test 2 study guide

The controller for Knights Co. estimates that the company's fixed overhead is $150,000 per year. They have also determined that the variable overhead is approximately $0.20 per unit. Since the company has s single product, overhead is applied on the basis of output units. What is the predetermined overhead per unit if the estimated output is 150,000 units?

$1.20

ABC Co. makes batches of custom novelty items or other companies to give away at career fairs. Job A11 consists of 2,000 pens that light up inside the pen base when used. In addition, a specialized logo is printed on the pens. Direct materials for these pens amount to $1,500; direct labor is $2,800; and manufacturing overhead is $1,600. Based on this information, what is the cost per pen for Job A11?

$2.95

ABC Co. implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping. ABC determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped. The cost driver for this pool is the number of individual items that are inspected. The third cost pool is used for the general operations of the department, and the cost driver is the number of orders. Cost Pool Estimated Total Costs Cost Driver Estimated Annual Activity Packaging & Shipping $67,200 Number of boxes shipped 16,000 boxes Inspection $220,000 Number items inspected 100,000 items General Operations $82,400 Number of orders 10,000 orders During the period, 4,000 items were sold, reflecting 800 orders that were packed and shipped in 2,100 boxes. What amount is allocated to each order for packing and shipping?

$4.20

Damon purchased a $140 ticket to a December game of the Jacksonville Jaguars in July. Parking for the game was expected to cost approximately $21, and Damon would probably spend another $11 for food. Is it now December, the Jaguars have had a miserable season, and the weather for the game looks terrible. Damon is thinking of skipping the game and going out to eat with friends. Damon expects the dinner to cost $100. The amount of sunk cost that should influence Damon's decision to hang out with friends is:

0

ABC Manufacturing uses activity-based costing. Each product consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information is as follows: Acitivity Allocation Base Cost Allocation Rate Materials handling Number of parts $0.08 Machine operations Number of hours $5.22 Assembling Number of parts $0.35 Packaging Number of completed products $2.00 What is the cost of materials handling per product?

1.6

ABC Corp., which has excess capacity, received a special order for 4,021 units at a price of $15 per unit. Currently, production and sales are anticipated to be 10,000 units without considering the special order. The budget information related to the current year is as follows: Sales $190,000 Less: Cost of goods sold 145,000 Gross margin $45,000 The cost of goods sold includes $30,000 of fixed manufacturing costs. If the special order is accepted, the company's income will increase by:

14,074

The controller for Knights Co. estimates that the company's fixed overhead is $160,000 per year. They have also determined that the variable overhead is approximately $0.25 per unit. Since the company has s single product, overhead is applied on the basis of output units. What is the predetermined overhead per unit if the estimated output is 80,000 units?

2.25

ABC Company makes backpacking tents. It has the capacity to produce 10,000 tents per year and is currently producing and selling 7,000 tents. The normal selling price for a tent is $470. Unit-level costs are $100 for direct materials, $200 for direct labor, and $25 for other manufacturing costs. Facility-level costs of $80 are allocated to each tent. ABC Company has received a special order for 1,387 tents at $340 each. How much income will ABC Company make on the special order? Enter your response without a comma or $ sign. Round to the nearest whole number.

20,805 margin of error +/- 10%

ABC Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using machine hours.

20.00

ABC Co. makes batches of custom novelty items or other companies to give away at career fairs. Job A11 consists of 1,500 pens that light up inside the pen base when used. In addition, a specialized logo is printed on the pens. Direct materials for these pens amount to $1,875; direct labor is $1,800; and manufacturing overhead is $1,200. Based on this information, what is the cost per pen for Job A11?

3.25

. Fill in the missing items for the following inventories: Product A Product B Product C Beginning balance $14,200 $ x $17,000 Ending balance x 28,000 16,000 Transferred in 44,000 79,500 x Transferred out 45,800 85,000 19,000

33500 12400 18000

Seashore Furniture has selected direct labor hours as its allocation base. The budgeted manufacturing overhead costs are $326,280 for products that are expected to use a total of 5,576 direct labor hours. What is the predetermined overhead rate?

59

Seashore Furniture has selected direct labor hours as its allocation base. The budgeted manufacturing overhead costs are $322,368 for products that are expected to use a total of 5,333 direct labor hours. What is the predetermined overhead rate?

60

Seashore Furniture has selected direct labor hours as its allocation base. The budgeted manufacturing overhead costs are $338,483 for products that are expected to use a total of 5,504 direct labor hours. What is the predetermined overhead rate?

62

ABC Co., currently makes 10,000 units of a product that has created a number of manufacturing problems. ABC's costs are as follows: Manufacturing Costs: Variable $540,000 Fixed 180,000 Allocated corporate administrative costs 60,000 If ABC were to discontinue production, fixed manufacturing costs would be reduced by 0.62%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

651,600

ABC Co., currently makes 10,000 units of a product that has created a number of manufacturing problems. ABC's costs are as follows: Manufacturing Costs: Variable $540,000 Fixed 180,000 Allocated corporate administrative costs 60,000 If ABC were to discontinue production, fixed manufacturing costs would be reduced by 0.66%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

658,800

A company calculated the predetermined overhead based on an estimated overhead of $70,000, and the activity for the cost driver was estimated as 2,500 hours. If product A utilized 1,280 hours and product B utilized 1,090 hours, what was the total amount of overhead assigned to the products?

