Accounting 2102 Final Combined Practice

Managerial Accounting

-Main characteristic of information is that it must be relevant -Reports tend to be prepared for the parts of the organization rather than the whole organization. -Primary users are internal (i.e., company managers). -Reports are prepared as needed. -It is not governed by legal requirements. -Focus is on the future.

Which of the following statements concerning performance evaluation tools used in decentralized operations is correct? A positive residual income indicates that a segment's return on investment is greater than the company's target rate of return. Segment margin is calculating by subtracting the common fixed costs allocated to a segment from the segment's contribution margin. Segmented income statements are also referred to as budget versus actual reports. A segment's return on investment can be calculated by dividing the segment's sales margin percentage by its capital turnover ratio. Performance reports can only be used to evaluate the performance of cost centers.

A)A positive residual income indicates that a segment's return on investment is greater than the company's target rate of return.

1. Which of the following "rules of thumb" is incorrect with regard to making short-term business decisions? a. Analysis should be performed using a traditional income statement approach. a. Variable costs should be analyzed on a per unit. b. Qualitative factors should be considered when analyzing a decision. c. Past costs should not be used in the decision-making process. d. Per unit fixed costs should be converted to totals for analysis.

A-Analysis should be performed using a traditional income statement approach

Which of the following questions does the Statement of Cash Flows not answer? Did the company invest in long-term assets during the period? Did the company operate within its means during the period? Did the company pay down long-term debt during the period? Did the company make cash dividend distributions during the period? All of the above questions are answered by the Statement of Cash Flows

All of the above questions are answered by the Statement of Cash Flows

Champagne of the South, Inc., a manufacturer of bottled sweet tea, had the following beginning and ending inventories for the year ended December 31: January 1 December 31 Work in Process Inventory $18,000 $17,000 Finished Goods Inventory $21,000 $16,500 $27,000 in Raw Materials were purchased during the year. The net decrease in Raw Materials Inventory during the year was $2,000. Raw Materials Inventory only contains direct materials. In addition, the following costs were incurred during the year: direct labor costs of $30,000, factory supervisor's salary of $10,000, factory utilities of $12,000, factory depreciation of $9,000, factory rent of $8,000, indirect factory materials of $5,000, and selling, general, and administrative expenses of $22,000. The company uses actual costing to account for manufacturing overhead costs. What was the cost assigned to the units completed during the year? $108,500 $131,000 $104,000 $98,000 $103,000

$104,000

Get Reel, Inc. is a manufacturer of fishing rods. The company produces the rods in small batches based on customer specifications. At the beginning of the year, Get Reel estimated total manufacturing overhead of $135,000 and total machine hours of 10,000. The company allocated manufacturing overhead to production based on machine hours using a traditional, normal costing system. During August, Get Reel started and finished Job CC. The job consisted of 10 identical rods sold at a sales price of $130 per rod. A total of $200 in direct materials were requisitioned for the job during the month. Direct laborers worked a total of 12.5 hours on the job and were paid at a rate of $18 per direct labor hour. Given Job CC required 15 hours of machine time, what is the gross profit per rod? $87.50 $67.25 $87.95 $68.75 $70.63

$67.25

Financial Accounting

-Reports are usually prepared quarterly and annually. -Information is verified by external auditors. -Focus is on the past. -It is governed by Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). -The primary characteristics of information are that it must be reliable and objective -Primary users are external (i.e., creditors, investors).

The computer system for Get Cha Head in the Game, LLC, a manufacturer of basketball jerseys, fell victim to an internet virus. The following data was gathered from various sources: Standard Cost of Direct Material $16 per yard Actual Cost of Direct Material $18 per yard Actual Output 20,000 jerseys Direct Material Price Variance $120,000 U Total Direct Material Variances $40,000 F Beginning Direct Material Inventory 5,000 yards Ending Direct Material Inventory 5,000 yards The amount of yards the company expected to use per jersey is 2.75 yards 2.63 yards 3.25 yards 3.50 yards 2.50 yards

3.50 yards

Which of the following statements is incorrect with regard to process costing? a. Nonuniform input occurs when production costs are added at different points in time in a production department. b. The percentage of completion for all units in a subsequent department with respect to transferred in costs from a previous department is 100%. c. Manufacturers who operate in a mass production environment choose between job costing and process costing to account for manufacturing overhead. d. In sequential processing, manufacturing occurs "in order" of production departments. e. When you reach the end of step 3 on the production cost report for the final department in the production process, given the sales price, the unit gross profit can be calculated.

C- Manufacturers who operate in a mass production environment choose between job costing and process costing to account for manufacturing overhead.

1. Which of the following is incorrect regarding cost behavior equations? a. If costs are nonlinear, managers can develop cost behavior equations by defining multiple relevant ranges. b. The account analysis method is considered the most subjective tool available for developing a cost behavior equation. c. If a data set only contains two data points, the high low method and regression analysis will yield different cost behavior equations. d. The y-intercept value in a cost behavior equation represents total expected costs when the activity level is zero. e. The relevant range is defined as the range of activity over which a cost behavior equation is valid.

C-If a data set only contains two data points, the high low method and regression analysis will yield different cost behavior equations.

Which of the following statements is correct concerning standard costing and/or variance calculations? a. Price (rate) standards represent the expected cost per unit of output. b. A favorable quantity (efficiency) variance indicates that a company used more input than allowed for the actual level of output. c. Variances falling outside of an acceptable range of outcomes are considered immaterial variances. d. Standards are only used by companies at the end of the period to evaluate performance and control operations. e. A price (rate) variance calculates the difference between what a company paid and what it expected to pay for its production input.

E- A price (rate) variance calculates the difference between what a company paid and what it expected to pay for its production input.

Which of the following statements is correct concerning budget preparation? If a participative approach is used to prepare budgets, multiple levels of management are involved in the budgeting process. A zero-based budgeting approach requires that all budgeted amounts be "justified" during the budgeting process. The preparation of the sales budget is the starting point in the budgeting process for all companies. Participative budgeting increases the risk that employees will create budgetary slack. All of the above statements are correct concerning budget preparation.

