Quiz 1 and 2 ECON 110

How would the following costs be classified (product or period) under variable costing at a retail clothing store? Cost of purchasing clothing; sales commissions a. product; period b. period; period c. period; product d. product; product

A

Merced Corporation has a process costing system and uses the FIFO method. For May, the company's beginning work in process inventory was 75% complete with respect to conversion, and the ending work in process inventory was 80% complete with respect to conversion. Information on units processed and conversion costs incurred during May follow: Units; Conversion Work in process inventory on May 1: 28,000; $44,000 Units started into production, and costs incurred during the month: 130,000; $266,700 Units completed and transferred to finished goods during the month: 108,000 Work in process inventory on May 31: 50,000 The amount of conversion cost in the ending work in process inventory was: a. $84,000 b. $68,000 c. $80,000 d. $222,700

A

Fackler Company's quality cost report is to be based on the following data: Quality Circles: 12,000 Product recalls: 24,000 Supplies used in testing and inspection: 87,000 Net cost of scrap: 59,000 Liability arising from defective products: 38,000 Re-entering data because of keying errors: 65,000 Debugging software errors: 19,000 Test and inspection of incoming materials: 65,000 Quality data gathering, analysis, and reporting: 55,000 a. 67,000 b. 99,000 c. 120,000 d. 79,000

A Quality Circles (12,000)+ Quality data gathering, analysis, and reporting (55,000) = 67000

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will a. have no effect on the contribution margin ratio b. have no effect on the break-even volume c. decrease the degree of operating leverage d. decrease the contribution margin

B

Feauto Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its product using a predetermined overhead rate based on direct labor-hours. The company has two products, I63E and E76I, about which it has provided the following data: I63E; E76I Direct materials per unit: $19.90; $54.40 Direct labor per unit: $12.00; $31.50 Direct labor hours per unit: 0.80; 2.10 Annual production: 30,000; 10,000 The company's estimated total manufacturing overhead for the year is $2,063,250 and the company's estimated total direct labor-hours for the year is 45,000. The company is considering using a form of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Assembling products: $720,000 Preparing batches: 263,250 Product support: 1,080,000 Total: $2,063,250 DLHs: 24,000; 21,000 Batches: 1,080; 675 Product variations: 2,115; 1,485 The manufacturing overhead that would be applied to a unit of product E76I under the activity-based costing system is closest to: a. $88.28 b. $10.13 c. $184.57 d. $96.29

A (21000/45000)*720000 = 336,000 (675/1755) * 263250 = 101,250 (1485/3600) * 1080000 = 445,500 total = 882,750 882750/10000 = $88.28

In classifying the costs of quality at a company that manufactures sonar equipment, which of the following is considered an external failure cost? a. the cost of debugging software errors found in the sonar equipment during inspection at the plant b. the cost of repairs and replacements made during the warranty period c. the net cost of scrap and spoilage incurred during production d. both the cost of repairs and replacements made during the warranty period and the cost of debugging software errors found in the sonar equipment during inspection at the plant

B

The following date have been collected for four different cost items. cost item; cost at 100 units; cost at 140 units W; 8,000; 10,560 X; 5,000; 5,000 Y; 6500; 9100 Z; 6700;8580 The cost of direct materials are classified as Cost W; Cost X; Cost Y; Cost Z a. variable, fixed, mixed variable b. mixed, fixed, variable, mixed c. variable, fixed, variable, variable d. mixed, fixed, mixed, mixed

B

When closing overapplied manufacturing overhead to cost of goods sold, which of the following would be true? a. Work in Process will decrease b. Gross Margin will increase c. Cost of Goods Sold will increase d. Net income will decrease

B

Which of the following statements about product costs is true? a. product costs appear on financial statements only when products are sold b. product costs are associated with unsold finished goods and work in process appear on the balance sheet as assets c. product costs are deducted from revenue as expenditures are made d. product costs are deducted from revenue when the production process is completed

B

Which of the following statements concerning direct and indirect costs is NOT true? a. The factory manager's salary would be classified as an indirect cost of producing one unit of product b. whether a particular cost is classified as direct or indirect does not depend on the cost object c. a direct cost is one that can be easily traced to the particular cost object d. a particular cost may be direct or indirect depending on the cost object

