Principles of Managerial Accounting
Which of the following are indirect costs for the finishing department of a furniture manufacture? (check all that apply)
electricity cost for the plant rent on the manufacturing facility plant manager's salary
Conversion costs consist of:
factory overhead and direct labor
managerial accounting primarily provides information to
internal users
The main difference between a manufacturer's and a merchandiser's balance sheet is in the
inventory account
Understanding the cost of partially completed goods allows the manufacturer to:
measure production activity for the period
A _______ cost includes both fixed and variable components.
mixed
In a process operation, each process has a separate department which will accumulate costs for each of the following:
overhead direct labor direct materials
The weakness of the departmental and the plantwide overhead rate methods is that
overhead cost is often too complex to be explained by direct labor hours or machine hours.
Manufacturing of products in a repetitive manner is referred to as (process/job order) _______ operations while manufacturing custom products is referred to as (process/job order) ______ operations.
process job order
Department A completed and transferred out 2,100 units and had ending work in process inventory of 120 units. The ending inventory is 10% complete for materials and 70% complete for labor and overhead. The equivalent units of production for materials is ______ units.
2100+12 (120x.1) =2112
Department A completed and transferred out 2,100 units and had ending work in process inventory of 120 units. The ending inventory is 10% complete for materials and 70% complete for labor and overhead. The equivalent units of production for labor and overhead is ______ units.
2100+84(120*.7)=2184
The total beginning balance in Work in Process Inventory is $60,000, which included direct materials and conversion. During the period, the department incurred the following costs: direct materials $22,000 and conversion costs $142,000. The total costs to account for is $_____.
224000
A company produces a product with a contribution margin per unit of $36. If the company incurs $62,000 in total fixed costs and expects to sell 2,500 units their income would be $______
28000
Because of its usefulness in CVP analysis, managers generally use an income statement in which format?
Contribution margin income statement
The cost of materials a company purchases to use in making products are
raw materials
When using activity-based costing, it is very important that the activities in each cost pool are
similar
Equivalent units of production refers to the number of units that could have been:
started and completed
On a CVP chart, the line which starts at the level of fixed costs and slopes upwards represents the ______ cost line.
total
On a CVP chart, the line which crosses the vertical axis at $0 and slopes upwards represents:
total sales
Factory overhead includes all manufacturing costs except direct materials and direct labor
true
After adjusting for over- or underapplied overhead, the balance in the Factory Overhead account will be $.____
zero or 0
Consider a service company that provides carpet cleaning. Classify the cost of the hourly workers who clean carpets for customers.
Direct
A Schedule of Cost of Goods Manufactured includes all of the following costs:
direct labor used work in process inventory direct materials used factory overhead applied
A company has a predetermined overhead rate of 50% of direct labor costs. Job 62 incurs $560 in labor costs. Overhead allocated to Job 62 will be $______
$560 x .5 = $280
A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:
(50,000-x)/50,000=20%. x = $40,000.
The cost accountant at Company C used the high-low method to determine a cost equation of $14,000 plus $1.50 per unit. If the company plans to produce 200,500 units next month, then the total estimated cost will be $_______.
1.50*200500+14000=314750
A company has break-even sales of $200,000. If the company expects sales of $500,000, the margin of safety is _____%.
500,000-200,000/500,000
True or false: Factory overhead includes direct materials and direct labor.
False (oh includes all production costs except dm and dl)
Which of the following is the correct statement about fixed costs?
The fixed cost per unit will decrease when volume increases.
Manufacturing costs include direct materials, direct labor, and
applied overhead costs.
managerial accounting information is normally provided to managers:
as they request it
The predetermined overhead rate is calculated:
at the start of the accounting period
(managerial/financial) _____ accounting allows internal users to determine what information they need to make planning and control decisions and is not rules-based
managerial
If a company uses activity-based costing, the most appropriate cost driver for the production department would be the:
number of direct labor hours
Each department in a process costing system, will use (one, two, none) ________ Work in Process account.
one
The predetermined overhead rate is based on total ______ costs and activity base.
overhead
Using a single overhead rate to apply overhead to products is called the
plantwide overhead rate method.
