ACCT 202 Final Exam

The Assembly Department started the month with 35,000 units in its beginning work in process inventory. An additional 472,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 34,000 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month? A. 471,000 B. 473,000 C. 507,000 D. 541,000

473,000

AAA company has supplied the following data: Bags produced and sold= 240,000 Sales revenue= 1,896,000 Variable manufacturing expense= 804,000 Fixed manufacturing expense= 520,000 Variable selling and administrative expense= 180,000 Fixed selling and administrative expense= 270,000 Net operating income=122,000 The company's degree of operating leverage is closest to: A. 1.25 B. 15.54 C. 1.97 D. 7.48

7.48

Fabian Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 9,000 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 90,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. During the month 87,000 units were completed in the Assembly Department and transferred to the next processing department. There were 12,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month? A. 89,400 B. 83,100 C. 93,000 D. 87,000

89,400

Which of the following statements is true? A. A regional sales manager's salary would be a direct cost of the regional office in which the sales manager works. B. A particular cost is either direct or indirect, regardless of the cost object. C. As long as a cost is traceable to a specific cost object, it is direct cost. D. A direct cost is sometimes referred to as common cost.

A regional sales manager's salary would be a direct cost of the regional office in which the sales manager works.

A laptop computer manufacturer would consider the computer's processor chip to be a(n): A. Indirect material cost B. Direct manufacturing overhead cost C. Direct material cost D. Indirect manufacturing overhead cost

Direct material cost

Which of the following is less likely fixed costs? A. Electricity to operate factory machines B. Factory rent C. Administrative salaries D. Factory insurance

Electricity to operate factory machines

Administrative costs include: A. Executive compensation and public relations costs B. Shipping costs and sales commissions C. Factory maintenance workers wages D. Sales commissions and factory supervisors salaries

Executive compensation and public relations costs

A company's cost structure is not important as long as it achieves its sales goal.

False

All other things the same, an increase in variable expense per unit will reduce the break-even point.

False

Insurance incurred in the factory is period cost.

False

Operating leverage is a measure of how sensitive profit is to a given percentage in contribution margin.

False

Sandpaper is direct cost in furniture manufacturing.

False

Selling costs are sometimes recognized as assets.

False

There is no relationship between Profit and Contribution margin.

False

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost of attending college? A. Hal's lost wages at Burger Haven B. the cost of commuting to the Burger Haven job C. the cost of the textbooks D. the cost of the cola that Hal will consume during class

Hal's lost wages at Burger Haven

Which of the following statements about a process costing system is incorrect? A. In a process costing system, each processing department has a work in process account. B. In a process costing system, materials costs are traced to units of products. C. In a process costing system, equivalent units are separately computed for materials and for conversion costs. D. In a process costing system, overhead can be underapplied or overapplied just as in job-order costing.

In a process costing system, materials costs are traced to units of products.

Period costs are expensed on the income statement: A. In the period in which they are incurred. B. After they are capitalized. C. Never: they do not appear on the income statement. D. In the period in which the related goods are sold.

In the period in which they are incurred.

Salaries of factory supervisors and factory maintenance personnel are examples of _________ labor costs. A. Contributing B. primary C. Direct D. Indirect

Indirect

A contribution format income statement: A. Focuses on calculating net income. B. Is prepared primarily for external reporting purpose. C. Is mainly designed to assist with management decision making. D. Separates costs into their fixed and mixed components.

Is mainly designed to assist with management decision making.

The budget method that maintains a constant twelve-month planning horizon by adding a new month on the end as the current month is completed is called: A. a financial budget. B. a continuous budget. C. an operating budget. D. a master budget.

a continuous budget.

For which situation(s) below would an organization be more likely to use a process costing system rather than a job-order costing system? A. a paper mill that processes wood pulp into large rolls of paper B. a masonry company that builds brick walls, bulkheads, and walkways designed by architects C. a shop that restores old cars to "showroom" quality D. a framing shop that builds picture frames to order for individual customers

a paper mill that processes wood pulp into large rolls of paper

When the weighted-average method of process costing is used, a department's equivalent units are computed by: A. subtracting the equivalent units in beginning inventory from the sum of the units transferred out and the equivalent units in ending inventory. B. adding the units transferred out to the equivalent units in ending inventory. C. subtracting the equivalent units in beginning inventory from the equivalent units in ending inventory. D. subtracting the equivalent units in beginning inventory from the equivalent units for work performed during the period.

adding the units transferred out to the equivalent units in ending inventory.

Costs in an operation costing system are accumulated by: A. by individual job. B. by neither job nor department. C. by both job and departments. D. by department.

by both job and departments.

