cost acct practice final exam
Problems with costing occur when ________.
incorrect job numbers are recorded on source documents Your answer is correct.
Colonial North Manufacturing, Inc. is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is discontinued?
net income will decrease by the amount of the contribution margin of the product line being discontinued
The degree to which a predetermined objective or target is met is known as ________.
effectiveness
FIFO Aluminum processes a single type of aluminum. During the current period the following information was given: Units Material Costs Conversion Costs Begin. Inv. 4,800 $6,100 $5,600 Started this period 21,400 48,800 66,400 Ending Inventory 4,500 All materials are added at the beginning of the production process. The beginning inventory was 25% complete as to conversion, while the ending inventory was 40% completed for conversion purposes. FIFO Aluminum uses the first−in, first−out system of process costing. What were the costs assigned to the units transferred out this period (Round intermediary calculations to the nearest cent)?
$111,322
For fixed manufacturing overhead, there is no ________.
efficiency variance
Pearl Manufacturing Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of seven years and the new equipment has a value of $249,400 with a seven−year life. The expected additional cash inflows are $63,000 per year. What is the payback period for this investment?
4.0 years
Katrina's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,500, variable costs are $400, and fixed costs are $110,000. How many dresses are sold when operating income is zero? (Round the final calculation up to the next whole number.)
100 dresses
Sky High sells helicopters. During the current year, 150 helicopters were sold resulting in $840,000 of sales revenue, $250,000 of variable costs, and $350,000 of fixed costs. The number of helicopters that must be sold to achieve $310,000 of operating income is ________. (Round intermediary calculations to two decimal places, and your final answer up to the nearest whole number.)
168 units
Which of the following statements about actual costing is true?
Actual costing uses actual indirect−cost rates calculated annually.
Which of the following is true of absorption costing?
It includes fixed manufacturing overhead as an inventoriable cost.
Which of the following would be subtracted from sales while calculating contribution margin in a variable costing format of an operating income statement?
Direct labor in factory
As a discounted cash flow method does not report good operating income results in the project's early years, managers are tempted to not use discounted cash flow methods even though the decisions based on them would be in the best interests of the company as a whole over the long run.
TRUE
Which of the following statements is true of accrual accounting rate of return (AARR) method and internal rate of return (IRR) method?
The AARR method calculates the return using operating−income numbers after considering accruals and taxes, whereas the IRR method calculates the return using after−tax cash flows and the time value of money.
Which of the following statements is true of fixed overhead cost variances?
The difference between flexible budget costs and allocated overhead costs will give the production volume variance.
In the graph method of CVP analysis, ________.
The total revenue line starts at the origin and the total costs line starts at the fixed intercept.
_______ is the level of capacity based on producing at full efficiency all the time.
Theoretical capacity
A cost system determines the cost of a cost object by ________.
accumulating and then assigning costs
A favorable variance indicates that ________.
actual revenues exceed budgeted revenues
Job−costing is likely to be usedby________
advertising agencies
If machine maintenance is scheduled at a time when production is at a low level, then ________.
an understanding of operations is needed to determine an appropriate cost driver
At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually ________.
are considered a fixed cost
Direct costs ________
are costs related to a particular cost object that can be traced to that cost object in an economically feasible manner
Elite Stationary employs 20 full−time employees and 10 trainees. Direct and indirect costs are applied on a professional labor−hour basis that includes both employee and trainee hours. Following is information for 2020: Budget Actual Indirect costs $300,000 $400,000 Annual salary of each employee $200,000 $210,000 Annual salary of each trainee $35,000 $40,000 Total professional labor−hours 20,000dlh 40,000dlh When a normal costing system is used, clients using proportionately more full−time employees than trainees will ________.
be under billed for actual resources used
Which of the following is an example of sunk costs?
book value of equipment
The ________ is a component of financial budgets.
budgeted statement of cash flows
Sensitivity analysis helps managers evaluate risks ________.
by showing the effects of changes to the original data or an underlying assumption
Effective planning of fixed overhead costs includes ________.
choosing the appropriate level of investment in productive assets
To discourage producing for inventory, management can ________.
develop budgeting and planning activities that reduce management's freedom to inappropriately build inventory through increased production
Wages paid to machine operators on an assembly line are classified as a ________.
direct manufacturing labor cost
In the computation of the cost per equivalent unit, the weighted−average method of process costing considers all the costs ________
entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period
It is usually difficult to find good cost driver (cause−and−effect relationship) between ________ and a cost allocation base.
facility−sustaining costs
Which of the following is a problem related to cost analysis?
fixed costs are allocated as if they are variable costs
A limitation of using past performance as a basis for judging actual results is that ________.
future conditions can be different from past conditions
Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75−cent price increase, demand is expected to fall by 7,000 units. Current Projected Demand 76,000 units 69,000 units Selling price $8.50 $9.25 Incremental cost per unit $5.80 $5.80 If the price increase is implemented, operating profit is projected to ________.