Sales mix is the proportion of _____ for various products.
sales volume
In activity-based costing, activities in each cost pool should be (similar / dissimilar) ______.
similar
A company works on three jobs and incurs the following: Direct materials - $50,000 and Direct labor - $100,000. The company uses a predetermined overhead rate of 60% of direct labor costs. How much overhead will be allocated to the three jobs?
$100,000 x .60= $60,000
A company sells 800 units at $16 each, has variable costs of $12 per unit, and fixed costs of $1,200. Income is $__________
2000
A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in dollars to achieve the desired target income is $________.
26000
A manufacturing company has a process where one-half of the materials are added at the beginning of the process 1. Conversion are added at a rate of 20% in Process 1. If 600 units are started, the EUP with respect to conversion is _____.
600*.2=120
RST Company produces a product that has expected sales of $75,000 and break-even sales of $50,000. The margin of safety is $_______
75000-50000=25000
True or false: The principle of customization is applicable to both service and manufacturing companies.
True
The amount by which a product's unit selling price exceeds its total unit variable cost is the:
contribution margin per unit
Assuming all other factors remain constant, if sales price per unit increases, then the break-even point will:
decrease
The contribution margin ratio is interpreted as the percent of:
each sales dollar that remains after deducting unit variable cost
Activity cost pools are:
group of costs related to the same activity
Applying a single overhead rate to all products is known as the _____ overhead rate method.
plantwide
Time tickets are used in job order costing to:
report hours worked on specific jobs during the payroll
Activities that include finished goods are considered ____ activites
sales
True or false: managerial accounting provides information to internal managerial and executive employees who are in charge of a company's business activities
true
true or false: the main purpose of managerial accounting is to provide relevant information to its managers
true
The high-low method uses ___ points to estimate the cost equation.
two
The cost object of the cost assignment under the plantwide overhead rate method is the
unit of product
The break-even point can be expressed as sales in_____ or _______
units dollars
A ________ cost changes in proportion to changes in volume of activity.
variable
Inventory which is paritally complete is known as
work in process
Partially complete units are known as _____ _____ ____ inventory
work in process
Jackson Company uses activity-based costing to allocate their overhead costs. Setup costs of $850,000 are based on number of batches. Design modification costs of $155,000 are based on number of design changes. Jackson Company has identified 40,000 batches and has 5,000 design changes in their factory. What is the activity rate for setup.
$850,000/40,000=$21.25.
Mobile Company uses activity-based costing. One of their products, a phone, requires 20 setup activities at $50 per setup and 15 design changes at $1,000 per design. If Mobile Company produces 2,000 phones, what is the total overhead cost per unit?
(20x$50)+(15x$1,000)=$16,000. $16,000/2,000=$8.00.
A company incurs factory overhead costs of $1,200 and applied $1,500. If the difference is considered immaterial, then the: (Check all that apply.)
-Factory Overhead account has a credit balance of $300 before adjusting. -adjusting entry will require a credit to Cost of Goods Sold.
Strengths of the departmental overhead rate method and the plantwide overhead method include all of the following:
-They comply with GAAP. -They are easy to implement. -They are based on readily available information.
Advantages of the activity-based costing include: Check all that apply.
-accurate assignment of costs to products -more effective overhead cost control -better production and pricing decisions
Which of the following are a type of overhead allocation method? (Check all that apply).
-activity-based costing method -plantwide overhead rate method -departmental overhead rate method
If the factory overhead is underapplied, then: (Check all that apply.)
-actual overhead cost > applied overhead costs. -the Factory Overhead account has a debit balance.
Managers make assumptions in CVP analysis. These assumptions include: (Check all that apply.)
-costs are linear within the relevant range. -costs can be classified as variable or fixed.
