ACC 303 Midterm

17) For a given job the direct costs associated with the job are: B) direct material C) direct manufacturing labor D) Both b and c are correct. Answer: D

18) Stewart Company's actual manufacturing overhead is $2,800,000. Overhead is allocated on the basis of direct labor hours. The direct labor hours were 50,000 for the period. What is the manufacturing overhead rate? B) $56.00 Answer: B Explanation: B) 2,800,000/50,000 = 56.00

In order to make decisions, managers need to know: C) both costs

2) Budgeted costs are: C) planned or forecasted costs Answer: C

19) O'Reilly Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit. C) $8,450 Answer: C Explanation: C) 2,950+2,000+((2,000/20)*35

20) In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. C) manufacturing overhead costs Answer: C

3) Cost allocation is: C) the assignment of indirect costs to the chosen cost object Answer: C

4) Which statement is true? C) A direct cost of one cost object can be an indirect cost of another cost object. Answer: C

5) Which of the following items is NOT an assumption of CVP analysis? C) Unit selling price, unit variable costs, and unit fixed costs are known and remain constant. Answer: C

6) Operating income calculations use: C) cost of goods sold and operating costs Answer: C

Why is a mission statement important to a organization ?

A mission statement is important to an organization because it provides a clearly worded view of what the organization wants to accomplish and how the organization uniquely meets or plans to meet its targeted customers' needs with products and services. Without a mission statement, an organization may veer away from its "view of itself" and find that it is engaging in activities that are not, and can never be, part of what it wants to do.

Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. 14) How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%? A) 200 dresses Answer: A Explanation: A) $1,000N - $400N - $90,000 = $18,000 / (1 - 0.4); $600N - $90,000 = $30,000; N = 200 units

Assume the following cost information for Fernandez Company: Selling price $120 per unit Variable costs $80 per unit Total fixed costs $80,000 Tax rate 40% 15) What minimum volume of sales dollars is required to earn an aftertax net income of $30,000? C) $390,000 Answer: C Explanation: C) [$80,000 + ($30,000/0.6)] / [($120 - $80) / $120] = $390,000 16) What is the number of units that must be sold to earn an after-tax net income of $42,000? A) 3,750 units Answer: A Explanation: A) [$80,000 + ($42,000 / 0.6)] / ($120 - $80) = 3,750 units

Mertens Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Account inquiry hours $200,000 10,000 hours Account billing lines $140,000 4,000,000 lines Account verification accounts $75,000 40,000 accounts Correspondence letters $ 25,000 4,000 letters Total costs $440,000 The above activities are used by Departments A and B as follows: Department A Department B Account inquiry hours 2,000 hours 4,000 hours Account billing lines 400,000 lines 200,000 lines Account verification accounts 10,000 accounts 8,000 accounts Correspondence letters 1,000 letters 1,600 letters 27) How much of the account inquiry cost will be assigned to Department A? A) $40,000 Answer: A Explanation: A) ($200,000 / 10,000) × 2,000 = $40,000 28) How much of the account billing cost will be assigned to Department B? C) $7,000 Answer: C Explanation: C) ($140,000 / 4,000,000) × 200,000 = $7,000 29) How much of account verification costs will be assigned to Department A? B) $18,750 Answer: B Explanation: B) ($75,000 / 40,000) × 10,000 = $18,750 30) How much of correspondence costs will be assigned to Department B? D) $10,000 Answer: D Explanation: D) ($25,000 / 4,000) × 1,600 = $10,000

Happy Valley Land and Snow Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Labor hours $320,000 8,000 hours Gas $36,000 6,000 gallons Invoices $40,000 2,500 invoices Total costs $396,000 The above activities used by their three departments are: Lawn Department Bush Department Plowing Department Labor hours 2,500 hours 1,200 hours 4,300 hours Gas 1,500 gallons 800 gallons 3,700 gallons Invoices 1,600 invoices 400 invoices 500 invoices 31) How much of the labor cost will be assigned to the Lawn Department? A) $100,000 Answer: A Explanation: A) ($32,000 / 8,000) × 2,500 = $100,000 32) How much of the gas cost will be assigned to the Plowing Department? B) $22,200 Answer: B Explanation: B) ($36,000 / 6,000) × 3,700 = $22,200 20) How much of invoice cost will be assigned to the Bush Department? A) $6,400 Answer: A Explanation: A) ($40,000/ 2,500) × 400 = $6,400

Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. 10) Contribution margin per ham is: B) $15.00 Answer: B Explanation: B) ($220,000 - $55,000) / 11,000 hams = $15 per ham 11) If sales increase by $40,000, operating income will increase by: C) $30,000 Answer: C Explanation: C) Price = $220,000/11,000 = $20.00 Sales in hams = $40,000/$20.00 = 2,000 hams Operating Income increase = 2,000 hams x $15.00 per = $30,000 12) If selling price per unit is $30, variable costs per unit are $20, total fixed costs are $10,000, the tax rate is 30%, and the company sells 5,000 units, net income is: C) $28,000 Answer: C Explanation: C) [(($30 - $20) × 5,000) - $10,000] × (1.0 - .3) = $28,000

Northenscold Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 13) The contribution margin per unit is: C) $12 Answer: C Explanation: C) $20 - $4 - $1.60 - $0.40 - $2 = $12 Answer the following questions using the information below:

For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation base. The accounting records contain the following information: Estimated Actual Manufacturing overhead costs $200,000 $240,000 Machine-hours 40,000 50,000 21) Using job costing, the 2010 actual indirect-cost rate is: B) $4.80 per machine-hour Answer: B

Philadelphia Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the accounting records for June 2010: Direct materials $140,000 Direct labor (3,500 hours @ $11/hour) $ 38,500 Indirect labor $ 10,000 Plant facility rent $ 30,000 Depreciation on plant machinery and equipment $ 15,000 Sales commissions $ 20,000 Administrative expenses $ 25,000 22) The actual amount of manufacturing overhead costs incurred in June 2010 totals: C) $55,000 Answer: C Explanation: C) $10,000 + $30,000 + $15,000 = $55,000

Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3: Budget Actual Indirect costs $270,000 $300,000 Annual salary of each attorney $100,000 $110,000 Annual salary of each paraprofessional $ 29,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 23) What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour? D) $27.00; $5.00 Answer: D Explanation: D) [($110,000 × 12) + ($30,000 × 10)] / 60,000 = $27.00 actual direct rate $300,000 / 60,000 = $5.00 actual indirect rate

Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3: Budget Actual Indirect costs $270,000 $300,000 Annual salary of each attorney $100,000 $110,000 Annual salary of each paraprofessional $ 29,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 24) What are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively, per professional labor-hour? B) $29.80; $5.40 Answer: B Explanation: B) [($100,000 × 12) + ($29,000 × 10)] / 50,000 = $29.80 budgeted direct rate $270,000 / 50,000 = $5.40 budgeted indirect rate 25) How much should a client be billed in a normal costing system when 1,000 professional labor-hours are used? C) $35,200 Answer: C Explanation: C) [($100,000 × 12) + ($29,000 × 10)] / 50,000 × 1,000 = $29,800 + $270,000 / 50,000 × 1000 × 1,000 = $5,400 $29,800 + $5,400 = $35,200 26) What would be the appropriate journal entry if the following labor wages were incurred in a furniture manufacturing company? Assembly workers $20,000 Janitors $10,000 B) Work-in-Process Control 20,000 Manufacturing Overhead Control 10,000 Wages Payable Control 30,000 Answer: B

7) Contribution margin equals: C) Revenues minus variable costs Answer: C

Sherry's Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of fixed costs. 8) Contribution margin per unit is: C) $6.00 Answer: C Explanation: C) ($7,000 - $2,800) / 700 units = $6 per unit 9) If sales increase by $25,000, operating income will increase by: B) $15,000 Answer: B Explanation: B) [($7,000 - $2,800) / $7,000] × $25,000 = $15,000