Accounting 610 Chapter 13 & 14

Peoria Manufacturing, Inc., has budgeted production for June of 6,000 units and for July of 8,000 units. Each unit produced requires 4 pounds of raw material A. Peoria's beginning inventory of raw material A in June is 4,800 pounds and Peoria requires 20% of the next month's budgeted production as ending raw material inventory each month. The number of pounds of raw material A budgeted to be purchased in June is: A. 25,600 pounds B. 30,400 pounds C. 22,400 pounds D. 24,000 pounds

A. 25,600 pounds

An example of a cost likely to have an indirect relationship with products being manufactured is: A. production labor costs. B. raw material costs. C. electricity costs for packaging equipment. D. none of the above.

C. electricity costs for packaging equipment.

A cash budget would include: A. gain on sale of equipment B. accounts receivable C. sale of common stock D. building depreciation

C. sale of common stock

The sequence of functions and related activities that, over the life of a product or service, can ultimately make a difference to the customer are:

The value chain

SKM Innovations, Inc., anticipates producing 40,000 units and incurring the following manufacturing costs for the coming year: raw material, $35 per unit; direct labor, $50 per unit; manufacturing overhead, $1,200,000 + $40 per unit. Using direct costing, the unit cost for the coming year will be: A. $125 B. $155 C. $85 D. $90

B. $155 Reason: Absorption costing unit product cost Direct material$ 35.00 Direct labor$ 50.00 Variable Manufacturing overhead$ 40.00 Fixed manufacturing overhead (1200000/40000)$30.00 Absorption costing Unit Product Cost$ 155.00

XYZ Company has budgeted production of Item #123 for April, May, and June of 2,400, 3,200, and 2,800 units, respectively. XYZ Company currently pays a standard rate of $3 per foot for raw material A and $5 per sheet for raw material B. Each unit produced requires 4 feet of raw material A and 2 sheets of raw material B. Each unit produced also requires 30 minutes of cutting direct labor time at a standard rate of $16 per hour and 2 hours of assembly direct labor time at a standard rate of $20 per hour. Manufacturing overhead is applied at the standard rate of $10 per direct labor hour. The total standard cost of May's budgeted production of Item #123 is: A. $198,400. B. $304,000. C. $208,800. D. $308,800.

B. $304,000 Reason: Total Standard Cost = Manufacturing cost per unit*Number of units = (3*4+5*2+16*0.5 + 20*2+10*2.5)*3200

When a cost is incurred as a result of a long-range policy decision, the cost is known as a: A. Noncontrollable cost B. Committed Cost C. Zero Based Cost D. Standard Cost

B. Committed Cost

Which of the following items would be reported on the Statement of Cost of Goods Manufactured? A. Contribution Margin B. Cost of Goods Sold C. Finished Goods Inventory D. Ending work in process inventory

B. Cost of goods sold *maybe

An example of a product cost is: A. Wages of the production line and assembly staff. B. Delivery expense for the product. C. A portion of the presidents compensation expenses D. Interest on a loan to finance a new sales office

B. Delivery expense for the product.

Which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accounting period? A. Work-in-process B. Raw Materials C. Finished Goods D. Cost of Goods Sold

B. Raw Materials

Identify the option which lists the components of the master budget in correct chronological order: A. Sales budget, direct labor budget, production budget. B. Sales budget, production budget, cash budget. C. Production budget, cash budget, cost of goods sold budget. D. Cash budget, sales budget, manufacturing over

B. Sales budget, production budget, cash budget.

An excess of cost of goods manufactured over cost of goods sold for the period represents: A. overapplied manufacturing overhead. B. an increase in finished goods inventory. C. an increase in gross profit. D. a decrease in work in process inventory.

B. an increase in finished goods inventory.

Indirect costs pertain to costs that: A. are traceable to a cost object. B. are not traceable to a cost object. C. are commonly incurred. D. are variable costs.

B. are not traceable to a cost object.

The operating budget depends on key information developed in the: A. cash forecast B. sales forecast. C. labor forecast D. operating forecast

B. sales forecast

The concept of a standard used for planning and control purposes is most like a: A. measure of ideal performance. B. unit budget. C. measure of maximum efficiency. D. measure of historical performance.