E-All of the above statements are correct concerning budget preparation.

Which of the following statements is correct? a. Period costs are relevant for purposes of calculating Gross Profit on the Income Statement for a both a merchandiser and a manufacturer. b. Product costs for a merchandiser are expensed as selling, general, and administrative expensed when the related unit is sold. c. All links in the value chain applicable to a service company are considered product costs. d. Costs incurred in the purchases link in the value chain for a merchandiser are expensed when incurred. Product costs for a manufacturer are categorized as either direct material, direct labor, or manufacturing overhead costs

E-Product costs for a manufacturer are categorized as either direct material, direct labor, or manufacturing overhead costs

Which of the following companies would be the least likely to use a job order costing system? a. Rosie the Robot Company, a manufacturer of space age cleaning robots built to customer specifications. b. Before the Amplifier, Inc., a manufacturer of custom made acoustic guitars. c. The Black Bear Trail, LLC, a builder specializing in one-of-a-kind residential Pacific Northwest cabins. d. The Wright Flight Company, a manufacturer of custom built aircrafts. e. Sweetwater, Inc., a manufacturer of mass-produced blueberry beverages.

E-Sweetwater, Inc., a manufacturer of mass-produced blueberry beverages.

Which of the following statements is incorrect with regard to the production cost report prepared in a given department? The production cost report ultimately assigns costs to units in ending inventory and units completed and transferred out. The cost per equivalent unit represents how much it costs to produce one completed unit during the period. Total costs to account for include product costs in beginning inventory and product costs added during the period. Total equivalent units for a product cost category could never exceed total physical units. Equivalent units represent the number of units that were completed in each product cost category given the costs incurred.

Equivalent units represent the number of units that were completed in each product cost category given the costs incurred.

The following information was extracted from the accounting records of Jump Around, Inc., a manufacturer of pogo sticks, for the second quarter of 2019: Raw materials used $12,000 Direct materials used $9,000 Direct labor $6,000 Indirect factory labor $1,000 Administrative and sales salaries $3,000 Building depreciation* $3,125 Building rent* $3,000 *The building is 5,000 square feet. 4,000 square feet are devoted to manufacturing operations. The remaining square footage is devoted to administrative and selling activities. Shared costs are allocated based on square footage. The company started the quarter with $15,000 in its Work in Process inventory. The balance in Work in Process inventory had increased to $20,000 by the end of the quarter. The net decrease in Finished Goods inventory during the quarter was $3,000. The company uses an actual costing system to account for MOH and includes both direct and indirect materials in its Raw Materials Inventory account. Which of the following statements is correct? The total indirect product costs for the period were $5,900. The total period costs included in the above data chart equal $1,225. Gross Profit for the period was equal to Sales Revenue minus $21,900. There was a net decrease of $5,000 in Work in Process inventory during the period. More than one of the above statements is correct.

Gross Profit for the period was equal to Sales Revenue minus $21,900.

Which of the following statements is​ correct? The preparation of managerial accounting information is not bound by Generally Accepted Accounting Principles. Financial accounting relies on the knowledge of​ broad, multidisciplinary teams to properly record and report transactions. Managerial accounting systems produce the four basic financial statements. Reports and other output provided by financial accounting systems focus on the future. Managerial accounting systems provide information primarily used by shareholders and other external users.

The preparation of managerial accounting information is not bound by Generally Accepted Accounting Principles.

1. The High School Musical Company has two divisions - Troy and Gabriella. In the previous year, Troy generated sales revenue of $300,000 and had total traceable costs of $80,000, $20,000 of which was fixed. Gabriella generated a segment margin of $30,000. Common fixed costs totaled $170,000; $50,000 of this amount was allocated to the Gabriella division. Management is considering the elimination of the Gabriella division since it has shown an operating loss for the past several years. If Gabriella is dropped, the company would open a new division in its place. The new division would generate $200,000 in sales revenue and have a contribution margin percentage equal to 40%. The new division's traceable fixed costs would total $15,000. In addition, it is projected that opening the new division would decrease Troy's sales volume by 6%. What would be the net increase in the company's operating income if Gabriella is dropped and replaced with the new division? a. $20,600 b. $100,600 c. $99,400 d. $90,600 e. $21,800

a. $20,600

Sadie May is a manufacturer of leather high heel shoes. Sadie has recently experienced turnover in her accounting department and is unable to find documentation of the prior period standard rate per direct labor hour. She needs this information to begin the budgeting process for the next period. She has determined that the total direct labor variance in the prior period was a favorable $390 and that direct laborers were paid $0.50 less per hour than expected. Management expected 5,200 direct labor hours to be logged during production based on the actual pairs of heels produced; however, 260 more actual direct labor hours were logged during production. What was the prior period's expected direct labor rate per hour? a. $9.00 per direct labor hour b. $8.50 per direct labor hour c. $12.00 per direct labor hour d. $8.00 per direct labor hour e. $10.50 per direct labor hour

a. $9.00 per direct labor hou

1. Which of the following is correct with regard to short-term decision making? a. If a company has insufficient excess capacity to fully fill a special order, the company will need to give up regular sales if they accept the special order. b. When a manufacturer outsources production of a part used in its production process, the manufacturer will typically eliminate all fixed manufacturing costs. c. In a keep/drop decision, if all of a company's fixed costs are common, a segment's segment margin will be less than its contribution margin. d. The effect on current and future customer relationships should not be considered when deciding whether to accept or reject a special order. e. A company having few competitors would typically use target costing in its pricing approach.

a. If a company has insufficient excess capacity to fully fill a special order, the company will need to give up regular sales if they accept the special order.

1. Which of the following statements is correct regarding contribution margin? a. The contribution margin income statement is organized by cost behavior. b. The total contribution margin tells managers the amount by which sales revenue exceeds cost of goods sold. c. The unit contribution margin is calculated by subtracting the unit fixed cost from the sales price. d. The variable cost percentage represents the amount from each unit sale that covers variable costs. Companies that sell more than one product can disregard sales mix when performing CVP analysis

a. The contribution margin income statement is organized by cost behavior.