B

The James Corporation has four departments with data as follows: Service Department|Operating Department Cafeteria; Maintenance| Milling; Finishing Budgeted costs: $12,000; 10,000| 42,000; 38,000 Number of employees: 12; 10| 84; 66 Labor Hours: 1500; 1250 | 5250; 4750 Cafeteria costs are allocated on the basis of number of employees. If the step-down method is used with costs of the Cafeteria allocated first, the amount of cost allocated from the Cafeteria to Maintenance would be: a. 625 b. 750 c. 698 d. 0

B 10/(10+84+66)= 0.0625 0.0625* 12,000= 750

Goodman Corporation has sales of 3000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed costs are $66000, the degree of operating leverage is: a. 0.93 b. 1.73 c. 2.67 d. 0.79

B 3000x80x.65=156000 NOI = 156000-66000=90000 operating leverage: 156000/90000 = 1.73

Bellue Inc manufactures a single product. Variable costing net operating income was 96,300 last year and its inventory decreased by 2600 units. Fixed manufacturing overhead cost was $1 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year? a. 98900 b. 93700 c. 96300 d. 2600

B 96300-2600= 93700

Saada Corporation uses the weighted-average method in its process costing system. The Fitting Department is the second department in its production process. the data below summarize the department's operations in March. Units; % complete with respect to conversion Beginning work in process inventory: 3,700; 20% Transferred in from the prior department during March: 59,000 Ending work in process inventory: 7,200; 60% The Fitting Department's cost per equivalent unit for conversion cost for March was $5.99. How much conversion cost was assigned to the units transferred out of the Fitting Department during March? a. 375,573.00 b. 332445.00 c. 353,410.00 d. 328,012.40

B. transferred out = 3700+59000-7200=55500 55500*5.99=332445

In a job-order costing system, indirect labor cost is usually recorded as a debit to: a. cost of goods sold b. finished goods c. manufacturing overhead d. work in process

C

San Juan Minerals has two service departments and two operating departments. Operating data for these departments for last year are as follows: Maintenance; Cafeteria; Mining; Processing Departmental costs: 48000; 45000; 70000; 130000 Machine hours: 2000; 1000; 11000; 9000 Number of employees: 40; 30; 400; 360 Cost of the Maintenance Department are allocated on the basis of machine hours. Cafeteria costs are allocated on the basis of number of employees. SJM does not distinguish between variable and fixed overhead costs. Assuming SJM allocates service department costs using the direct method, the total cost allocated from Cafeteria to Mining would be closest to: a. 22500 b. 21687 c. 23684 d. 15750

C

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory? a. the workman's compensation insurance of the supervisor who oversees production b. the cost of glue in a chair c. the amount paid to the individual who stains a chair d. the factory utilities of the department in which production takes place

C

Eban Corporatino uses the FIFO method in its process costing system. The first processing department, the Welding Department, started the month with 18,000 units in its beginning work in process inventory that were 50% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $52,200. An additional 55,000 units were started into production during the month. There were 16,000 units in the ending work in process inventory of the Welding Department that were 20% complete with respect to conversion costs. A total of $284, 160 in conversion costs were incurred in the department during the month. The cost per equivalent unit for conversion costs is closest to: a. 5.8 b. 5.167 c. 5.55 d. 4.608

C (18000*0.5) + (55000-16000) + (16000*0.2) = 51200 284160/51200 = 5.55

The management of Krach Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 10,000 machine-hours. Capacity is 12,000 machine-hours and the actual level of activity for the year is assumed to be 9,500 machine-hours. All of the manufacturing overhead is fixed and both the estimated amount at the beginning of the year and the actual amount at the end of the year are assumed to be $12,000 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. If the company bases its predetermined overhead rate on capacity, what would be the cost of unused capacity reported on the income statement prepared for internal management purposes? a. $2000 b. $600 c. $2500 d. $1900

C ($12000/12000)= $1 per machine hour (12000-9500) * $1 = $2500

In process costing, a separate work in process account is kept for each: a. cost category b. individual order c. equivalent unit d. processing department

D

Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for material at Malcolm would be the sum of: a. units in ending work in process and units started b. units in ending work in process and the units started and completed c. units in beginning in process and the units started and completed d. units in beginning work in process and units started.