The two main assumptions of the departmental overhead rate method include:
-departmental overhead costs are proportional to the departmental allocation base -different products are similar in volume, complexity and batch size
Which of the following characteristics describe managerial accounting? (check all that apply)
-used to make planning and control decisions -many future projections
A department completed and transferred to finished goods 75,000 units. The cost per EUP for direct materials is $8.00 and the cost per EUP for conversion cost is $6.00. The costs transferred to Finished Goods Inventory is $_____
1,050,000
The departmental overhead rate method uses a three-step process to allocate cost objects. List these steps in the correct order
1. assign overhead costs to departmental cost pools 2. select an allocation base and compute allocation rate for each department 3. allocate overhead costs to cost objects
Identify the three steps in activity-based costing Rank these in the correct order.
1. identify activities and assign budgeted costs to activity cost pools 2. compute an overhead activity rate for each activity cost pool 3. allocate overhead costs to cost objects
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a profit of $20,000. The contribution margin per unit is $______
10-6=4
A company that sells multiple types of products has a combined selling price per unit of $150, combined variable cost per unit of $50 and total fixed costs of $25,000. The weighted-average contribution margin per unit is $______
100
Spring Company uses activity-based costing to allocate their overhead costs. Setup costs of $100,000 are based on number of setups. Factory services of $65,000 are based on square footage. Spring Company has identified 500 setups and has 10,000 square feet in their factory. What is the activity rate for the setup activity cost pool.
100,000/500=$200
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a target income of $20,000. The sales level in units to achieve the desired target income is ___________
12,500
A company incurs $12,000 in direct labor costs when they produce 480 units and $12,500 in direct labor costs when they produce 500 units. The direct labor cost per unit is $_______
12000/480=25
A company has sales of $125,000, variable costs of $45,000 and fixed costs of $30,000. The contribution margin ratio is _____%
125000-45000/125000=64
The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and it lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated fixed costs are $________
17500
A company uses the departmental overhead rate method. Total overhead costs are $6,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the assembly department.
2,000,000/50,000=$40 dl hours
A department begins the month with 100 units at a cost of $7,500 in work in process. An additional 1,000 units are started during the month and additional costs incurred are $12,500. At the end of the month, there are 200 units still in process which are 50% complete. The ending balance in Work in Process Inventory is $________.
2000?
A manufacturing department has 50,000 EUP for units completed and transferred out and 4,500 EUP for units in ending inventory. Materials cost is $2.50 per EUP and labor and overhead cost is $3.75 per EUP. The total amount of ending work in process inventory is $_______.
28125
A company completes 21,000 units this month and has ending work in process inventory of 3,000 units which are estimated to be 40% complete. Total production costs are $666,000. The cost of ending Work in Process Inventory is $_____
36,000
A manufacturer has a process where materials are added all at the beginning of the process and conversion costs are added evenly throughout the manufacturing process. If 400 are 30% completed during the period, the EUP for conversion is ______.
400*.3=120
A company sells two models of a product—basic and premium. The basic model has a variable cost of $75 and sells for $100. The premium model has a variable cost of $100 and sells for $150. If the company usually sells 2,500 basic models and 7,500 premium models, then the weighted-average contribution margin per unit is $________
43.75
A company has the following activities and costs: machine setup of $5,000 per setup and factory services of $100 per square foot. If product 1 uses 2 setups and has 10,000 square feet, overhead allocated to product 1 is $______.
5,000x2=10,000 100x10,000=1,000,000 10,000+1,000,000=1,010,000
Phillip Company uses activity-based costing. Phillip Company produces two types of lamps, floor lamps and table lamps. The floor lamp requires 15 setup activities at $60 per setup and 5 design changes at $50 per design. If Phillip Company produces 1,200 floor lamps, what is the total overhead cost per floor lamp? Round your answer to two decimal places.
: (15x$60)+(5x$50)=$1,150/1,200=.9583 rounded to 0.96.
The high-low formula to compute total costs is:
Fixed costs + (Variable cost per unit x Units)
The cost of goods sold for a manufacturer is computed as
beginning finished goods inventory plus cost of goods manufactured minus ending finished goods inventory
A disadvantage of using activity-based costing is that
collecting and analyzing cost data is expensive.