B. unit budget.

The operating expense budget of MountainTop Creations is comprised of the following budget formulas for its fixed and variable selling and administrative expense items: Selling expenses: $288,000 per year + $18 per unitAdministrative expenses: $552,000 per year + 2% of sales If MountainTop's sales budget includes sales of 5,000 units each month at a price $50 per unit, the total budgeted operating expense for the year would be: A. $1,080,000 B. $840,000 C. $1,980,000 D. $612,000

C. $1,980,000 Reason: Selling expenses = 288,000 + (18*12*5000 units) = 1,368,000 Administrative expenses = 552,000 + (2% * 5000*12*50) = 612,000 Total = 1,368,000 + 612,000 = 1,980,000

he following information is from ABC Company's general ledger: Beginning and ending inventories, respectively, for raw materials were $16,000 and $20,000 and for work in process were $40,000 and $44,000. Raw material purchases and direct labor costs incurred were $72,000 each, and manufacturing overhead applied amounted to $40,000. Determine the total cost of goods manufactured during the period. A. $184,000 B. $220,000 C. $176,000 D. $180,000

C. $176,000

Which of the following is not an important factor to consider when preparing a sales forecast? A. the state of the economy. B. seasonal demand variations. C. a change in the management team. D. competitors' actions.

C. a change in the management team.

When developing standards, a standard that will almost never be achieved and will result in an unrealistic performance target is: A. an attainable standard. B. a past experience standard. C. an ideal standard. D. a negotiated standard.

C. an ideal standard.

If all units produced during March are sold, and there is no change in the number of units in the beginning finished goods inventory, then: A. ending finished goods inventory will increase. B. income determined with absorption costing will be higher than income determined with direct costing C. income determined with absorption costing will equal income determined with direct costing D. ending work in process inventory will increase with absorption costing.

C. income determined with absorption costing will equal income determined with direct costing

Standard costs are comprised of two elements: A. the quantity of input and the cost per unit of output. B. the quality of input and the cost per unit of output. C. the quantity of input and the cost per unit of input. D. the quality of input and the cost per unit of input.

C. the quantity of input and the cost per unit of input.

Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because: A) Direct costs identified with the product or activity may not be accurately assigned. B) Fixed costs will change in total if the volume of activity changes. C) All costs may not have been allocated to the product or activity. D) Arbitrarily allocated costs may not behave in the way assumed in the allocation method.

D) Arbitrarily allocated costs may not behave in the way assumed in the allocation method.

Canine Supply Company's budgeted sales for January, February, and March are $120,000, $160,000, and $140,000, respectively. Based on past experience, ABC expects that 25% of a month's sales will be collected in the month of sale, 65% in the following month, and 9% in the second month following the sale. Budgeted cash receipts for the month of March would be: A. $141,800 B. $140,000 C. $135,400 D. $149,800

D. $149,800

Liberty Company estimates total overhead costs to be $900,000 and will apply overhead to units produced based on 200,000 estimated machine hours. During the year Liberty Company incurred actual overhead costs of $925,000 and achieved 220,000 machine hours. Liberty Company's predetermined overhead rate is: A. $4.20 per machine B. $4.09 per machine C. $4.63 per machine D. $4.50 per machine

D. $4.50 Reason: Estimated total overhead/ estimated machine hours

The use of activity-based costing information to support the decision-making process is known as: A. Cost-based management B. Value Chain Analysis C. Cost distortion analysis D. Activity-based management

D. Activity-based management

Budget slack is: A. Sometimes called padding or cushion B. The result of budget estimates submitted that they are slightly higher than what the costs are really expected to be. C. An allowance for contingencies built into a budget. D. All of the answers are correct.

D. All answers are correct.

The fixed cost classifications identified with a time frame perspective are known as: A. Variable cost and fixed cost. B. Direct cost and indirect cost. C. Product cost and period cost D. Committed cost and discretionary cost.

D. Committed cost and discretionary cost.

The budgeting process that most likely creates an attitude supportive of achieving organization goals is: A. Proportionate increase approach B. Zero-Based Approach C. Top-Down Approach D. Participative Approach

D. Participative Approach

A materials purchases budget must be completed immediately after the preparation of the: A. Direct labor budget B. Operating Expense Budget C. Cash Budget D. Production Budget

D. Production Budget

The three sections of a statement of cost of goods manufactured include: A. sales revenue, gross profit, selling and administrative expenses. B. variable expenses, contribution margin, fixed expenses. C. direct costs, indirect costs, operating profit. D. raw material, direct labor, manufacturing overhead.

D. Raw Material, Direct labor, manufacturing overhead.

Cost accounting is concerned with: A. accumulation and determination of product, process or service cost. B. income measurement and inventory valuation. C. generally accepted accounting principles. D. all of the above.