D

Simila Corporation has a provided the following data for its most recent year of operation: Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials: $11 Direct labor: $7 Variable manufacturing overhead: $5 Fixed manufacturing overhead per year: $308,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold: $5 Fixed selling and administrative expense per year: $81,000 Units in beginning inventory: 0 Units produced during the year: 11,000 Units sold during the year: 9,000 Units in ending inventory: 2,000 Which of the following statements is true? a. the amount of fixed manufacturing overhead released from inventories is $459,000 b. the amount of fixed manufacturing overhead released from inventories is $56,000 c. the amount of fixed manufacturing overhead deferred in inventories is $459,000 d. the amount of fixed manufacturing overhead deferred in inventories is $56,000

D

The costs of direct materials are classified as: Conversions Cost; Manufacturing Cost; Prime cost a. Yes, Yes, Yes b. No, No, No c. Yes, Yes, No d. No, Yes, Yes

D

Andom Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. Production volume: 1000 units; 2000 units Direct Materials: 15.20 per unit; 15.20 per unit Direct Labor: 30.50 per unit; 30.50 per unit Manufacturing overhead: 54.10 per unit; 37.40 per unit The best estimate of the total monthly fixed manufacturing cost is: a. 74800 b. 54100 c. 99800 d. 33400

D 1000*99.8=99800 2000*83.1= 166200 (166200-99800)/1000=66400 99800-66400=33400

Croft Corporation produced a single product. Last year, the company had a net operating income of $160,000 using absorption costing and $149,000 using variable costing. The fixed manufacturing overhead cost was $10 per unit. There were no beginning inventories. If 43,000 units were produced last year, then sales last year were: a. 54000 b. 40000 c. 32000 d. 41900

D 160,000-149000= $11000 11000/10=1100 43000-1100=41900

Larker Brothers Inc used the high-low method to derive its cost formula for electrical power cost. According tot he cost formula, the variable cost per unit of activity is $4 per machine-hour. Total electrical power cost at the high level of activity was $19,200 and at the low level of activity was $18,400. If the high level of activity was 3,300 machine hours, then the low level of activity was: a. 2900 b. 3200 c. 3000 d. 3100

D 19200-18400=800 800/4= 200 3300-200=3100

Salmont Corporation uses the FIFO method in its process costing system. The company reported 30,800 equivalent units of production for materials last month. The company's beginning work in process inventory consisted of 8,000 units, 75% compete with respect to materials. The ending work in process inventory consisted of 6,000 units, 80% complete with respect to materials. The number of units started during the month was: a. 24,000 b. 6,800 c. 32,000 d. 30,000

D 30800- (.25*8000)- (.8*6000)= 24,000 24,000+6000=30,000

Carrington Corporation produces canned vegetable soup. The company uses the weighted-average method in its process costing system. The company sold 300,000 units in January. Data concerning inventories follow: Inventory at January 1: Work in process: None Finished Goods: 75,000 units Inventory at January 31: Work in process (75% complete with respect to conversion costs): 24,000 units Finished Goods: 60,000 units What were the equivalent units for conversion costs for January? a. 309,000 b. 285,000 c. 300,000 d. 303,000

D (24000*0.75)=18,000 60,000+18,000-75,000 = 3000 units 300,000+3000= 303,000 units

In the Vasquez Corporation, any overapplied or underapplied manufacturing overhead is closed out to Cost of Goods Sold. Last year, the Corporation incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of manufacturing overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Corporation's Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any overapplied or underapplied manufacturing overhead, for the year must have been: a. 98,000 b. 73,000 c. 71,000 d. 69,000

D 2000 overapplied. 71,000-2000= 69000

Wofril Corporation uses the cost formula Y= $5300+ $0.60X for the maintenance cost, where X is machine-hours. The August budget is based on 8,000 hours of planned machine time. Maintenance cost expected to be incurred during August is: a. 5300 b. 500 c. 4800 d. 10100

D 5300 + 0.6 (8000)= 10100

Annenbaum Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were: Cost; Percent Complete Material costs: $5700; 65% Conversion costs: $6800, 45% A total of 6500 units were started and 5900 were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Material costs: $125,000 Conversion costs: $207,000 The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs. The cost per equivalent unit for conversion costs the first department for the month is closest to: a. 33.12 b. 30.99 c. 35.92 d. 34.21

D. 6500+400-5900= 1000 ending inventory units 5900+350(1000*.35)=6250 equivalent units of conversion (6800+207000)/6250 = 34.21