ACC 256 Final

Ace Inc. purchased 10,000 units of material and used 8,000 units in production. Computation of the materials price variance should: A) Use 10,000 units as the amount for actual quantity (AQ). B) Use 8,000 units as the amount for actual quantity (AQ). C) Use the amount that will produce the smallest variance. D) Always show a favorable variance since the amount used was less than the amount purchased.

A

Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance? A) The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid, experienced individuals. B) The mix of workers assigned to the particular job was heavily weighted towards the use of new relatively low paid, unskilled workers. C) Because of the production schedule, workers from other production areas were assigned to assist this particular process. D) Defective materials caused more labor to be used in order to produce a standard unit.

A

Johansen Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for the next year: Direct materials $ 6,000 Direct labor 20,000 Rent on factory building 15,000 Sales Salaries 25,000 Depreciation on factory equipment 8,000 Indirect labor 12,000 Production supervisor's salary 15,000 Johansen estimates that 20,000 direct labor hours will be worked during the year. The predetermined overhead rate per hour will be: A. $2.50. B. $3.50. C. $3.75. D. $5.05.

A. $2.50.

Dunitall Inc. is working on its cash budget for December. The budgeted beginning cash balance is $14,000. Budgeted cash receipts total $127,000 and budgeted cash disbursements total $126,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for December, the company needs to borrow: A. $25,000 B. $0 C. $55,000 D. $40,000

A. $25,000

Assume that a firm can sell 10,000 units of a product and that the variable expenses are $2 per unit. Fixed expenses are $20,000, and the firm wishes to earn a net income of $10,000. What price must the firm be able to charge? A. $5 per unit. B. $4 per unit. C. $3 per unit. D. $2 per unit.

A. $5 per unit.

46. Which of the following is the journal entry to record the closing of manufacturing overhead given the following facts? The actual manufacturing overhead is $7,100. The estimated manufacturing overhead was $7,000. The amount of overhead allocated is $6,900. A. Cost of Goods Sold 200 Manufacturing Overheard 200 B. Cost of Goods Sold 100 Manufacturing Overhead 100 C. Manufacturing Overhead 100 Cost of Goods Sold 100 D. Manufacturing Overhead 200 Cost of Goods Sold 200

A. Cost of Goods Sold 200 Manufacturing Overheard 200

. When the activity level is expected to decline within the relevant range, what effects would be anticipated with respect to each of the following? Fixed cost Variable cost per unit per unit A. Increase No change B. Increase Increase C. No change No change D. No change Increase

A. Increase No change

The Reedy Company uses a standard costing system. The following data are available for November: Actual direct labor hours worked: 5,800 hours Standard direct labor rate: $9 per hour Labor rate variance: $1,160 favorable The actual direct labor rate for November is: A. $9.20 B. $8.80 C. $8.90 D. $9.00

B

Golden Restaurant would like to estimate the variable and fixed components of its utilities cost and has compiled the following data for the last five months of operations. Month Meals Served Utilities Costs December 550 $40,100 January 300 36,000 February 250 34,750 March 400 38,550 April 600 41,400 Using the high-low method of analysis, the estimated variable utilities cost per meal served is: A. $ 22 B. $ 19 C. $ 73 D. $ 69

B. $ 19

The Cook Company has two divisions--Eastern and Western. The divisions have the following revenues and expenses: Eastern Western Sales $550,000 $500,000 Variable costs 275,000 200,000 Direct (Traceable) fixed costs 180,000 150,000 Allocated corporate costs 170,000 135,000 Net Income (Loss) $(75,000) $ 15,000 The management of Cook is considering the elimination of the Eastern Division. If the Eastern Division were eliminated, the direct fixed costs associated with this division could be avoided. However, corporate costs would still be $305,000 in total. Given these data, the elimination of the Eastern Division would result in an overall company net income (loss) of: A. $15,000. B. ($155,000). C. ($75,000). D. ($60,000).

B. ($155,000).

The Work in Process (WIP) inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs in WIP show charges of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: A. 83%. B. 120%. C. 40%. D. 300%.

B. 120%.

Use the following information for Company A for questions 8 & 9. Sales $900,000 Operating income 36,000 Stockholders' equity 100,000 Total assets 180,000 Target rate of return 15% Company A's return on investment (ROI) is: A. 36% B. 20% C. 15% D. 4%

B. 20%

The t-accounts shown below represent which transaction: WIP FG \100 100/ A. Requisition of Raw Materials into production B. Completion of work in process C. Sale of finished goods D. Application of overhead

B. Completion of work in process

Which of the following should be ignored when deciding whether to sell as is or process a product further? A. The revenue if the product is sold as is B. The costs already incurred in producing the product as is C. The cost of processing the product further D. The revenue if the product is processed further

B. The costs already incurred in producing the product as is

Which of the following is the appropriate formula to calculate a predetermined overhead rate: A. actual overhead divided by budgeted (planned) activity B. budgeted overhead divided by budgeted activity C. actual overhead divided by actual activity D. budgeted overhead divided by actual activity

B. budgeted overhead divided by budgeted activity

A method of budgeting where, as quarter 1 of year 1 is completed, the firm immediately budgets for quarter 1 of year 2, is called: A. operational budgeting. B. continuous or rolling budgeting. C. responsibility accounting. D. zero-based budgeting.

