.98 per machine hour
d. None of these
e. $5.67 per machine hour
Feedback
Predetermined overhead rate = Estimated overhead / Estimated direct labor hours
Rate = $850,,000 = $21.25 per direct labor hour
The correct answer is: $21.25 per direct labor hour
Question 5
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Which of the following is not an objective of managerial accounting?
a. To provide information for planning an organization’s action
b. To produce information for external users, including investors, creditors, customers, suppliers,
and government agencies
c. To provide information for effective decision making by the management of a company
d. To provide information for evaluating and continuously improving an organization’s actions
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Managerial accounting is intended for internal use, focusing on planning, decision-making, and
control. Financial accounting targets external stakeholders.
The correct answer is: To produce information for external users, including investors, creditors,
customers, suppliers, and government agencies
Question 6
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