When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on: A. contribution margin per unit of the constraining resource B. unit sales volume C. contribution margin per unit D. selling price per unit

contribution margin per unit of the constraining resource

A study has been conducted to determine if Product A should be dropped. Sales of the product total $400,000 per year; variable expenses total $270,000 per year. Fixed expenses charged to the product total $160,000 per year. The company estimates that $70,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the company's overall net operating income would: A. decrease by $40,000 per year B. increase by $30,000 per year C. increase by $40,000 per year D. decrease by $30,000 per year

decrease by $40,000 per year

The break-even in units sold will decrease if there is an increase in: A. unit variable expenses. B. unit sales volume. C. selling price. D. total fixed expenses

selling price.

If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative to its previous position will: A. shift downward and have a flatter slope. B. shift upward and have a steeper slope. C. shift upward and have a flatter slope. D. shift downward and have a steeper slope.

shift upward and have a flatter slope.

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

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

The variance that is usually most useful in assessing the performance of the purchasing department manager is: A. the labor efficiency variance. B. the labor rate variance. C. the materials quantity variance. D. the materials price variance.

the materials price variance.

Which of the following is NOT a correct definition of the break-even point? A. the point where total profit equals zero. B. the point where total sales equals total expenses. C. the point where total profit equals total fixed expenses. D. the point where total contribution margin equals total fixed expenses.

the point where total profit equals total fixed expenses.

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is unfavorable, the variable overhead efficiency variance will be: A. either favorable or unfavorable. B. zero. C. unfavorable D. favorable.

unfavorable

In a company's standard costing system direct labor-hours are used as the base for applying variable manufacturing overhead costs. The standard direct labor rate is twice the variable overhead rate. Last period the labor efficiency variance was unfavorable. From this information one can conclude that last period the variable overhead efficiency variance was: A. favorable and half the labor efficiency variance. B. unfavorable and half the labor efficiency variance. C. favorable and twice the labor efficiency variance. D. unfavorable and twice the labor efficiency variance.

unfavorable and half the labor efficiency variance.

Pulo Corporation uses a weighted-average process costing system. The company has two processing departments. Production starts in the Assembly Department and is completed in the Finishing Department. The units completed and transferred out of the Assembly department during April will become the: A. units in April's ending work in process in Finishing. B. units started in production in Finishing for April. C. units in May's beginning work in process in Finishing. D. units started in production in Finishing for May.

units started in production in Finishing for April.

Contribution margin is the amount remaining after: A. fixed expenses have been deducted from variable expenses. B. fixed expenses have been deducted from sales revenue. C. cost of goods sold has been deducted from sales revenues. D. variable expenses have been deducted from sales revenue.

variable expenses have been deducted from sales revenue.

Within the relevant range of activity, variable costs: A. vary in total. B. remain constant in total. C. is not predictable. D. vary per unit.

vary in total.

AAA company has supplied the following data: Bags produced and sold= 240,000 Sales revenue= 1,896,000 Variable manufacturing expense= 804,000 Fixed manufacturing expense= 520,000 Variable selling and administrative expense= 180,000 Fixed selling and administrative expense= 270,000 Net operating income=122,000 The company's unit contribution margin is closest to: A. $ 7.15 per unit B. $ 4.55 per unit C. $ 4.10 per unit D. $ 3.80 per unit

$ 3.80 per unit

Sales salaries and commissions are $10,000 when 80,000 units are sold, $ 9,000 when 90,000 units are sold, and $14,000 when 120,000 units are sold. Using the high-low method, what is the variable portion of sales salaries and commission? A. $0.10 per unit B. $0.12 per unit C. $0.08 per unit D. $0.14 per unit

$0.10 per unit

Wehn Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $40 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $28 or processed further for $18 to make the end product industrial fiber that is sold for $37. The cane juice can be sold as is for $31 or processed further for $25 to make the end product molasses that is sold for $66. How much more profit (loss) does the company make by processing the intermediate product cane juice into molasses rather than selling it as is? A. ($3) B. ($43) C. $10 D. ($17)

$10

Laurey Inc. is working on its cash budget for May. The budgeted beginning cash balance is $45,000. Budgeted cash receipts total $129,000 and budgeted cash disbursements total $124,000. The desired ending cash balance is $60,000. To attain its desired ending cash balance for May, the company needs to borrow: A. $110,000 B. $0 C. $60,000 D. $10,000