Neither Paper nor Plastic Company is a manufacturer of high-end, reusable shopping bags. The company produces and sells two products: Nylon and Canvas. Currently, the company uses a traditional costing system to allocate manufacturing overhead to production based on machine hours. Management is considering switching to ABC to improve costing accuracy. In their analysis of manufacturing overhead, management has identified two activities and cost pools: Product Inspection and Machining. $96,000 of the budgeted manufacturing overhead relates to the Product Inspective activity. Product Inspection overhead costs are driven by inspection hours logged. The projected production levels for the upcoming period are 1,000 Nylon bags and 5,000 Canvas bags. In addition, the following input ratios were noted for the product lines: Nylon Canvas Inspections Hours 0.9 hours per unit 0.3 hours per unit Machine Hours 0.2 hours per unit 0.2 hours per unit Which of the following statements is correct with regard to the above information? a. Under activity based costing, 62.5% of the inspection manufacturing overhead costs will be allocated to the Canvas product line. b. The current costing system is undercosting both the Nylon and Canvas product lines with respect to inspection manufacturing overhead costs. c. Under the current costing​ system, 50% of the inspection manufacturing overhead costs will be allocated to the Nylon product line. d. The cost distortion per unit for both the Nylon and Canvas product lines with respect to inspection manufacturing overhead costs is equal. e. More than one of the above statements is correct.

a. Under activity based costing, 62.5% of the inspection manufacturing overhead costs will be allocated to the Canvas product line.

1. Holding all other variables constant, in which of the following situations will the breakeven point decrease? a. Variable expenses increase. b. Contribution margin percentage increases. c. Sales price decreases. d. Contribution margin decreases. e. Fixed expenses increase.

b- Contribution margin percentage increases

Where the Boat Leaves From, Inc., is a manufacturer of custom built boat docks. At the beginning of July, two jobs were in progress: Lanier and Sinclair. Lanier and Sinclair's June 30th job cost records showed balances of $5,000 and $2,500, respectively. During July, one additional job was started: Hartwell. Direct laborers are paid at a rate of $20 per hour. The company uses a traditional, normal costing system to account for manufacturing overhead. Manufacturing overhead is allocated to production at a rate of $10 per direct labor hour. The following actual factory overhead costs were incurred during the month: indirect materials $100, supervisor's salary $500, and equipment depreciation $200. In addition, the sales staff is paid a 2% commission on gross revenue generated from jobs sold during the month. The following additional information was extracted from the accounting records of Where the Boat Leaves From: Lanier Sinclair Hartwell Direct Materials added during July $500 $1,000 $1,400 Direct Labor costs incurred during July $150 $750 $800 Lanier and Hartwell were sold at cost plus 80% during the month. Sinclair remained in process at month end. Calculate the Gross Profit reported on the Income Statement for July assuming the Manufacturing Overhead account is closed out to cost of goods sold at the end of each month. a. $6,620 b. $6,710 c. $10,410 d. $8,330 e. $6,410

b. $6,710

Hawkins Audio Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras. A supplier has been identified who can sell the part to Hawkins at a price of $6.90 per unit. Currently, 60,000 units of the part were made last year. At this production level, the company incurred $354,000 of total variable direct product costs. Manufacturing overhead increased by $0.10 for each unit produced. Fixed manufacturing overhead costs equaled $50,000. If the part were purchased from the outside supplier, 75% of the total fixed manufacturing overhead cost would continue, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be $22,000 per year. Assume a supplier has not yet been identified and that the company will need 57,500 units of the part next year. At what purchase price per unit will Hawkins be economically indifferent between making and buying the part from the outside supplier? a. $6.90 b. $6.60 c. $6.22 d. $6.93 e. $5.83

b. $6.60

Good Morning Sunshine is a wholesaler of coffee makers. In 2020, actual September sales revenue totaled $200,000. In October and November, sales are expected to increase 10% above the previous month's sales. Prices are set to achieve a 60% gross profit. The company wants to maintain an ending merchandise inventory equal to 15% of the next month's cost of goods sold. What are the company's budgeted purchases for the month of October? a. $81,200 b. $89,320 c. $82,200 d. $88,000 e. $85,800

b. $89,320

Which of the following statements concerning performance reports is incorrect? a. The master budget variance is equal to the sum of the volume variance plus the flexible budget variance. b. A favorable sales revenue volume variance would indicate that the actual sales price was higher than the sales price used in the master budget. c. The master budget and the flexible budget use the same cost behavior equation to calculate budgeted expenses. d. The activity level used to populate the flexible budget is based on the actual "units." e. All material flexible budget variances should be investigated.

b. A favorable sales revenue volume variance would indicate that the actual sales price was higher than the sales price used in the master budget.

Back to the Basics, Inc. manufactures and sells two products: Debit and Credit. The following data were extracted from last month's accounting records: Debit Credit Sales Revenue $180,000 $180,000 Direct Material and Direct Labor 72,000 48,000 Manufacturing Overhead 72,000 84,000 Selling Expenses 14,400 10,080 Administrative Expenses 12,000 18,000 Manufacturing overhead is traceable to the products. $36,000 of the overhead assigned to Debit is fixed and $72,000 of the overhead assigned to Credit is fixed. The balance of the overhead is variable. Selling expenses consist entirely of commissions paid as a percentage of sales. Administrative expenses in the data above are common fixed costs and have been arbitrarily allocated to the products. Which of the following statements is incorrect? a. The company's operating income for the period equals $29,520. b. Credit's performance should be judged on a segment margin of $19,920. c. If Debit was expected to generate a segment margin of $30,000, it fell short of management's expectations by $8,400. d. Credit's contribution margin percentage for the period is approximately 61%. e. Debit's total traceable costs equal $158,400.

b. Credit's performance should be judged on a segment margin of $19,920

Hawkins Audio Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras. A supplier has been identified who can sell the part to Hawkins at a price of $6.90 per unit. Currently, 60,000 units of the part were made last year. At this production level, the company incurred $354,000 of total variable direct product costs. Manufacturing overhead increased by $0.10 for each unit produced. Fixed manufacturing overhead costs equaled $50,000. If the part were purchased from the outside supplier, 75% of the total fixed manufacturing overhead cost would continue, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be $22,000 per year. 1. Assume the company will need 50,000 units of the parts next year. If production is outsourced, what would be the effect on operating income? a. Increase of $33,000 b. Decrease of $10,500 c. Decrease of $54,500 d. Increase of $14,500 e. Decrease of $18,833

b. Decrease of $10,500

Which of the following would be considered a direct product cost for Sundy Zip Ups, LLC, a manufacturer of men's dress shoes? a. Salary paid to the factory supervisor. b. Leather used in the production of the shoes. c. Depreciation on the equipment in the sales offices. d. Rent paid for the manufacturing facility. e. Delivery charges paid for finished goods shipped to the customers.

b. Leather used in the production of the shoes.

