Principle of Accountant II - Final Exam

Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals.

True

Managerial accounting reports are designed to meet the specific needs of a company's management.

True

Most companies prepare a master budget on a yearly basis.

True

Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in process, and finished goods in job order costing systems.

True

The absorption costing income statement does not distinguish between variable and fixed costs.

True

Managerial accounting information includes both historical and estimated data.

True

The use of a single plantwide factory overhead rate assumes that the activities causing overhead costs are the same across all departments and products.

True

Unit variable cost does not change as the number of units of activity changes.

True

Variable costs as a percentage of sales are equal to 100% minus the contribution margin ratio.

True

In a process cost system, product costs are accumulated by processing department rather than by job.

True

Factory overhead is applied to production using a predetermined overhead rate.

True

Total fixed costs change as the level of activity changes.

False

Big Wheel, Inc., collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. Sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500 in April. What are the budgeted sales on account for April?

200,000 Collections from March sales (75% × $150,000) $112,500 Collections from April sales (25% × X). 50,000 Total receipts from sales on account. $162,500 X = $200,000

Anazi Leather Company manufactures leather handbags and moccasins. The company has been using the single plantwide factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate method to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices. Handbags = 60,000 units, 3 hours of direct labor Moccasins = 40,000 units, 2 hours of direct labor Total budgeted factory overhead cost = $360,000 The company has two different production departments: Cutting and Sewing. The Cutting Department has a factory overhead budget of $80,000. Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours. The Sewing Department estimates factory overhead in the amount of $280,000. Handbags require 2 hours of sewing time, and Moccasins require 1 hour for a total of 160,000 direct labor hours. Using the multiple production department factory overhead rate method, compute the total factory overhead to be allocated to each product using direct labor hours as the allocation base. Round interim calculations to two decimal places, if necessary.

Cutting Department factory overhead rate: $80,000 ÷ 100,000 dlh = $0.80 per dlh Sewing Department factory overhead rate: $280,000 ÷ 160,000 dlh = $1.75 per dlh Handbags $258000 (1 dlh × $0.80 per dlh × 60,000 units) + (2 dlh × $1.75 per dlh × 60,000 units) Moccasins 102000 (1 dlh × $0.80 per dlh × 40,000 units) + (1 dlh × $1.75 per dlh × 40,000 units) Total Factory Overhead Allocation. $360000 $258000 + 102000

Custom-made goods would be accounted for using a process costing system.

False

If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system.

False

Managerial accounting reports must be prepared according to generally accepted accounting principles.

False

On the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit.

False

On the variable costing income statement, variable costs are deducted from contribution margin to yield manufacturing margin.

False

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

False

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

True

A rental cost of $20,000 plus $0.70 per machine hour of use is an example of a mixed cost.

True

Flexible budgeting builds the effect of changes in level of activity into the budget system.

True

If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours are 80,000, and the actual direct labor hours are 6,700 for the month, the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours).

True

Which of the following is an example of a cost that varies in total as the number of units produced changes? a. direct materials cost b. salary of a production supervisor c. property taxes on factory buildings d. straight-line depreciation on factory equipment

a. direct materials cost

The source document for the data for debiting Work in Process for direct materials is a a. materials requisition b. purchase requisition c. purchase order d. receiving report

a. materials requisition

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $140,000 Direct labor 40,000 Variable factory overhead 20,000 Fixed factory overhead 4,000 $204,000 Operating expenses: Variable operating expenses $34,000 Fixed operating expenses 2,000 36,000 If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, the amount of operating income reported on the variable costing income statement would be a. $100,800 b. $100,000 c. $114,800 d. $140,000

b. $100,000

Which of the following is most associated with financial accounting reports? a. can be prepared periodically, or as needed b. prepared in accordance with GAAP c. can have both objective and subjective information d. can be prepared for the entity or segment Feedback Area

b. prepared in accordance with GAAP

Department G had 3,600 units 25% completed at the beginning of the period, 11,000 units were completed during the period; 3,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period: Work in process, beginning of period $40,000 Costs added during period: Direct materials (10,400 units at $8) 83,200 Direct labor 63,000 Factory overhead 25,000 All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. The total cost of the units started and completed during the period is (do not round unit cost calculations) a. $190,275 b. $211,200 c. $20,934 d. $120,060

d. $120,060 Number of Equivalent Units for Conversion Costs during the Period = (3,600 × 75%) + (11,000 - 3,600) + (3,000 × 20%) = 10,700 units Number of Units Started and Completed during the Period = 11,000 - 3,600 = 7,400 units Direct Materials Cost = 7,400 × $8 = $59,200 Total Conversion Cost = [($63,000 + $25,000) ÷ 10,700] × 7,400 = $60,860 Total Cost of Units Started and Completed during the Period = $59,200 + $60,860 = $120,060

Managerial accounting reports are a. related to the entire business entity only b. prepared according to GAAP c. prepared periodically only d. prepared according to management needs

d. prepared according to management needs

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service? a. number of packages picked up b. number of trucks in service c. number of truck drivers d. total miles driven

d. total miles driven

The materials requisition serves as the source document for debiting the accounts in the materials ledger.

False

Zorn Co. budgeted $600,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units to be produced are 200,000 units. Zorn's plantwide factory overhead rate is $3 per hour.

False

Department G had 3,600 units 25% completed at the beginning of the period, 11,000 units were completed during the period; 3,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period: Work in process, beginning of period. $40,000 Costs added during period: Direct materials (10,400 units at $8) 83,200 Direct labor 63,000 Factory overhead 25,000 All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. The total cost of the units started and completed during the period is (do not round unit cost calculations) a. $190,275 b. $211,200 c. $20,934 d. $120,060.

d. $120,060. Number of Equivalent Units for Conversion Costs during the Period = (3,600 × 75%) + (11,000 - 3,600) + (3,000 × 20%) = 10,700 units Number of Units Started and Completed during the Period = 11,000 - 3,600 = 7,400 units Direct Materials Cost = 7,400 × $8 = $59,200 Total Conversion Cost = [($63,000 + $25,000) ÷ 10,700] × 7,400 = $60,860 Total Cost of Units Started and Completed during the Period = $59,200 + $60,860 = $120,060

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units): Direct materials. $180,000 Direct labor. 240,000 Variable factory overhead. 280,000 Operating expenses: Variable operating expenses. $130,000 Fixed operating expenses 50,000 180,000 If 1,600 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is a. $64,000 b. $78,400 c. $66,400 d. $56,000

d. $56,000