$10,000

Trumbull Corporation budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Experience indicates that none of the sales on account will be collected in the month of the sale, 60% will be collected the month after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be: A. $147,960 B. $169,800 C. $194,760 D. $197,880

$169,800

Vandel Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 6,600 units are planned to be sold in April. The variable selling and administrative expense is $9.70 per unit. The budgeted fixed selling and administrative expense is $127,380 per month, which includes depreciation of $8,580 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the April selling and administrative expense budget should be: A. $64,020 B. $118,800 C. $191,400 D. $182,820

$182,820

AAA Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March. Sales (5,000 units) ..................$ 205,000 Variable expenses .................. 125,000 Contribution margin ............... 80,000 Fixed expenses ...................... 62,400 Profit ................................... 17,600 If the company sells 5,400 units, its profit should be closest to: A. $24,000 B. $19,008 C. $17,600 D. $34,000

$24,000

The following monthly data are available for the Wyatt Corporation and it makes only one product: Unit selling price ..........$36 unit variable expenses .........$ 28 Total fixed expenses .........$ 50,000 Actual sales for the month of May .......7,000 units The margin of safety for the company during May was: A. $106,000 B. $6,000 C. $27,000 D. $56,000

$27,000

Sioux Corporation is estimating the following sales for the first four months of next year: Jan = 260,000 Feb = 230,000 March = 270,000 April = 320,000 Sales are normally collected 60% in the month of sale, 35% in the month following the sale, and the remaining 5% being uncollectible. Based on this information, how much cash should Sioux expect to collect during the month of April? A. $320,000 B. $94,500 C. $286,500 D. $192,000

$286,500

Yehle Inc. regularly uses material Y51B and currently has in stock 460 liters of the material for which it paid $2,530 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $4.55 per liter. New stocks of the material can be purchased on the open market for $5.45 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 720 liters of the material to be used in a job for a customer. The relevant cost of the 720 liters of material Y51B is: A. $5,450 B. $3,510 C. $3,924 D. $3,276

$3,924

Machain Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's standard variable manufacturing overhead rate is $2.90 per machine-hour. The actual variable manufacturing overhead cost for the month was $15,270. The original budget for the month was based on 5,000 machine-hours. The company actually worked 5,090 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,200 machine-hours. What was the variable overhead efficiency variance for the month? A. $319 F B. $509 U C. $580 U D. $190 U

$319 F

Seventy percent of Parlee Corporation's sales are collected in the month of sale, 25% in the month following sale, and 5% in the second month following sale. The following are budgeted sales data for the company: total sales: January=600k February=700k March=500k April=300k Total budgeted cash collections in April would be: A. $370,000 B. $125,000 C. $35,000 D. $210,000

$370,000

AAA Corporation uses the cost formula Y = $4,800 + $0.4·X for the maintenance cost, where X is machine-hours. The August budget is based on 9,000 hours of planned machine time. Fixed maintenance cost expected to be incurred during August is: A. $6,000 B. $3,600 C. $4,800 D. $8,400

$4,800

Wehn Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $40 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $28 or processed further for $18 to make the end product industrial fiber that is sold for $37. The cane juice can be sold as is for $31 or processed further for $25 to make the end product molasses that is sold for $66. Which costs should not be considered in the company's "sell or process further" decision-making? A. $13 (cost of crushing) B. $40 (cost of sugar cane) C. $40 (cost of sugar cane) and $13 (cost of crushing) D. $40 (cost of sugar cane) and $13 (cost of crushing) and $43 (combined costs of further processing, $18+$25)

$40 (cost of sugar cane) and $13 (cost of crushing)

AAA company is a merchandiser that provided the following information: - Sales $12,000, - Cost of goods sold $6,000, - variable selling $1,000, - fixed administrative $1,500 - Depreciation expense $500 Calculate the contribution margin of this company. A. $10,000 B. $6,000 C. $5,000 D. $4,000

$5,000

AAA Corporation uses the cost formula Y = $4,800 + $0.4·X for the maintenance cost, where X is machine-hours. If budgeted August maintenance cost is $10,800, the variable maintenance cost expected to be incurred during August is: A. $6,000 B. $3,600 C. $8,400 D. $4,800

$6,000

AAA Corporation uses the cost formula Y = $4,800 + $0.4·X for the maintenance cost, where X is machine-hours. The August budget is based on 9,000 hours of planned machine time. Maintenance cost expected to be incurred during August is: A. $4,800 B. $8,400 C. $3,600 D. $6,000