1. Which of the following statements is correct concerning the above data? (use either account analysis or the high low method to develop an equation) a. If the bowling alley only accepts cash, you would need $41 to bowl 4 games. b. The total costs to bowl would be considered a mixed cost. c. For each additional game bowled, the total costs to bowl would increase by $5.58. d. The total cost to bowl per game increases as the number of games bowled increases. e. To determine the total variable costs to bowl at any activity level, the number of games bowled should be multiplied by $6.00.

b. The total costs to bowl would be considered a mixed cost.

Which of the following is NOT a reason why companies should budget? a. To provide expectations against which managers compare actual operating results. b. To guarantee that the company will be profitable. c. To generate space for managers to focus on the company's long term goals. d. To determine if "we have enough." e. To communicate to stakeholders what is important to the company.

b. To guarantee that the company will be profitable.

1. It's Five O'clock Somewhere, LLC manufactures beverage containers. The company is anxious to produce and sell a new beverage container designed to keep beverages cool for up to 2 hours. The container will sell for $3 each. Enough capacity exists in the company's plant to produce 16,000 of the new containers each month. $0.60 from every sales dollar covers variable costs. Fixed costs associated with the container would total $14,400 per month in the existing facility. The company's Marketing Department predicts that if demand for the new container exceeds the 16,000 containers that the company is able to produce in its current facility that additional manufacturing space can be rented from another company at a fixed cost of $1,000 per month. The rented facility has a production capacity of 20,000 units per month. The contribution margin percentage in the rented facility would equal 30% due to somewhat less efficient operations than in the company's current facility. Which of the following statements is correct? a. As long as the company's monthly target profit is less than or equal to $19,200, it will not need to rent the additional facility. b. To make a monthly target profit of $20,000, a total of 34,000 blenders must be produced and sold. c. The maximum monthly operating income that the company could make with the two facilities is $27,800. d. The monthly breakeven point in the rented facility is greater than the monthly breakeven point in the existing facility. e. If the company operates below full capacity in its current facility, the total fixed costs will be less than $14,400.

b. To make a monthly target profit of $20,000, a total of 34,000 blenders must be produced and sold.

Upon review of Make Your Mark, Inc.'s Statement of Cash Flows, the following was noted: Cash Flows from Operating Activities $25,000 Cash Flows from Investing Activities ($70,000) Cash Flows from Financing Activities $60,000 From this information, the most likely explanation is that Make Your Mark is a. using cash from operations and selling long term assets to pay back long term debt. b. using cash from operations and issuing common stock to purchase long term assets. c. using cash from operations to purchase long term assets and buy back treasury stock. d. issuing stock to fund operations and purchase long term assets. e. selling long term assets to fund operations and buy back treasury stock.

b. using cash from operations and issuing common stock to purchase long term assets.

The Daily Grind, Inc., a manufacturer of coffee makers, uses the weighted average method in its process costing system. The company allocates manufacturing overhead to production at a rate of $6 per direct labor hour using a traditional, normal costing system. In its first production department, assembly, all direct material is added at the beginning of the production process and conversion costs are incurred uniformly throughout the production process. On July 31st, 8,000 coffee makers, 75% complete with respect to conversion costs, were in the assembly department's work in process inventory. These units were assigned total costs of $27,780 on the July production cost report, $3,780 of which was for conversion costs. 120,000 coffee makers were started during August. At the end of August, 10,000 coffee makers were still in production in the assembly department. These units were 80% complete with respect to the conversion process. The following additional data are available for the department's August activities: Direct Materials Requisitioned $371,520 Direct Labor Costs Incurred* $43,560 *The direct labor wage rate was $18.15 per direct labor hour. What as the cost to assemble one coffee maker in July? a. $3.47 b. $3.68 c. $3.63 d. $3.58 e. $4.85

c. $3.63

The Dharma Initiative manufactures 1970's style clothing and accessories. The company produces two main products: Bellbottoms and Platform Boots. Currently Dharma uses a traditional overhead rate in which Manufacturing Overhead is allocated to products based on direct labor hours logged. The projected production levels for the period are 1,000 units of Bellbottoms and 500 units of Platform Boots. Due to profitability concerns, management is considering switching to Activity Based Costing (ABC). Management has divided Manufacturing Overhead Costs into three activities and cost pools: Assembly $32,000; Machine Setup $12,000; and Product Movement $102,600. Management has identified the following cost drivers for each overhead activity: direct labor hours for assembly, number of setups for machine setup, and number of moves for product movement. The following additional information has been compiled for each product line: Bellbottoms Platform Boots Direct Material Cost $10.50 per unit $15.25 per unit Direct Labor Requirements* 0.75 direct labor hours per unit 1.0 direct labor hours per unit Machine Setup Requirements 1 setup per 10 units produced 1 setup per 25 units produced Product Movement Requirements 1 move per 25 units produced 1 move per 25 units produced *Direct laborers are paid at a rate of $20 per hour. The per unit amount by which the Bellbottoms line is overcosted/undercosted by the current costing system is a. $20.71 undercosted b. $19.28 overcosted c. $9.64 undercosted d. $1.18 overcosted e. $25.01 undercosted

c. $9.64 undercosted

1. You own a 500-unit apartment complex and charge a monthly rental rate of $1,250 per unit. When the apartments are 80% occupied, monthly operating costs total $200,000. When occupancy dips to 75%, monthly operating costs fall to $197,000. A nearby manufacturing plant has just announced that it is expanding and adding additional jobs in the upcoming year. As a result, you anticipate occupancy will increase to 90%. Given the high low method is used to predict cost behavior, which of the following statements is incorrect? a. Monthly costs are expected to increase by $120 for each additional unit that is occupied. b. At 90% occupancy, the expected monthly operating costs are $206,000. c. Annual fixed costs are expected to be $152,000. d. At 90% occupancy, the expected monthly operating income is $356,500. e. If 505 units were occupied, the expected costs should not be calculated using the cost behavior formula developed.

c. Annual fixed costs are expected to be $152,000.

