Cost accounting test 3

Jupiter Corporation incurred fixed manufacturing costs of 16000 during 2015. Other information for 2015 includes: The budgeted denominator level is 2000 units. Units produces total 2200 units. Units sold total 1900 units. Variable cost per unit is $4. Beginning inventory is zero. The fixed manufacturing cost rate is based on the budgeted denominator level. Under absorption costing, the production-volume variance is _____

$2400. The total quantity budgeted to be produced during the period is 2000 units, whereas 2200 units were produced. Therefore, there is a variance of 200 units. The production-volume variance is $2,400. ($12 X 200 units).

Jupiter Corporation incurred fixed manufacturing costs of 16000 during 2015. Other information for 2015 includes: The budgeted denominator level is 2000 units. Units produces total 2200 units. Units sold total 1900 units. Variable cost per unit is $4. Beginning inventory is zero. The fixed manufacturing cost rate is based on the budgeted denominator level. Under absorption costing, fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total _______

$22,800. The fixed manufacturing expense attributable to each unit produced is $8 ($16000/2000 units). Since only 1900 units have been sold during the period, the total manufacturing costs to be expensed is 22800 ($8 plus $4) times 1900 units.

Zahra's Decoratives produces and sells a decorative pillow for $97.50 per unit. In the first month of operation, 2000 units were produces and 1750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs: $22.10 per unit Variable marketing costs $3.90 per unit Fixed manufacturing costs $13.00 per unit Administrative expenses all fixed $19.50 per unit Ending inventories: Direct Materials: 0 WIP: 0 Finished goods: 250 units What is cost of goods sold per unit using variable costing?

$22.10

Zahra's Decoratives produces and sells a decorative pillow for $97.50 per unit. In the first month of operation, 2000 units were produces and 1750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs: $22.10 per unit Variable marketing costs $3.90 per unit Fixed manufacturing costs $13.00 per unit Administrative expenses all fixed $19.50 per unit Ending inventories: Direct Materials: 0 WIP: 0 Finished goods: 250 units What is cost of goods sold using variable costing?

$22.10 X 1750 units= $38,675

Daniel Rubber Company produces a specialty item. Management has provided the following information: Actual sales 110000 units Budgeted production 100000 units Selling price $40.00 per unit Direct material costs $8.00 per unit Variable manufacturing overhead $3.00 per unit Variable administrative costs $5.00 per unit Fixed manufacturing overhead $4.00 per unit What is the total throughput contribution?

$3,520,000 Selling price per unit is $40 and the direct materials cost is $8. Under throughput costing, contribution is calculated by deducting direct materials cost from the sale amount, the throughput contribution, in this case, is $32. Total throughput contribution for 110,000 units sold is $3,520,000. (110,000 X $32)

Veach Corporation incurred fixed manufacturing costs of $6000 during 2015. Other information for 2015 includes: The budgeted denominator level is 1000 units. Units produced total 750 units. Units sold total 600 units. Beginning inventory was zero. The company uses variable costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total

$6,000 of actual fixed manufacting costs is expensed as a lump sum.

Daniel Rubber Company produces a specialty item. Management has provided the following information: Actual sales 110000 units Budgeted production 100000 units Selling price $40.00 per unit Direct material costs $8.00 per unit Variable manufacturing overhead $3.00 per unit Variable administrative costs $5.00 per unit Fixed manufacturing overhead $4.00 per unit What is the cost per statue if throughput costing is used?

$8.00

Which of the following is the correct mathematical expression to calculate annual relevant ordering costs?

(Demand in units for a specified period/size of each order) X Relevant ordering cost per purchase order.

Greene Manufacturing incurred the following expenses during 2015: Fixed manufacturing costs $112500 Fixed nonmanufacturing costs $87500 Unit selling price $250 Total unit cost $100 Variable manufacturing cost rate $50 Units produces 1340 units. What will be the breakeven point if variable costing is used?

1000 units. Total fixed costs = $112,500 + $87,500= $200,000. Contribution per unit= $250-$50= $200. Breakeven point= $200,000/$200= 1,000 units.

Jupiter Corporation incurred fixed manufacturing costs of 16000 during 2015. Other information for 2015 includes: The budgeted denominator level is 2000 units. Units produces total 2200 units. Units sold total 1900 units. Variable cost per unit is $4. Beginning inventory is zero. The fixed manufacturing cost rate is based on the budgeted denominator level. Under variable costing, the fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total ________.