$8,400

AAA Corporation has provided its contribution format income statement for January. The company produces and sells a single product. Sales (4,400 units) ..................$ 211,200 Variable expenses .................. 127,600 Contribution margin ............... 83,600 Fixed expenses ...................... 66,400 Profit ................................... 17,200 If the company sells 4,700 units, its total contribution margin should be closest to: A. $98,000 B. $83,600 C. $18,373 D. $89,300

$89,300

Blue Corporation's standards call for 2,500 direct labor-hours to produce 1,000 units of product. During May 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be: A. 2,400 hours B. 1,800 hours C. 2,250 hours D. 2,500 hours

2,250 hours

Starg Corporation, a retailer, plans to sell 25,000 units of Product X during the month of August. If the company has 9,000 units on hand at the start of the month, and plans to have 7,000 units on hand at the end of the month, how many units of Product X must be purchased from the supplier during the month? A. 27,000 B. 25,000 C. 23,000 D. 32,000

23,000

Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales at Fab (in units) for the next three months are as follows: Budgeted unit sales: Oct=28,000 Nov=25,000 Dec=31,000 Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fab plan on producing during the month of November? A. 26,800 mugs B. 34,300 mugs C. 25,900 mugs D. 23,200 mugs

26,800 mugs

Alpha Corporation reported the following data for its most recent year: sales, $500,000; variable expenses, $300,000; and fixed expenses, $150,000. The company's degree of operating leverage is: A. 4 B. 2 C. 10 D. 8

4

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of: A. Selling costs B. Direct materials C. Administrative costs D. Manufacturing overhead

Manufacturing overhead

Indirect materials and indirect labor are classified as: A. Period costs B. Fixed costs C. Manufacturing overhead D. Nonspecific costs

Manufacturing overhead

A cost driver or an activity base: A. Is a measure of whatever causes fixed costs to occur. B. Measures whatever causes costs to vary. C. Is sometimes called a cost base. D. Is part of the organization where major operations are planned and carried out.

Measures whatever causes costs to vary.

Which of the following companies would be most likely to use a process costing system? A. Furniture manufacturer B. Movie studio. C. Hospital. D. Oil refinery.

Oil refinery.

Consider the following statements: I. A division's net operating income, after deducting both traceable and allocated common fixed costs, is negative. II. The division's avoidable fixed costs exceed its contribution margin. III. The division's traceable fixed costs plus its allocated common corporate costs exceed its contribution margin. Which of the above statements is a valid reason for eliminating the division? A. Only III B. Only I C. Only II D. Only I and II

Only II

Which of the following is not an effective way of dealing with a production constraint (i.e., bottleneck)? A. Pay overtime to workers assigned to the bottleneck. B. Subcontract work that would otherwise require use of the bottleneck. C. Pay overtime to workers assigned to work stations located after the bottleneck in the production process. D. Reduce the number of defective units produced at the bottleneck.

Pay overtime to workers assigned to work stations located after the

Which one is different from other three from the perspective of matching principle? A. SG&A B. WIP C. Raw materials D. Finished goods

SG&A

Which of the following represents the normal sequence in which the below budgets are prepared? A. Sales Budget, Budgeted Income Statement, Budgeted Balance Sheet B. Sales Budget, Budgeted Balance Sheet, Budgeted Income Statement C. Budgeted Balance Sheet, Sales Budget, Budgeted Income Statement D. Budgeted Income Statement, Sales Budget, Budgeted Balance Sheet

Sales Budget, Budgeted Income Statement, Budgeted Balance Sheet

Which of the following would produce a materials price variance? A. Shipping materials to the plant by air freight rather than by truck. B. Breakage of materials in production. C. An excess quantity of materials used. D. An excess number of direct labor-hours worked in completing a job.

Shipping materials to the plant by air freight rather than by truck.

Which of the following is NOT an objective of the budgeting process? A. To uncover potential bottlenecks before they occur. B. To communicate management's plans throughout the entire organization. C. To provide a means of allocating resources to those parts of the organization where they can be used most effectively. D. To ensure that the company continues to grow.

To ensure that the company continues to grow.

All other things the same, an increase in total fixed expenses will increase the break-even point.

True

As total sales increase beyond the break-even point, the degree of operating leverage will decrease.

True

At the break-even point, the total contribution margin and fixed expenses are equal.

True

For a capital-intensive company, the profits tend to be more flucturating than for a less capital-intensive company.

True

If two companies produce the same product and have the same total sales and same total expenses, operating leverage will be higher in the company with a higher proportion of fixed expenses in its cost structure.

True

All the following are considered to be benefits of participative budgeting, except for: A. Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others. B. When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations. C. Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization. D. The budget estimates are prepared by those in directly involved in activities.

When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.