Cost-volume-profit analysis helps managers predict how changes in _______ and _______ levels affect income.
cost sales
The ______ overhead rate method uses a different overhead rate per production department.
departmental
The overhead rate method which uses a different overhead rate for each department is the
departmental method
fixed-> variable-> mixed->
depreciation, office salaries direct materials, direct materials water and electricity, sales rep pay which includes salary plus commission
As it relates to the departmental overhead rate method, when products differ in batch size and complexity, they usually consume _____ amounts of overhead costs.
different
All of the following are inventory accounts for a manufacturer except:
indirect materials inventory
The main advantage of the plantwide overhead rate method is:
it is easy to implement
To determine the cost of producing each job or job lot, companies use a:
job order costing system.
Match each product with the type of manufacturing most likely to be used—job order or process operations.
job order-customized home process-soft drinks
Each of the following are methods used to separate mixed costs into their fixed and variable components except
low-high method
Each of the following are methods used to separate mixed costs into their fixed and variable components except:
low-high method
Match the following overhead costs with their source documents. indirect materials-> indirect labor-> factory utilities-> depreciation on factory equipment->
materials requisition forms time tickets vouchers authorizing payment adjusting entries
CVP analysis relies on all of the following assumptions except:
mixed costs can be used
Materials activities include
raw materials beginning inventory purchasing materials
True or false: The departmental overhead rate method uses a three-step process where costs are assigned to cost pools in the first step and overhead is allocated to cost objects in the last step.
true
True or false: Using the weighted-average method, the computation of EUP separates units into direct materials and conversion.
true
The plantwide overhead rate method is most appropriate for companies which have
a single product
Those who work directly on the product to convert raw materials into a finished product are known as
direct labor
Managers use the process cost summary for all of the following except:
evaluate company as a whole
Inventory which is completed but not yet sold by a manufacturer is known as
finished goods inventory
An activity cost _______ is a a group of costs that are related to the same activity.
pool
The correct order of cost flows in a job order costing system is:
work in process; finished goods, cost of goods sold
Characteristics of process operations include: (Check all that apply.)
high volume production. identical units low product flexibility.
Johnson Company has the following overhead costs: machine setup $25,000; factory services $10,000; design of $15,000; and selling expenses of $5,000. What is the total overhead costs using activity-based costing?
$25,000 + $10,000 + $15,000 = $50,000.
Department D had materials costs of $10,000 in beginning work in process inventory and added an additional $50,000 in materials costs this period. If the department had 20,000 EUP for materials, the cost per equivalent unit of production is $_____
3
A manufacturing department has 50,000 EUP for units completed and transferred out and 4,500 EUP for units in ending inventory. Materials cost is $2.50 per EUP and labor/overhead cost is $3.75 per EUP. The total amount transferred out is $________
312,500
The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated fixed costs are $______
50000
A schedule of cost of goods manufactured has the following main sections:
Cogm, direct labor, direct materials, overhead
A company sells two models of a product—Alpha and Omega. If the company sells 10,000 Alpha models and 2,500 Omega models, then the sales mix can be expressed as:
Reason: 10,000/2,500=4:1
A Schedule of Cost of Goods Manufactured includes all of the following costs except:
cost of goods sold
financial accounting provides information for (internal/external) ______ users, while managerial accounting provides information for (internal/external) _____ decision makers.
external, and internal
Activities causing overhead include all of the following:
facility-level batch-level unit-level
Conversion costs consist of
factory overhead and direct labor
Companies use job cost sheets to track the costs of:
materials, labor, and overhead costs of a job
Disadvantages of using activity-based costing includes all of the following:
product cost can be distorted. cost to implement.
A company has sales of $125,000, variable costs of $45,000 and fixed costs of $30,000. The break-even point in sales dollars is $_____
46875
The Production Department incurs costs of $250,000 while working 12,500 direct labor hours. If Job 421 requires 25 direct labor hours to assemble, the amount of overhead allocated to the job will be $_______.