B. continuous or rolling budgeting.

If there are factors that restrict production capacity, a company should focus on the product line that has the highest: A. profit per unit of product. B. contribution margin per unit of the constraint. C. contribution margin ratio. D. selling price per unit of product.

B. contribution margin per unit of the constraint.

Last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of the total unit costs. If 10,500 units are manufactured next month and cost behavior patterns remain unchanged, the: A. total variable cost will remain unchanged. B. total cost per unit will decrease. C. fixed costs will increase in total. D. variable cost per unit will increase

B. total cost per unit will decrease.

Last month a manufacturing company had the following operating results: Beginning finished goods inventory $77,000 Ending finished goods inventory $54,000 Sales $449,000 Gross margin $75,000 What was the cost of goods manufactured for the month? A. $426,000 B. $374,000 C. $351,000 D. $397,000

C. $351,000

Use the following to answer questions 35 & 36:The Khaki Company has the following budgeted sales data: January February March April Credit sales$400,000 $350,000 $300,000 $320,000 Cash sales$70,000 $90,000 $80,000 $70,000 The regular pattern of collection of credit sales is 40% in the month of sale and 60% in the month following sale. There are no bad debts. The budgeted cash receipts for April would be: A. $308,000. B. $250,000. C. $378,000. D. $384,000. The budgeted accounts receivable balance on February 28 would be: A. $128,000. B. $192,000. C. $210,000. D. $234,000.

C. $378,000. C. $210,000.

During March, Adams Company had sales of $5,000,000, variable expenses of $3,000,000, and fixed expenses of $1,500,000. Assume that cost behavior and unit selling price remain unchanged during April. In order for the company to realize net operating income of $300,000 for April, sales would have to be: A. $3,750,000. B. $4,050,000. C. $4,500,000. D. $4,800,000.

C. $4,500,000.

The Ross Company has budgeted production for next year as follows: First Quarter Second Quarter Third Quarter Fourth Quarter Production in units 10,000 12,000 16,000 14,000 Four (4) pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year totals 4,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in the second quarter would be: A. 54,400 lbs. B. 56,800 lbs. C. 49,600 lbs D. 48,000 lbs

C. 49,600 lbs

Freestone Company is considering renting Machine Y to replace Machine X. It is expected that Y will waste less direct materials than does X. If Y is rented, X will be sold on the open market. For this decision, which of the following factors is (are) relevant? I. Cost of direct materials used II. Resale value of Machine X A. Only I B. Only II C. Both I and II D. Neither I nor II

C. Both I and II

Which of the following is most relevant to a manufacturing equipment replacement decision? A. Original cost of the old equipment. B. A lump-sum write-off amount from the disposal of the old equipment. C. Disposal value of the old equipment. D. Gain or loss on the disposal of the old equipment.

C. Disposal value of the old equipment.

The margin of safety is the: A. Excess of budgeted or actual sales over budgeted or actual variable expenses. B. Excess of budgeted or actual sales over budgeted or actual fixed expenses. C. Excess of budgeted or actual sales over the break-even volume of sales. D. Excess of budgeted net operating income over actual net operating income.

C. Excess of budgeted or actual sales over the break-even volume of sales.

When a decision is made among a number of alternatives, the lost revenue or contribution margin from choosing one alternate over another is the: A. Accrued benefit cost B. Conversion cost C. Opportunity cost D. Unrealized cost

C. Opportunity cost

. A sunk cost is: A. a cost that may be saved by not adopting an alternative. B. a cost that may be shifted to the future with little or no effect on current operations. C. a cost that cannot be avoided because it has already been incurred. D. a cost which does not entail any dollar outlay but which is relevant to the decision-making process.

C. a cost that cannot be avoided because it has already been incurred.

Stewart Company is attempting to classify costs according to their cost behavior. Data concerning activity and costs are listed below: January February Sales in units 1,200 1,400 Supplies $750 $790 Insurance 800 800 Advertising 900 1,050 24. The costs that Stewart Company would classify as variable would be: A. supplies. B. insurance. C. advertising. D. supplies and advertising

C. advertising.

Activity-based costing, as compared to traditional costing: A. is a simpler, cheaper way to apply overhead costs B. uses more cost pools, but fewer predetermined overhead rates C. results in product costs that more closely reflect the overhead resources consumed in the products' production D. is applied to period rather than product costs

C. results in product costs that more closely reflect the overhead resources consumed in the products' production

The master budget process usually begins with the: A. production budget. B. operating budget. C. sales budget. D. cash budget.

C. sales budget.

Participative budgets are: A. not subject to review by higher levels of management since to do so would contradict the participative aspect of the budgeting processing. B. passed down from top management without any involvement by lower-level managers. C. subject to review by higher levels of management in order to eliminate slack. D. not motivational to most employees.

C. subject to review by higher levels of management in order to eliminate slack.

The purpose of a flexible budget is to: A. remove items from performance reports that are not controllable by managers. B. permit managers to reduce the number of unfavorable variances that are reported. C. update the planning budget to reflect the actual level of activity of the period. D. reduce the amount of conflict between departments when the master budget is prepared.