1. Clarke Central's class of 2001 is currently planning its 20-year class reunion. In estimating costs for the 20-year reunion, the planning committee compiled the number of people in attendance and related total costs for each previous class reunion held. The data was then entered in a spreadsheet program and regression analysis was performed. The analysis resulted in the following cost behavior equation: y=56x+800 and indicated that 95% of the variability in total costs could be explained by the number of people in attendance. Which of the following statements is incorrect if the planning committee's best estimate is that 200 people will attend the 20-year reunion, and the committee expects all costs to be covered by the people in attendance? a. The best estimate of total costs for the 20-year reunion is $12,000. b. If the estimate is correct, the total fixed costs will be $800 c. Assuming the estimate is realistic, the minimum price that should be charged per person is $56. d. It is unlikely that an outlier exists in the data used to perform the regression analysis. e. The x variable coefficient is 56, and the intercept coefficient is 800.

c. Assuming the estimate is realistic, the minimum price that should be charged per person is $56.

1. Which of the following statements is true with regard to cost behavior? a. Cost behavior relates to the categorization of costs as either product or period costs. b. Variable costs do not change in total as the activity level changes. c. Fixed costs, calculated on a per unit basis, are inversely related to the change in activity level. d. Mixed costs are constant in total. e. More than one of the above statements is true.

c. Fixed costs, calculated on a per unit basis, are inversely related to the change in activity level.

When It Rains, It Pours, LLC, a manufacturer of umbrellas, is considering switching its operations to an Activity Based Costing system. The following manufacturing overhead activities and cost drivers have been identified: Activity Cost Driver Description Machine Setup Number of Machine Setups 1,000 umbrellas are manufactured per setup. Machine Assembly Machine Hours Logged Each umbrella requires 0.2 hours of machine time. Product Inspection Inspection Hours Logged Each umbrella requires 0.1 hours of inspection time. Product Movement Number of Moves 500 umbrellas are moved at a time. General Factory Machine Hours Logged Additional MOH costs not associated with the above activities. Based on the above descriptions, which of the following correctly pairs the activity with its appropriate cost level? a. General Factory . . . batch level cost b. Machine Setup . . . unit level cost c. Machine Assembly . . . unit level cost d. Product Inspection . . . batch level cost e. Product Movement . . . facility level cost

c. Machine Assembly . . . unit level cost

C. McGill, Inc. manufactures electricity blocking blankets in two sequential production departments: machining and packaging. Two direct materials, fabric and insulation, are used in the machining department. The fabric is added at the beginning of the production process and accounts for 40% of the direct material input. The insulation is added when the conversion process is 85% complete. Conversion costs are incurred uniformly throughout production in the machining department. The machining department began July with 225 blankets in process and started another 540 blankets during the month. At month​ end, 220 blankets remained in process in the department and were assigned a cost of​ $10,450 on the​ department's July production cost report, $3,850 of which was for conversion costs. Management estimates that​ 30% more in conversion costs need to be added to these blankets in the machining department before they can be transferred to the packaging department. Given the above information, which of the following statements is incorrect with regard to the machining department's July operations? a. The costs transferred to the packaging department during July equal $54,500. b. The total costs to account for in machining during July equals $64,950. c. Physical units in ending inventory each receive $25 of conversion costs. d. Machining worked on 765 physical units during July. e. The cost to fully machine a blanket during July equals $100.

c. Physical units in ending inventory each receive $25 of conversion costs.

Business in the Front, Party in the Back, a manufacturer of hairstyling products, provided the following information for its most popular product, Billy Ray: Standard Unit Cost Standard Input Ratio Direct Material $14 per unit of product 8 ounces Direct Labor $2 per unit of product 0.25 hours During February the company purchased 320,000 ounces of direct material at a total cost of $608,000. The direct labor wages for February were $75,600. 38,000 units of product were manufactured during February, using 285,000 ounces of direct material and logging 10,000 direct labor hours. Given the above data, which of the following statements is correct? a. The direct labor hours allowed for the actual output level were greater than the direct labor hours logged. b. The Direct Material Price Variance is favorable. c. The actual direct material unit input ratio was less than the standard direct material unit input ratio. d. The actual direct labor rate was greater than the standard direct labor rate. e. None of the above statements are correct.

c. The actual direct material unit input ratio was less than the standard direct material unit input ratio.

The following partial Income Statement was prepared for Wooden Wick, a merchandiser of candles: Wooden Wick Partial Income Statement For the year ended December 31, 2019 Operating Income $25,100 Gain on Sale of Equipment 5,500 Net Income $30,600 All of the company's sales are made on account. For 2019, sales revenue equaled $47,000. At the beginning of the year, the accounts receivable balance was $3,500. The balance had increased to $9,200 by year-end. The company uses the direct write off method to account for bad debts. No accounts were written off or reinstated during the year. All of the company's inventory purchases are made on account, and accounts payable consists solely of inventory purchases. At the beginning of the year, the Inventory balance was $2,400. By year-end, the balance had increased by $900. The net decrease in the accounts payable balance during the year was $100. The company's selling and administrative expenses for 2019 were $3,900 and included $150 of noncash expenses. Cash selling and administrative expenses are paid when incurred. Which of the following statements is correct with respect to the company's operating activities? a. The cash operating expenses for the year totaled $22,750. b. Cash received from customers during the year equaled $56,200. c. The cash flows from operating activities for the year were $18,550. d. $18,900 was paid to suppliers during the year for inventory purchases. e. $5,500 related to the sale of equipment is included as a source of cash in the operating section.

c. The cash flows from operating activities for the year were $18,550.