500
A cost driver is
a factor that causes activity to go up or down.
Requisitions are used in job order costing to record the cost and quantity of:
both direct and indirect materials requested by the production department
The ____ overhead rate method uses a different overhead rate per production department.
departmental
A company has a degree of operating leverage of 2.5. If sales increase by 10%, then profits will:
increase by 25%
The three methods used to classify costs into their fixed and variable components includes
regression scatter diagrams high-low method
A company incurred manufacturing costs of $45,000. If the beginning balance in Work in process inventory is $10,000 and the ending balance is $15,000, then the cost of goods manufactured is $ _____
$40,000
A company completes 21,000 units this month and has ending goods in process inventory of 3,000 units which are estimated to be 40% complete. Direct materials cost per EUP is $5.00 and Conversion cost per EUP is $1.50. The cost transferred to Finished Goods Inventory is $______.
136500?
At the end of the accounting period, a company's overhead was overapplied by $400. The Factory Overhead account was properly adjusted. What effect did the adjustment have on net income?
It increased net income by $400.
At the end of the accounting period, a company's overhead was overapplied by $400. The Factory Overhead account was properly adjusted. What effect did the adjustment have on net income?
It increased net income by $400. (If overhead is overapplied, cost of goods sold is decreased. Therefore, the effect on net income is an increase.)
The base to which overhead costs are linked, such as direct labor or machine hours, is known as the overhead _______ base.
allocation or activity
Department 1 completed and transferred out 450 units and had ending work in process inventory of 60 units. The ending inventory is 20% complete for materials and 60% complete for labor and overhead. The equivalent units of production for labor and overhead is _____units.
486?
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. How many units must be produced to break-even ________?
7500
________ (Identifying, Assigning, Tracing) activities is the first step in applying activity-based costing
Identifying
Which of the following is the correct statement about variable costs?
The variable cost per unit does not change when volume changes.
Managerial reporting systems are
flexible
A manufacturing company reports the following items: Finished goods inv, beg balance: $1000 finish goods inv, ending balance: $1200 cost of goods manufactured, $5000 the cost of goods sold is $_____
$4800
A company uses the departmental overhead rate method. Total overhead costs are $5,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the machining department.
$50.00 per machine hours
Process cost information is prepared for the following reasons. (Check all that apply.)
-To provide cost information for financial statements -To help factory managers evaluate department managers' performances -To help department managers control costs
Process and job order operations are similar in that both: (Check all that apply.)
-are used to determine the cost per unit of product or service. -combine materials, labor, and overhead in producing products.
Which of the following are product costs for a manufacture? (check all that apply)
-direct materials -depreciation on the factory equipment
Production activities include:
-factory overhead costs -production workers assembling products -direct materials used
The two assumptions regarding the usefulness of the single plantwide overhead rate method includes:
-overhead costs change with the allocation base -all products use overhead costs in the same proportion
Job cost sheets can be used to: (Check all that apply.)
-provide a subsidiary ledger for the Finished Goods Inventory account. -provide a record for the Cost of Goods Sold account. -monitor costs incurred and to predict costs for each job.
If the factory overhead is overapplied, then: (Check all that apply.)
-the Factory Overhead account has a credit balance. -applied overhead costs > actual overhead costs.
The margin of safety is: (Check all that apply.)
-the amount sales can drop before the company incurs a loss. -the difference between expected sales and break-even sales divided by expected sales.
match the following characteristic to the type of accounting: financial-> managerial->
-uses past performance using historical information -uses current performance and future projections
LMN Company produces a product that sells for $1. The company has production costs of $600,000, half of which are fixed costs. Assuming production and sales of 750,000 units, the contribution margin per unit is $______
.60
List the four steps involving analysis when accounting for a department's activity, with the first step listed on top.
1. physical flows 2. equivalent units 3. cost per equivalent unit 4. assignment and reconciliation
A company uses direct labor hours as its allocation base. Management estimates the company will have 10,000 hours of direct labor during the year and total overhead costs of $120,000. The predetermined overhead rate will be $ _____per hour.