increase by $32,850
Which of the following is an example of time−series data:
indirect labor costs and machine−hours in a manufacturer's assembly department each month for the last 12 months
Which of the following is a stage of the capital budgeting process that determines which investment yields the greatest benefit and the least cost to an organization?
make decisions by choosing among alternatives stage
An unfavorable production-volume variance ______
measures the amount of extra fixed costs planned for but not used
For a business that offers customers a store where product can be purchased and picked up or a delivery service that can ship the product directly to the customer, which of the following would most likely be the best cost allocation base for distribution costs?
number of pounds of product shipped or delivered
A company has three products possible products that it can produce in a machine intensive production process. Capacity is constrained by the number of hours the machines can run during a period and the products are so popular that all units produced will be sold. Here is additional information: Product A Product B Product C Contribution per unit $20 $30 $40 Machine hours per unit 2.5 3.25 4.5 Which of the following would be an accurate conclusion based on these facts?
product B should be emphasized if the goal is to maximize contribution margin.
The sales-volume variance is sometimes due to ________.
quality problems leading to customer dissatisfaction
The district director of 5 mortgage origination offices staffed by bank associates who could call potential customers in an attempt to gain home mortgage and home equity loan business is most likely responsible for a(n) ________.
revenue center
A learning curve is a function ________.
that measures the decline in labor−hours per unit due to workers becoming better at a job
Operating decisions primarily deal with ________.
the best use of scarce resources
Which if the following are not conversion costs?
the cost of tires on an automobile
The assignment of the cost of the leather used to make 100 bicycle seats to a custom order to be shipped to a bike retailer is an example of:
the cost tracing of direct costs to the chosen cost object
A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?
the setup cost of the new equipment
A single indirect−cost rate distorts product costs because ________.
there is an assumption that all support activities affect all products in a uniform way
If 1,000 units are produced and only 700 units are sold, ________ results in the greatest amount of expense reported on the income statement.
throughput costing
A favorable price variance for direct manufacturing labor might indicate that ________
underskilled employees are being hired
An unfavorable flexible-budget variance for variable costs may be the result of _______
using more input quantities than were budgeted
Product−cost cross−subsidization meansthat:
when a company under costs one of its products, it will over cost at least one of its other products
The cost components of a heater include $38 for the compressor, $14 for the sheet molded compound frame, and $70 per unit for assembly. The factory machines and tools cost is $53,000. The company expects to produce 1,400 heaters in the coming year. What cost function best represents these costs?
y = 53,000 + 122X
Blistre Company operates on a contribution margin of 40% and currently has fixed costs of $510,000. Next year, sales are projected to be $3,100,000. An advertising campaign is being evaluated that costs an additional $110,000. How much would sales have to increase to justify the additional expenditure?
$275,000
Wonderful Products Manufacturing Corp. provided the following information for last month: Sales $43,000 Variable costs 14,000 Fixed costs 11,000 Operating income $18,000 If sales reduce to half of the amount in the next month, what is the projected operating income?
$3,500
Globus Autos sells a single product. 8,300 units were sold resulting in $83,000 of sales revenue, $20,000 of variable costs, and $14,000 of fixed costs. If variable costs decrease by $1.00 per unit, the new margin of safety is ________. (Round intermediate calculations to the nearest cent.)
$66,721
Majestic Corporation manufactures wheelbarrows and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: Budgeted output units 43,500 units Budgeted machine-hours 17,400 hours Budgeted var. manuf. OH costs for 43,500 units $382,800 Actual output units produced 47,500 units Actual machine-hours used 15,100 hours Actual variable manufacturing overhead costs $387,518 What is the amount of the budgeted variable manufacturing overhead cost per unit? (Do not round any intermediary calculations. Round your final answer to the nearest cent.)
$8.80
The Venoid Corporation has an annual cash inflow from operations from its investment in a capital asset of $18,000 (excluding depreciation) each year for eight years. The corporation's income tax rate is 40%. Calculate the total after−tax cash inflow from operations for eight years.
$86,400
Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Department A for February 2020 are: Work in process, beginning inventory, 40% converted 320 units Units started during February 900 units Work in process, ending inventory 120 units Costs for Department A for February 2020 are: Work in process, beginning inventory: Direct materials $160,000 Conversion costs $203,000 Direct materials costs added during February $601,000 Conversion costs added during February $427,000 How many units were completed and transferred out of Department A during February?
1,100 units
Direct Disk Drive Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were for August 2020: Work in process, beginning inventory 150,800 units Transferred−in costs (100% complete) Direct materials (0% complete) Conversion costs (80% complete) Transferred in during current period 450,200 units Completed and transferred out 400,800 units Work in process, ending inventory 202,000 units Transferred−in costs (100% complete) Direct materials (0% complete) Conversion costs (60% complete) Calculate equivalent units for conversion costs using the FIFO method.
399,560 units