Which of the following statements is correct with regard to Activity Based Costing (ABC)? a. Only manufacturing companies can use ABC. b. ABC categorizes all manufacturing overhead activities as unit level activities. c. The costs of implementing ABC are generally lower for companies that have established information technology systems. d. ABC uses only volume based cost drivers in the calculation of predetermined manufacturing overhead rates. e. If the consumption ratios using the traditional method are the same as the consumption ratios using ABC, cost distortion will exist.

c. The costs of implementing ABC are generally lower for companies that have established information technology systems.

Hypnotize, Inc. is a merchandiser of items influenced by music from the 1990s. The company began 2019 with $6,000 in cash and reported a net loss of $600 on its 2019 income statement. During 2019 a gain of $250 was reported on the sale of a piece of equipment with a book value of $1,000. A new piece of equipment was purchased at a cost of $8,000 to replace the equipment that was sold. The company paid $1,500 from its available cash balance to purchase the equipment and took out a cash long-term note payable from its bank for the remaining balance. The company always pays cash dividends on the date of declaration. The beginning retained earnings was $10,000 and the ending retained earnings was $8,200. Given a reported positive cash flow of $1,500 from its operating activities during the year, which of the following statements is incorrect? a. The company's cash flows from financing activities were $5,300. b. The company operated within its means during the year. c. The ending cash reported on the balance sheet was $4,550. d. The company's overall investing activities used cash of $6,750. e. The net change in cash for the year was $50.

c. The ending cash reported on the balance sheet was $4,550.

Quidditch, Inc. is a merchandiser of a single line of broomsticks. At the beginning of the day, the shop had 15 brooms in its inventory. During the day, 5 new brooms were delivered to the shop. By close of business, only 9 brooms remained in inventory. The purchase price of each broom from the supplier is $250. In addition, the company pays $5 for shipping on each broomstick and 2% of the purchase price for delivery insurance on each broomstick. These costs have remained consistent since the company began business. Quidditch sells each broomstick for $475. Which of the following statements is correct? a. The shipping cost of $5 per broom would be reported as an operating expense on the Income Statement. b. The company's total gross profit for the day is $1,935. c. The gross profit per broomstick is $215. d. The product cost per broomstick is $250. e. The ending inventory reported on the company's balance sheet is $2,860.

c. The gross profit per broomstick is $215.

1. Reach the Summit, Inc. is planning to open a new rock climbing facility in Athens. Summit will generate revenue by selling monthly memberships that give climbers unlimited access to the facility. The facility will have an estimated $240,000 in assets. The owners expect to earn a 15% annual return on the company's assets. The facility's annual fixed costs are estimated to be $42,000. The variable costs per climber are estimated to be $15 per month. After researching the market, the company believes that it can sell 100 memberships in its first month of operations if it does not require an initial signup fee. Summit can only charge $75 per month for a membership because of competition from another facility in the area. Which of the following statements is incorrect regarding the company's first month of operations? a. Holding all other variables constant, if the company reduces variable costs to $10 per member, the company would meet its monthly target profit. b. If fixed costs are reduced to $3,000 per month and all other variables remain constant, the company would meet its monthly target profit. c. The total monthly target costs for Reach the Summit is $4,000. d. Reach the Summit is considered a price taker in its current market. e. If it makes no changes to its projected operations, the company will fall short of its monthly target profit by $500.

c. The total monthly target costs for Reach the Summit is $4,000.

Unwind, Inc. is a merchandiser of herbal tea products. The company will begin operations on January 1 with a $500 initial investment from its sole owner. The company expects sales in its first month of operations to total $5,000. All sales will be cash sales. Inventory purchases during January are expected to equal $1,500. Purchases are paid for in the month following the month of purchase. No purchase discounts are available. Unwind's employees are paid on the last day of each month. Expected salaries and wages for January are $835. The company leases its retail space for $500 per month. Rent is due on the 15th of each month. Utilities are paid on the first day of the following month. Unwind anticipates its January utility bill will be $250. Depreciation of $165 is recorded under the straight line method of depreciation at the end of the month. The company has no other expenses. Unwind is required to maintain a minimum cash balance of $2,500 at the end of each month by the bank. Which of the following statements is correct? a. Unwind's expected ending cash balance on January 31st is $3,750. b. Cash collections expected from Unwind's customers in January cannot be calculated without information related to cash collection patterns. c. Unwind could pay up to $1,665 in cash dividends to its owner during January without dipping below the required minimum cash balance. d. In order to calculate the cash payments expected to be paid to Unwind's supplier in January, the company's December purchases would need to be given. e. Unwind should anticipate having to pull $750 from an established line of credit if it makes no changes to the above plan.

c. Unwind could pay up to $1,665 in cash dividends to its owner during January without dipping below the required minimum cash balance.

Which of the following statements is incorrect with regard to direct material variances and/or direct labor variances? The direct labor efficiency variance can first be calculated at the point of production. The quantity purchased is used to determine the direct materials price variance. The sum of the direct labor rate variance and the direct labor efficiency variance will always equal the total direct labor variance. The standard input ratio for direct material represents the actual amount of direct material used to produce one unit of product. The production manager is held responsible for all direct labor variances.

d-The standard input ratio for direct material represents the actual amount of direct material used to produce one unit of product.