12
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a target income of $20,000. The sales level in dollars to achieve the desired target income is $_____
125,000
The Factory Services Department incurs costs of $130,000 while maintaining machinery that is operated 1,000,000 machine hours. If Job 276 requires 1,500 machine hours, the amount of costs allocated to the job will be $________.
130,000/1,000,000=.13 .13x1,500=195
The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated variable cost per unit is $___________.
15
RST Company produces a product that has a selling price of $10 per unit and variable cost of $6 per unit. The company's fixed costs are $30,000. If the company sells 15,000 units, the degree of operating leverage is _______.
15000*10=150,000 15000*6=90000 CM=60,000 Income= 30,000(60,000-30,000) 2
Department C had direct materials EUP cost of $4.00 and conversion EUP cost of $2.50. If the department had 38,000 units completed and transferred to the next department, their cost of units completed for direct materials is $_____.
152,000
A manufactoring company reports the following items: work in process inventory, beginning balance: $500; Work in process inventory, ending balance $200; Dirct materials: $700; Direct labor: $600; Factory overhead: $100. The cost of goods manufactured is $ ______.
1700
Department A completed and transferred to finished goods a total of 60,000 units. Their ending inventory consisted of 40,000 units which were 80% complete with respect to direct materials and 30% complete with respect to conversion cost. The cost per EUP for direct materials is $4.00 and for conversion is $3.50. The cost of ending work in process inventory is $_______
170000
The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and its lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated variable cost per hour is $.
25
Department A had a beginning inventory balance of 25 units. During the accounting period, the department started an additional 275 units and had an ending balance of 50 units. _______ units were transferred out.
275+25-50=250
A merchandising company usually has one inventory account while a manufacturing company usually has ___ inventory accounts
3
Landen Company uses a single plantwide overhead rate of $100 per direct labor hour (DLH). Landen has two products as follows: basic chairs which used 20 DLH and deluxe chairs which used 35 DLH. What is the total amount allocated to these products?
35+20=55x100=$5,500
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a profit of $20,000. The contribution margin ratio is _______%.
40
A company sells two models of a product—basic and premium. Fixed costs are $150,000. The basic model has a variable cost of $75 and sells for $100. The premium model has a variable cost of $100 and sells for $150. If the company usually sells 5 basic models to 3 premium models, then the weighted-average break-even in units is _______
4363 or 4364
A company has fixed costs of $50,000 while manufacturing a product that has variable costs of $4 per unit and sells for $14 per unit. The break-even point is _____ units.
5000
A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in units to achieve the desired target income is ________ units.
5200
A company sells two models of a product—basic and premium. The basic model has a contribution margin per unit of $25 and unit sales of 750. The premium model has a contribution margin per unit of $40 and unit sales of 250. Fixed costs are $15,000. The weighted average contribution margin in units is ________
521 or 522
A manufacturing company incurs direct materials costs of $6 per unit. The total direct materials cost is $_______ when the company manufactures 2,000 units.
6*2000=12000
Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000. The revised break-even point in dollars is $_________
60,000
Department Y started 675 units during the accounting period. They had a beginning balance in goods in process inventory of 225 units and an ending balance of 150 units. ______ units were completed and transferred out.
675+225=900 900-150=750`
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The break-even point in sales dollars is $______
75000
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $4, but increase fixed costs by $15,000. The revised break-even point in dollars is $_________
75000
The basis of the activity-based costing method is a(n)
Activity
Match the following activities to their effect on the general ledger accounts. allocate indirect labor-> pay factory property tax-> purchase materials-> use direct materials-> complete job-> sold job->
Credit Factory Wages Payable Debit Factory Overhead Debit Raw Materials Inventory Credit Raw Materials Inventory Debit Finished Goods Inventory Credit Finished Goods Inventory
True or False: The main purpose of managerial accounting is to provide general-purpose financial statements.
False
A cost accounting system includes which of the following?
It accumulates production costs and assigns them to products and services.