D. all of the above.

Standard costs are used in which of the following phases of the management process? A. planning. B. organizing. C. control. D. both planning and control.

D. both planning and control.

Cost of Goods Manufactured can be computed as:

beginning balance of work in process + raw materials used + direct labor costs incurred +manufacturing overhead costs applied ─ ending balance of work in process.

The term "cost" means: a. the price paid for maintenence supplies b. The salary paid to a supervisor c. The price charged by an accounting firm for its audit services d. all of the above

d. all of the above

Strategic cost management initiatives that would occur in an organization's value chain functions begins with

research and development, customer service

SurfsUp Specialty Products has the following inventory account balances and related manufacturing cost flow information for the month of October: Raw Materials, October 1 $20,000 Raw Materials, October 31 $25,000 Work in Process, October 1 $45,000 Work in Process, October 31 $40,000 Finished Goods, October 1 $68,000 Finished Goods, October 31 $62,000 Raw materials purchased ? Raw materials used $75,000 Direct labor incurred ? Manufacturing overhead incurred $120,000 Cost of goods manufactured $300,000 Cost of goods sold ? Raw materials purchased in October is: A. $80,000 B. $90,000 C. $5,000 D. $70,000

A. $80, 000 Reason: Raw Material Purchases = Raw materials used + Ending raw materials - Beginning raw materials = 75,000 + 25,000 - 20,000 =$80,000

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a: A. Cost Driver B. Cost Object C. Direct Cost D. Cost Applier

A. Cost Driver

Direct costing may be used for: A. Internal Reporting Purposes B. External Financial Reporting Purposes C. Income Tax Reporting Purposes D. All Answers are correct

A. Internal Reporting Purposes

Which of the following describes the correct sequence of flow of costs for a manufacturing firm? A. Raw materials, work-in-process, finished goods, cost of goods sold. B. Raw materials, finished goods, work-in-process, cost of goods sold. C. Raw materials, work-in-process, cost of goods sold, finished goods. D. Work-in-process, raw materials, finished goods, cost of goods sold.

A. Raw materials, work-in-process, finished goods, cost of goods sold.

Advertising expense would appear in which of the following budgets? A. Sales budget. B. Manufacturing overhead budget. C. Purchases budget. D. Operating expense budget.

A. Sales Budget

Which of the following items would be included in the operating expense budget? A. Sales commissions B. Raw material purchases C. Cash receipts D. Cost of goods sold.

A. Sales commissions

When developing standards of performance, the type of standard that is most useful for planning and control is: A. an attainable standard. B. a past performance standard. C. a negotiated standard. D. a logical standard.

A. an attainable standard.

In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account: A. cost of goods sold is debited to finished goods inventory. B. cost of goods manufactured is debited to finished goods inventory. C. raw materials purchases are debited to work in process. D. direct labor costs are credited to work in process.

A. cost of goods sold is debited to finished goods inventory.

Which of the following costs are included in the "for product costing purposes" in the big-picture cost classification model? A. product cost and period cost B. differential cost and opportunity cost C. committed cost and controllable cost D. variable cost and fixed cost

A. product cost and period cost

Standards are most appropriately used to: A. support the planning and control processes of the firm. B. calculate the unit cost of a product or service. C. reward workers and managers who meet them D. penalize workers and managers who do not meet them.

A. support the planning and control processes of the firm.

Standards are considered to be most useful when they are expressed in: A. terms most easily related to by the individual whose performance is being evaluated. B. unit and total costs for the accounting period for the department being evaluated. C. dollars per unit of input to the manufacturing process. D. quantities per unit of output from the process being evaluated.

A. terms easily related to by the individual whose performance is being evaluated.

The advantage of a continuous budget is: A. that the final budget for any quarter should be more accurate. B. that it is less costly to produce. C. that it eliminates the need for annual planning. D. that it saves time for other management activities.

A. that the final budget for any quarter should be more accurate.

When compared to a single-period budget, ___________ budgets are generally more expensive to maintain because more time and effort is required in their preparation. A. Continuous B. Top-Down C. Operating D. Zero-based

A Continuous

Canine Supply Company has a cash balance of $65,000 on October 1 and requires a minimum ending cash balance of $50,000. Cash receipts and disbursements budgeted for August amount to $140,000 and $170,000, respectively. Canine Supply's cash budget for August will indicate cash borrowings of: A. $15,000 B. $30,000 C. $0 D. $35,000

A. $15,000