C. update the planning budget to reflect the actual level of activity of the period.

Disclosing confidential information of a past employer to gain advantage at a new job is a violation of the ________ standard of ethics? confidentiality competence credibility integrity

Confidentiality

Division A of Parker Inc. produces a component used in the production of the product manufactured by Division B. Currently Division A sells the component to external buyers for $12.00. Division A has variable manufacturing costs of $5.00 and fixed manufacturing costs of $3.00 per unit for the component. If Division A has excess capacity, the minimum transfer price per unit to be used with reference to an internal sale to Division B would be: A. $12.00 B. $ 8.00 C. $ 4.00 D. $ 5.00

D. $ 5.00

44. April Company makes collections on sales according to the following schedule: --30% in the month of sale --60% in the month following sale --8% in the second month following sale The following sales are expected: JAN= 100,000 FEB= 120,000 MAR= 110,000 Cash collections in March are budgeted to be: A. $110,000 B. $110,800 C. $105,000 D. $113,000

D. $113,000

Rider Company sells a single product. The product has a selling price of $40 per unit and variable expenses of $15 per unit. The company's fixed expenses total $30,000 per year. The company's break-even point in terms of total dollar sales is: A. $100,000. B. $80,000. C. $60,000. D. $48,000.

D. $48,000.

A marketing consultant uses the job costing system and has a predetermined overhead rate of $15 per direct labor hour. This amount is based on an estimated overhead of $30,000 and an average time of 5.0 hours per job. Job #521 incurred direct material costs of $50 and 6 direct labor hours costing $75 per hour. The total cost of job #521 is: A. $155. B. $215. C. $565. D. $590.

D. $590.

Use the following information for Company A for questions 8 & 9. Sales $900,000 Operating income 36,000 Stockholders' equity 100,000 Total assets 180,000 Target rate of return 15% Company A's residual income is: A. $24,000 B. $45,000 C. $21,000 D. $9,000

D. $9,000

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sales price of $30 each. This is a $10 reduction in the normal sales price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change. Which of the following is TRUE? A. Management should accept the order if the variable costs per unit and fixed costs in total will not change with the order. B. Management should accept the order if they have excess capacity. C. Management should consider not accepting the order if all their customers will expect the price decrease as the standard price in the future. D. All of the above are true.

D. All of the above are true.

Which of the following types of costs are deducted to calculate the segment margin? A. Variable expenses of the segment B. Direct fixed expenses of the segment C. Common fixed costs D. Both A and B above

D. Both A and B above

Which of the following is included in the entries to record the sale of a job costing $5,000 to produce? A. Finished Goods Inventory 5,000 Work in Process Inventory 5,000 B. Cost of Goods Sold 5,000 Work in Process Inventory 5,000 C. Work in Process Inventory 5,000 Finished Goods Inventory 5,000 D. Cost of Goods Sold 5,000 Finished Goods Inventory 5,000

D. Cost of Goods Sold 5,000 Finished Goods Inventory 5,000

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sales price of $30 each. This is a $10 reduction in the normal sales price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change as a result of the special order. The Corporation has enough excess capacity to fill the order without affecting current sales. What will be the impact on operating income if the special order is accepted? A. Decrease in operating income of $90,000 B. Decrease in operating income of $200,000 C. Increase in operating income of $90,000 D. Increase in operating income of $200,000

D. Increase in operating income of $200,000

Consider the following three statements: I. A profit center has control over both cost and revenues. II. An investment center has control over invested funds, but not over costs and revenues. III. A cost center has no control over sales. Which statement(s) are correct? A. Only I. B. Only II. C. Only I and II. D. Only I and III.

D. Only I and III.

Which of the following costs are irrelevant to short-term business decisions? A. Variable costs B. Costs that differ between alternatives C. Future costs D. Sunk costs

D. Sunk costs

For sales beyond the break-even point: A. variable expenses will remain constant in total. B. the contribution margin ratio begins to decrease. C. the total contribution margin changes from negative to positive. D. net income will increase by the unit contribution margin for each additional item sold.

D. net income will increase by the unit contribution margin for each additional item sold.

A good example of a common fixed cost which would not be deducted before the segment margin line for a segmented income statement organized by product line is: A. direct materials. B. the product manager's salary. C. product advertising outlays. D. salary of a corporation president.

D. salary of a corporation president.

. In decision making, managers use: A. financial accounting information exclusively since it is more objective and precise due to well- established principles and conventions. B. information regarding the organization as a whole rather than segments of the organization in order to capture a broader perspective of the company's operations. C. information that is as precise as humanly possible. D. whatever information is relevant to the decision even though the information may not conform to generally accepted accounting principles.

D. whatever information is relevant to the decision even though the information may not conform to generally accepted accounting principles.

ROI formula

Operating Income/Total Assets

capital turnover formula

Sales / TA

A market share measure would most likely be part of:

The customer section of the balance scorecard

The manager of a manufacturing plant is most likely in charge of

a cost center

Sales Margin Formula

operating income/sales