At the end of the accounting period, a company's overhead was underapplied by $150. If not adjusted, how does this affect net income?
Net income will be overstated by $150.
A company sells two models of a product—basic and premium. If the company sells 5,000 basic models and 2,500 premium models, then the sales mix can be expressed as:
Reason: 5,000/2,500=2:1
Managers use a predetermined overhead rate for which of the following reasons? (Check all that apply.)
To estimate total job costs before the job is completed To assist in setting prices for jobs
Activity-based cost systems allocate costs by focusing on ______.
activities
In activity-based costing, costs are first traced to ______, activity rates are computed, and then allocated to ______.
activities; cost objects
The basic principle of activity-based costing is that a(n)_____ is what causes overhead cost to be incurred.
activity
The third step in activity-based costing is to
allocate costs to cost objects.
Managerial information:
allows estimates and projections
List the items below in the correct order in which they would appear in the calculation of cost of goods sold for a manufacturing company.
beginning finished goods inventory, plus, cogm, minus, ending finished goods inventroy
Time tickets are used in job order costing to record the time and cost of:
both direct and indirect labor in the production department
The main difference between merchandising and manufacturing companies is that merchandising companies ____ (buy/manufacture) goods ready for sale and manufacturing companies ___ (buy/manufacture) products
buy manufacture
The percent by which a product's unit selling price exceeds its total unit variable cost is the:
contribution margin ratio.
The primary difference between the income statement for a merchandising company and a manufacturing company is in the ____ section
cost of goods sold
Match the following activities to their effect on the general ledger accounts. allocate overhead cost to jobs-> pay factory utilities-> purchase indirect materials-> use indirect materials-> direct labor used->
credit factory overhead debit factory overhead debit raw materials inventory credit raw materials inventory debit work in process inventory
The Factory Overhead account is (debited/credited) ______ for applied overhead costs
credited
Designate the following as either from job order or process operations.
custom order-job order operat mass prod-process operat
Job order production is most likely used by companies that produce:
customized wedding cakes
If the factory overhead is underapplied, then the adjusting journal entry to close the factory overhead account includes a: (Check all that apply.)
debit to Cost of Goods Sold. credit to Factory Overhead.
If the factory overhead is overapplied, then the adjusting journal entry to close the factory overhead account includes a: (Check all that apply.)
debit to Factory Overhead. credit to Cost of Goods Sold.
A measure to assess the effect of changes in the level of sales on income is the :
degree of operating leverage
Receiving reports are used in job order costing to record the cost and quantity of materials:
delivered from suppliers
The efforts of employees who work directly to convert direct materials into the finished product are referred to as _____ _____.
direct labor
Overhead may be applied based on:
direct labor machine hours
The three types of manufacturing costs in a job order costing system include:
direct labor overhead direct materials
Select all answers which apply. The plantwide overhead rate can be based on:
direct labor hours machine hours
Costs which are crucial parts of the finished product are called ____ _____.
direct materials
Which of the following are included in Raw materials inventory (check all that apply)
direct materials
Costs to implement an activity-based system are considered a ______ (advantage, disadvantage) of this system.
disadvantage
A cost ______ is a factor that causes the cost of an activity to go up or down.
driver
The parts of the process cost report include: (Check all that apply.)
equivalent units of production. cost assignment and reconciliation. physical flow of units. cost/equivalent unit of production
The following items would be included in the overhead section of the schedule of cost of goods manufactured:
factory utilities, factory supplies used, and factory insurance
True or False: finished goods are products which are partially complete
false
True or false: The plantwide overhead rate method uses multiple rates to allocate overhead costs to products.
false
Sales activities include:
finished goods inventory selling finished products
In the _____ (first/second) stage of activity-based costing the activities and overhead costs are identified.
first
A ______ cost remains unchanged when the volume of activity changes within the relevant range.
fixed
Contribution margin per unit contributes to covering ______ costs and then generating _____ on a per unit basis.
fixed; profits
Consider a company that manufactures picture frames. Which of the following costs would be considered direct costs? (check all that apply)
glass used in the frame oak wood used for frame wages of assembly line worker
The break-even point is the sales level at which a company: (Check all that apply.)
has income of $0. contribution margin equals fixed costs.