The Daily Grind, Inc., a manufacturer of coffee makers, uses the weighted average method in its process costing system. The company allocates manufacturing overhead to production at a rate of $6 per direct labor hour using a traditional, normal costing system. In its first production department, assembly, all direct material is added at the beginning of the production process and conversion costs are incurred uniformly throughout the production process. On July 31st, 8,000 coffee makers, 75% complete with respect to conversion costs, were in the assembly department's work in process inventory. These units were assigned total costs of $27,780 on the July production cost report, $3,780 of which was for conversion costs. 120,000 coffee makers were started during August. At the end of August, 10,000 coffee makers were still in production in the assembly department. These units were 80% complete with respect to the conversion process. The following additional data are available for the department's August activities: Direct Materials Requisitioned $371,520 Direct Labor Costs Incurred* $43,560 *The direct labor wage rate was $18.15 per direct labor hour. What was the conversion cost included in work in process - assembly on September 1st? a. $5,040 b. $4,900 c. $3,690 d. $3,920 e. $4,823

d. $3,920

Blue Sky, Inc. generated $265,000 in sales during September 2020. Of this amount, $65,000 was for cash. The remaining $200,000 of sales were made on account. The company budgeted $350,000 in sales for October 2020 and expect sales in November 2020 to be 10% lower than October's sales. 20% of the total budgeted sales are for cash; the remaining budgeted sales are expected to be made on account. The historical collection pattern for sales made on account is as follows: month of sale 60% first month following the month of sale 35% second month following the month of sale 4% The balance is expected to be uncollectible. Given the above information, calculate the total expected cash receipts in November. a. $322,100 b. $367,800 c. $257,200 d. $320,200 e. $321,390

d. $320,200

Red Stapler, Inc. is a wholesaler of office supplies. In the current year, actual March sales revenue totaled $100,000. April sales revenue is expected to increase 20% above March sales revenue. May sales revenue are expected to decrease 10% below April sales revenue. June sales revenue is expected to be $90,000. Prices are set to achieve a 60% gross profit. The company wants to maintain an ending merchandise inventory equal to 15% of the next month's cost of sales. The ending inventory requirement was met at the end of March. Accounts Payable consist solely of inventory purchases. Purchases from suppliers carry payment terms of 2/10, net 30. All invoices from the supplier are dated as of the end of the month regardless of when purchases are made during the month. What is Red Stapler's expected cash disbursement in May to its supplier assuming it pays within the discount period? a. $47,280.00 b. $41,277.60 c. $42,336.00 d. $46,334.40 e. $45,276.00

d. $46,334.40

The Dharma Initiative manufactures 1970's style clothing and accessories. The company produces two main products: Bellbottoms and Platform Boots. Currently Dharma uses a traditional overhead rate in which Manufacturing Overhead is allocated to products based on direct labor hours logged. The projected production levels for the period are 1,000 units of Bellbottoms and 500 units of Platform Boots. Due to profitability concerns, management is considering switching to Activity Based Costing (ABC). Management has divided Manufacturing Overhead Costs into three activities and cost pools: Assembly $32,000; Machine Setup $12,000; and Product Movement $102,600. Management has identified the following cost drivers for each overhead activity: direct labor hours for assembly, number of setups for machine setup, and number of moves for product movement. The following additional information has been compiled for each product line: Bellbottoms Platform Boots Direct Material Cost $10.50 per unit $15.25 per unit Direct Labor Requirements* 0.75 direct labor hours per unit 1.0 direct labor hours per unit Machine Setup Requirements 1 setup per 10 units produced 1 setup per 25 units produced Product Movement Requirements 1 move per 25 units produced 1 move per 25 units produced *Direct laborers are paid at a rate of $20 per hour. Which of the following statements is correct with regard to the above information? a. Based on the information given in the chart, all three activities identified by ABC appear to be batch level activities. b. Based on appropriate consumption ratios, ABC equally allocates the overhead costs related to the product movement activity to the two product lines. c. The direct product cost for the Bellbottoms line differs between the traditional costing system and activity based costing system by $9.75 per unit. d. Assuming the company marks up costs 40% to determine sales price, the Platform Boots line is being overpriced by approximately $27 per unit. e. More than one of the above statements is correct.

d. Assuming the company marks up costs 40% to determine sales price, the Platform Boots line is being overpriced by approximately $27 per unit.

1. For CVP analysis calculations, which of the following statement is incorrect? a. The break-even point is the point at which operating income is equal to $0. b. In target profit calculations, sales revenue exceeds total costs. c. If sales volume is expected to be higher than the indifferent point, management should choose the cost structure with higher fixed costs. d. CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit. e. A company's sales mix is ultimately determined by the market.

d. CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit.

1. Why would a manufacturer who produces its product in small batches choose to use job costing to track its manufacturing costs? a. The direct material and direct labor costs are not easily identifiable for each batch. b. Each batch is typically completed in the period in which it is started. c. The conversion process is identical for all batches worked on during the period. d. Each batch requires different product costs for completion. e. To minimize the risk of cost distortion related to overhead allocation.

d. Each batch requires different product costs for completion

A merchandiser has created a sales budget for its first five months of operations. The sales budget includes unit sales and sales revenue. The company has a policy that each month's ending inventory in units must equal 15% of the next month's anticipated unit sales. Given this information, the company can prepare purchases budgets for how many months? a. Two b. One c. Five d. Four e. Three

d. Four

1. Hold That Plank manufactures a single line of yoga mats and is based in Nashville, Tennessee. The company is considering relocating its operations to Franklin, Tennessee in an effort to increase profit. For the year ended December 31, 2019, the company manufactured and sold a total of 15,000 mats. The following additional information was prepared for 2019: Sales Revenue $750,000 Contribution Margin $450,000 Fixed Costs $275,000 If the company relocates to Franklin, the sales price will not change, but the variable manufacturing costs per mat will decrease to $18. No other variable costs will be affected. Annual fixed costs will increase by $50,040. Based on the above information, which of the following statements is correct? a. The company's operating income for 2019 was $25,000. b. If the company relocates to Franklin, the unit contribution margin will decrease by $12. c. At an annual sales level of 4,170 units, the company be indifferent between remaining in Nashville and moving to Franklin. d. If the company relocates to Franklin, 21,095 mats must be sold to achieve a target profit of $350,000. e. At an annual sales level above the indifference point, the company should choose to remain in Nashville.

d. If the company relocates to Franklin, 21,095 mats must be sold to achieve a target profit of $350,000.

