acct 2302 midterm review

If the contribution margin is not sufficient to cover fixed expenses:

a loss occurs

A soft drink bottler incurred the following factory utility cost: $3,686 for 1,300 cases bottled and $3,766 for 1,900 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:

$0.13 high level of activity: 1,900 units, $3,766 low level of activity: 1,300 units, $3,686 change: 600 units, $80 variable cost per unit = change in cost/change in activity $80/600 units $0.13 per unit

A soft drink bottler incurred the following factory utility cost: $3,786 for 1,100 cases bottled and $3,856 for 1,500 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:

$0.18

The Richmond Corporation uses the weighted-average method in its process costing system. The company has only a single processing department. The company's ending work in process inventory on August 31 consisted of 20,000 units. The units in the ending work in process inventory were 100% complete with respect to materials and 60% complete with respect to labor and overhead. If the cost per equivalent unit for August was $3.25 for materials and $4.75 for labor and overhead, the total cost assigned to the ending work in process inventory was:

$122,000 ending WIP: -materials: 20,000 X 100% = 20,000 (materials) -conversions: 20,000 X 60% = 12,000 (labor and OH) 20,000 X $3.25 = 65,000 12,000 X 4.75 = 57,000 65,000 + 57,000 = 122,000

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $496,000 or a new model 220 machine costing $481,000 to replace a machine that was purchased 6 years ago for $486,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $481,000 in the new machine, the money could be invested in a project that would return a total of $483,000. In making the decision to buy the model 220 machine rather than the model 370 machine, the differential cost was:

$15,000 496,000 - 481,000

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $244,200 and 9,200 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $245,000 and actual direct labor-hours were 6,100. The applied manufacturing overhead for the year was closest to:

$161,894 Predetermined overhead rate = Estimated total manufacturing overhead/Estimated total direct labor-hours ($244,200/9,200 direct labor-hours = $26.54 per direct labor-hour Manufacturing overhead applied = Predetermined overhead rate × Actual direct labor-hours = $26.54 per direct labor-hour × 6,100 direct labor-hours = $161,894

In July, one of the processing departments at Okamura Corporation had beginning work in process inventory of $18,000 and ending work in process inventory of $23,000. During the month, the cost of units transferred out from the department was $153,000. In the department's cost reconciliation report for July, the total cost to be accounted for under the weighted-average method would be:

$176,000 Cost of ending work in process inventory: $23,000 Cost of units transferred out: $153,000 Total cost accounted for: $176,000

Data concerning Follick Corporation's single product appear below: Selling price per unit: $240.00 Variable expense per unit: $76.80 Fixed expense per month: $146,880 The break-even in monthly dollar sales is closest to:

$216,000 CM ratio = unit contribution margin/unit selling price ($240.00 per unit - $76.80 per unit) / $240 per unit Dollar sales to break even = Fixed expense / CM ratio $146,880 / 0.68 $216,000

The Assembly Department started the month with 24,400 units in its beginning work in process inventory. An additional 309,400 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 29,400 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?

$304,400 Units completed and transferred out = Units in beginning work in process inventory + Units started into production or transferred in - Units in ending work in process inventory Units completed and transferred out = 24,400 + 309,400 - 29,400 = 304,400

In April, one of the processing departments at Terada Corporation had beginning work in process inventory of $41,000 and ending work in process inventory of $47,000. During the month, $264,000 of costs were added to production and the cost of units transferred out from the department was $258,000. In the department's cost reconciliation report for April, the total cost to be accounted for under the weighted-average method would be:

$305,000 cost of beg. WIP inventory: $41,000 costs added to production during the period: $264,000

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $459,000 or a new model 220 machine costing $405,000 to replace a machine that was purchased 9 years ago for $414,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $405,000 in the new machine, the money could be invested in a project that would return a total of $445,000. In making the decision to buy the model 220 machine rather than the model 370 machine, the sunk cost was:

$414,000 sunk cost = cost of old machine

Gayne Corporation's contribution margin ratio is 18% and its fixed monthly expenses are $46,500. If the company's sales for a month are $304,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

$8,220 profit = (cm ratio X sales) - fixed expenses p = (0.18 X $304,000) - $46,500 p = 54,720 - 46, 500 p = 8,200

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $537,000 or a new model 220 machine costing $388,000 to replace a machine that was purchased 9 years ago for $473,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $388,000 in the new machine, the money could be invested in a project that would return a total of $495,000. In making the decision to invest in the model 220 machine, the opportunity cost was:

$495,000 opportunity cost = return from alternative investment

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $239,600 and 4,770 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $244,000 and actual direct labor-hours were 4,660. The predetermined overhead rate for the year was closest to:

$50.23 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total direct labor-hours = $239,600 ÷ 4,770 direct labor-hours = $50.23 per direct labor-hour

The following data have been recorded for recently completed Job 450 on its job cost sheet. Direct materials cost was $2,136. A total of 33 direct labor-hours and 270 machine-hours were worked on the job. The direct labor wage rate is $21 per labor-hour. The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $25 per machine-hour. The total cost for the job on its job cost sheet would be:

$9,579 direct materials: $2,136 direct labor (33 direct labor hours X $21 per direct labor hours): 693 overhead (270 machines X $25 per hour machine): 6,750

Mcmurtry Corporation sells a product for $190 per unit. The product's current sales are 13,000 units and its break-even sales are 11,050 units. The margin of safety as a percentage of sales is closest to:

15% Margin of safety in dollars = Total sales - Break-even sales = ($190 per unit × 13,000 units) - ($190 per unit × 11,050 units) = $2,470,000 - $2,099,500 = $370,500 Margin of safety percentage = Margin of safety in dollars ÷ Total sales = $370,500 ÷ $2,470,000 = 0.15

In the cost reconciliation report under the weighted-average method, the "Total cost accounted for" equals:

Cost of ending work in process inventory + Cost of units transferred out

Which of the following statements is true when referring to the high-low method of cost analysis?

In essence, the high-low method draws a straight line through two data points.

In a job-order costing system, indirect labor cost is usually recorded as a debit to:

Manufacturing overhead

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

Manufacturing overhead is incurred only to support some jobs.

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and:

Purchases of raw materials

During March, Zea Inc. transferred $55,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $61,000. The journal entries to record these transactions would include a:

credit to Work in Process of $55,000.

During March, Pendergraph Corporation incurred $77,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $79,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

debit to Manufacturing Overhead of $77,000

During June, Buttrey Corporation incurred $69,000 of direct labor costs and $9,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

debit to Work in Process of $69,000.

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $244,500 and 9,500 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $245,200 and actual direct labor-hours were 6,200. The overhead for the year was

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Within the relevant range, variable costs can be expected to:

vary in total in direct proportion to changes in the activity level.

A process costing system is employed in those situations where:

where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.