A cost accounting system: (Check all that apply.)
helps managers' determine selling prices. is used to control costs of manufacturing activities.
The first step in applying activity-based costing is
identifying the activities.
Managerial Accounting has the following characteristics? (Check all the that apply?)
includes mostly monetary and some nonmonetary information -emphasis is on projects, processes, and divisions -focus is on internal users
CVP analysis looks at how _______ is affected by sales price per unit, variable costs per unit, volume, and fixed costs.
income
Assuming all other factors remain constant, if fixed costs increase, then the break-even point will:
increase
Assuming all other factors remain constant, if variable cost per unit increases, then the break-even point will:
increase
Consider a service company that provides carpet cleaning and uses straight-line depreciation. Classify the cost of the depreciation on the carpet cleaning machines.
indirect
Each of the following are examples of factory overhead: (check all that apply)
indirect materials indirect labor
The cost accounting system used when producing customized products is called ____ order production
job
The cost object in a job order system is the ______ and the cost object in a process costing system is the ______.
job; process or department
The plantwide and departmental overhead rate methods are based on readily available information such as direct ________hours or ____ hours.
labor and machine
Activities such as purchasing raw materials are considered ____ activities
materials
List the following activities in the order in which they occur, with the first activity on top
materials activity production activity sales activity
Match the activity with the activity type purchase materials -> use materials -> product sold ->
materials activity production activity sales activity
Jack works on the production line at an assembly plant. Jack receives a base salary plus $1.25 per unit assembled. This is an example of a ______ cost.
mixed
One of the characteristics of activity-based costing is that it allows ____ (more, less) effective control over costs.
more
Under the plantwide overhead rate method, total budgeted overhead costs are divided by the chosen allocation base to determine the
one overhead cost rate
Each of the following are types of _______ allocation methods: plantwide rate method, departmental overhead rate method and activity-based costing method.
overhead
Activities such as using materials and labor to produce finished products are considered ____ activites
production
Match the activity to the most appropriate cost driver.
production-> dl hours setup-> # of setups factory services-> square ft design-> # of design changes
List the following documents in the order in which they are used when recording indirect materials costs in job order cost accounting, with the first document on top.
receiving reports materials ledger cards materials requestions factory overhead ledger
List the following documents in the order in which they are used when recording direct materials costs in job order cost accounting, with the first document on top.
receiving reports materials leger cards materials requestion job cost sheet
Which of the following are indirect costs for the finishing department of a furniture manufacture? (check all that apply)
rent on the manufacturing facility electricity cost for the plant plant manager's salary
The formula used in a contribution margin income statement is:
sales - variable costs = contribution margin - fixed costs = income
Which of the following are period costs for a manufacturer? (check all that apply)
sales commissions rent on the office building salary for administrative staff
In process operations, where there is a series of repetitive processes, each ______is a separate production department.
step or process
The plantwide overhead rate method can be based on each of the following except
supervisor hours
When using the high-low method, the slope represents:
the variable cost per unit
The departmental overhead rate method allows individual departments to have
their own overhead rate and allocation base.
In a process costing system, which of the following is correct regarding the Work in Process Inventory account:
there will be a separate Work In Process account for each process or department
In the _____ (third,fourth) stage of activity-based costing, overhead allocation rate is determined for each activity.
third
direct materials costs for an automobile manufacturer would include all of the following:
tires, bumpers, steering wheels
True or false: One of the advantages of the departmental overhead rate method over the plantwide overhead rate method is that in the departmental overhead rate method, individual departments can have their own overhead rate and allocation base.
true
True or false: The cost object of the plantwide overhead rate method is the unit of product.
true
True or false: The usefulness of the single plantwide overhead rate method depends on assuming that overhead costs change with the allocation base and all products use overhead costs in the same proportions.
true