Elevate, Inc. is a manufacturer of bed frames. The company allocates manufacturing overhead to production using a single, plantwide overhead rate based on the most appropriate cost driver for its highly automated manufacturing environment. The following information is available for the year just ended: Estimated Manufacturing Overhead $350,000 Estimated Direct Labor Hours 50,000 Estimated Machine Hours 10,000 Actual Direct Labor Hours 55,000 Actual Machine Hours 12,000 Actual Manufacturing Overhead $362,000 Calculate the amount by which manufacturing overhead was either underallocated or overallocated for the year. a. Overallocated by $35,000 b. Overallocated by $23,000 c. Underallocated by $12,000 d. Overallocated by $58,000 e. Underallocated by $278,000

d. Overallocated by $58,000

That's How We Roll is a bowling center. The following total costs were incurred during two different sessions for a single bowler: Games Bowled Shoe Rental Game Fees Total Costs to Bowl 3 $6.00 $12.75 $18.75 6 $6.00 $25.50 $31.50 1. The cost behavior for each cost listed above is: a. Shoe Rental - variable; Game Fees - variable b. Shoe Rental - fixed; Game Fees - mixed c. Shoe Rental - mixed; Game Fees - variable d. Shoe Rental - fixed; Game Fees - variable e. Shoe Rental - fixed; Game Fees - fixed

d. Shoe Rental - fixed; Game Fees - variable

Which of the following statements concerning budget preparation for a merchandiser is incorrect? a. Bad debt expense under the percentage of sales method is calculated by multiplying total sales on account by the estimated uncollectible percentage. b. Timing differences can cause operating expenses to differ from operating cash outflows. c. For the cash disbursements budget, it is assumed that the company will take advantage of all available purchase discounts. d. The operating expense budget includes both variable product costs and variable period costs. e. The purchases budget is prepared using the cost of sales.

d. The operating expense budget includes both variable product costs and variable period costs.

If a net increase is reported in the Work in Process Inventory account during the period, which of the following statements is always true? a. The cost assigned to units sold is greater than the total manufacturing costs added to production during the period. b. The cost assigned to units completed is greater than the total manufacturing costs added to production during the period. c. Raw Material used in production is less than Raw Material purchased during the period. d. The sum of Direct Material, Direct Labor, and Manufacturing Overhead costs added during the period is greater than the Cost of Goods Manufactured. e. The Cost of Goods Sold is less than the Cost of Goods Manufactured during the period.

d. The sum of Direct Material, Direct Labor, and Manufacturing Overhead costs added during the period is greater than the Cost of Goods Manufactured.

Peppermint Kiss is a manufacturer of candy. It currently manufactures 3 different product lines. The manager of each product line is held responsible for generating revenue and controlling costs. The following information was provided by the Chocolate Candy product line for the prior period: Actual Results (10,000 units) Master Budget (8,000 units) Sales Revenue $20,000 $12,000 Variable Manufacturing Costs $6,250 $2,000 Fixed Manufacturing Costs $4,350 $5,000 Variable SG&A $1,000 $1,600 Fixed SG&A $500 $500 Which of the following statements is incorrect? a. The Chocolate Candy product line is a profit center. b. The revenue volume variance is favorable and the variable cost volume variance is unfavorable. c. If the company's materiality threshold is $900, three of the flexible budget variances should be investigated. d. The total fixed costs on the flexible budget would equal $6,875. e. The budgeted unit sales price is $0.50 lower than the actual unit sales price.

d. The total fixed costs on the flexible budget would equal $6,875.

Which of the following is not an advantage of decentralized operations? Employees experience increased motivation. The information available to make decisions is more accurate. Customer relations are improved. Top managers are able to focus on strategic decision making. Concerns about a lack of goal congruence are eliminated.

e-Concerns about a lack of goal congruence are eliminated.

When It Rains, It Pours, LLC is a manufacturer of umbrellas. During the previous period, $780,000 of direct materials were requisitioned and $150,000 of direct labor costs were incurred in the company's manufacturing operations. The company uses actual costing to account for manufacturing overhead. The actual manufacturing overhead costs incurred totaled $640,000. The following additional information was extracted from the company's accounting records: Cost of Goods Manufactured $1,650,000 Sales Revenue $2,500,000 Operating Expenses $410,000 Given a net decrease in Finished Goods Inventory of $50,000, calculate Operating Income for the previous period. a. $440,000 b. $800,000 c. $490,000 d. $470,000 e. $390,000

e. $390,000

1. #namaste manufactures yoga props such as straps and blocks. Straps are sold to customers at a price of $15 per strap. The company is currently operating at 75% capacity with regard to strap production and produces 30,000 straps per year. At the current operating level, the cost of producing and selling a single strap is as follows: Variable Product Costs $3.20 Fixed Product Costs 1.30 Variable Period Costs 0.50 Fixed Period Costs 0.45 Total Cost per Mat $5.45 An order has been received from a chain of yoga studios for 12,000 straps at a special price of $10 per strap. If the special order is accepted, the unit variable manufacturing costs will increase by $0.20 per strap due to the addition of a special label the studio has requested be included on the straps. Additionally, the total fixed product costs will increase by 5%. Variable period costs consist solely of sales commissions, which will not be paid on the special order. Fixed period costs will not be affected by acceptance of the special order. By how much will operating income increase if the special order is accepted? a. $26,400 b. $50,600 c. $24,750 d. $77,250 e. $54,650

e. $54,650

Sales and operating data for the investment centers of three different companies are given below: Investment Center for Company A Investment Center for Company B Investment Center for Company C Sales Revenue $60,000 $100,000 $80,000 Capital $15,000 $50,000 $20,000 Operating Income $3,000 $9,000 $1,800 Company's Hurdle Rate 15% 18% 8% Each investment center is presented with an investment opportunity that requires a $10,000 investment and is expected to yield a rate of return of 19%. If performance is being measured using Residual Income, which investment center(s) will accept the opportunity? a. Only the investment center for Company B b. Only the investment center for Company A c. The investment centers for Companies B and C d. The investment centers for Companies A and C e. The investment centers for Companies A, B, and C

e. The investment centers for Companies A, B, and C