$16,000 of actual fixed manufacturing costs is expensed as a lump sum

The gross-margin format is used for

Absorption costing income statement

Which of the following is true of capacity costs?

Capacity costs are difficult to estimate.

The following information applies to Krynton Corp. which supplies microscopes to labratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand= 1/52 of annual demand) 13,000 units. Orders per year as per EOQ model: 13. Lead time in days: 15 days. Annual relevant carrying costs: $2,600. Assuming each order was made at the economic order quantity amount, what is the cost of placing an order?

Cost of placing an order = $2,600/13= $200 per order

Relevant costs in a make-or-buy decision of a part include

Currently used manufacturing capacity that has alternative units.

Under backflush costing approach, the purchase of materials is

Debited to the Materials and In-Process Inventory Control Account.

Which of the following costs is inventoried when using variable costing?

Electricity consumed in manufacturing process.

Advocates of throughput costing maintain that

Fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units.

The only difference between variable and absorption costing is the expensing of

Fixed manufacturing costs.

A decision model involves a

Formal method of making a choice that often involves both quantitative and qualitative analyses.

When deciding whether to discontinue a segment of a business, relevant costs include

Future administrative costs that can be eliminated.

Which of the following is a reason for companies to use absorption costing for internal accounting?

It can help prevent managers from taking actions that make their performance measure look good but that hurt the income they report to shareholders.

Which of the following is true of normal capacity utilization?

It can result in setting selling prices that are not competitive.

Which of the following statements is true of contribution-margin format of the income statement?

It highlights the lump sum of fixed manufacturing costs.

Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

It reduces the incentives for undesirable buildup of inventories.

Piels Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10000 units of this part are as follows: Direct materials $90000 Direct labor $130000 Variable factory overhead $60000 Fixed factory overhead $140000 Total costs $420000 Of the fixed factory overhead costs, $60000 is avoidable. Conners Co. has offered to sell 10000 units of the same part to Piels Corp. for $36 per unit. Assuming there is no other use for the facilities, Schmidt should

Make the part, as this would save $2 per unit. Avoidable costs total $340,000= $90,000+$130,000+$60,000+$60,000. $36-($340,000/10,000)= $2.

_____is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Normal capacity utilization.

Advocates of throughput costing argue that

Only direct material costs are included as inventoriable costs.

_______ provides the lowest estimate of denominator-level capacity in case demand of the product is not a limiting factor.

Practical capacity.

Traditional normal and standard costing systems use

Sequential tracking.

Just-in-time purchasing requires

Smaller and more frequent purchase orders.

Throughput costing is also called

Super-variable costing.

The budgeted fixed manufacturing cost rate is the lowest for

Theoretical capacity.

Zahra's Decoratives produces and sells a decorative pillow for $97.50 per unit. In the first month of operation, 2000 units were produces and 1750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs: $22.10 per unit Variable marketing costs $3.90 per unit Fixed manufacturing costs $13.00 per unit Administrative expenses all fixed $19.50 per unit Ending inventories: Direct Materials: 0 WIP: 0 Finished goods: 250 units What is the contribution margin using variable costing?

Total sales= $97.50 X 1750=$170,625. Variable cost of goods sold= $22.10 X 1750= $38,675 Variable marketing costs= $3.90 X 1750= $6,825. Total variable costs= $45,500 Contribution margin = $170,625-$45,500= $125,125.

Mariposa Corporation sells "bigger", its only product. The following information is available for the current month: Selling price per unit $100 Standard fixed manufacturing costs per unit $50 Variable selling and administrative costs per unit $8 Standard variable manufacturing costs per unit $2 Fixed selling and administrative costs $40000 Units produced 10000 units Units sold 9600 units

What is the variable costing breakeven point in units? 6000 units- Standard fixed manufacturing cost is $50 and hence the total fixed manufacturing cost is $500,000 ($50 X 10,000 units). Fixed selling and administrative overhead is $40,000. Therefore, the total fixed expense is $540,000. ($500,000 plus $40,000.) The contribution per unit is $90 ($100-$8-$2). Therefore, the breakeven point in units is 6000 units.

Switching production to products that absorb the highest amount of fixed manufacturing costs is also called

cherry picking.

A relevant revenue is revenue that is a

future revenue.

To discourage producing for inventory, management can

incorporate a carrying charge for inventory in the internal accounting system.

Capacity constraints include

increased need of display space for a retailer.

If Talium Services does not use one of its limited resources in the best possible way, the lost contribution to income could be called an

opportunity cost.

Among different types of costs associated with inventory, the costs of obtaining purchase approvals are

ordering costs