66,360

The initial processing department had a beginning inventory of 780 units and an ending inventory of 1,344 units, and it started 9,500 units into production. How many were transferred out to the next department?

8,936

A company estimated 100,000 direct labor hours and $800,000 in overhead. The actual overhead was $805,100, and there were 99,900 direct labor hours. What is the predetermined overhead rate? How much was applied during the year?

8.00 799200.00

Consider the following statements regarding traditional costing systems. Which of the statements is the most accurate?

Overhead costs are applied to products on the basis of volume-related measures and traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements

Which of the following cost drivers would best be associated with the activity of a physician time in a medical clinic?

Physician minutes with a patient

ABC Production manufactures products X and Y and has been applying overhead on the basis of direct labor hours. Product X is a high-volume product and relatively simplistic in nature. Product Y is a low-volume product that requires a variety of complex manufacturing procedures. What would an activity-based costing system likely disclose about products X and Y?

Product X was overcosted and product Y was undercosted

Party Supply is trying to decide whether or not to continue its costume segment. The information shown is available for Party Supply's business segments. Assume that neither the Direct fixed costs nor the Allocated common fixed costs may be eliminated but will be allocated to the two remaining segments. Costumes Party Supplies Floral Decorations Sales $160,000 $110,000 $210,000 Variable costs $84,000 $50,000 $120,000 Direct Fixed costs $50,000 $20,000 $25,000 Allocated Fixed costs $30,000 $25,000 $30,000 Net income $(4,000) $15,000 $35,000 If the costumes segment is dropped, what change will occur to profit?

Profit will decrease by $76,000

Which of the following would activity-based costing most likely lead to?

Raising the sale price of low-colume products

A cost not relevant to deciding whether to purchase a new machine is:

The cost of the old machine

Which of the following product situations is better suited to job order costing than to process costing?

The costs are easily traced to a specific product.

Which of the following is a reason a company would implement activity-based costing?

They want to improve the data on which decisions are made.

The Shoe Department at the Knights Department Store is being considered for closure. The following information related to shoe department activity: Sales revenue $350,000 Variable costs: Cost of goods sold 280,000 Sales commissions 30,000 Fixed operating costs 90,000 If 70% of the fixed operating costs are avoidable, should the shoe department be closed?

Yes, Knights would be better off by $23,000

The Shoe Department at the Knights Department Store is being considered for closure. The following information related to shoe department activity: Sales revenue $352,000 Variable costs: Cost of goods sold 282,000 Sales commissions 32,000 Fixed operating costs 92,000 If 80% of the fixed operating costs are avoidable, should the shoe department be closed?

Yes, Knights would be better off by $35,600

A job order costing system is most likely used by which of the following?

an accounting firm specializing in tax returns

Activity-based costing systems:

frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product

Manufacturing overhead:

is a pool of indirect production costs that must somehow be attached to each unit manufactured

A custom-home builder would likely utilize:

job-order costing

Activity-based costing systems:

often reveal products that were under- or over-costed by traditional costing systems

Factors in a decision problem that cannot be expressed in numerical terms are:

qualitative in nature

The cost of inventory owned by a company is considered a:

sunk cost

Which of the following types of companies would most likely use process costing?

textile manufacturers

In activity-based costing system, direct materials used would typically be classified as a:

unit-level cost

ABC Co. makes batches of custom novelty items or other companies to give away at career fairs. Job A11 consists of 2,000 pens that light up inside the pen base when used. In addition, a specialized logo is printed on the pens. Direct materials for these pens amount to $1,400; direct labor is $2,200; and manufacturing overhead is $1,800. Based on this information, what is the cost per pen for Job A11?

$2.70

ABC Co. implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping. ABC determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped. The cost driver for this pool is the number of individual items that are inspected. The third cost pool is used for the general operations of the department, and the cost driver is the number of orders. Cost Pool Estimated Total Costs Cost Driver Estimated Annual Activity Packaging & Shipping $67,200 Number of boxes shipped 16,000 boxes Inspection $220,000 Number items inspected 100,000 items General Operations $82,400 Number of orders 10,000 orders An order is shipped to a retail customer who has ordered 8 individual items. This order will be shipped in 5 separate boxes. What is the packing and shipping cost that will be allocated to this order?

$21.00

A company anticipates the cost to heat the building will be $21,000. Product A takes up 500 square feet of space, while Product B takes up 200 square feet. The activity rate per product using activity-based costing would be which of the following?

$30 per square foot

ABC Manufacturing uses activity-based costing. Each product consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information is as follows: Acitivity Allocation Base Cost Allocation Rate Materials handling Number of parts $0.04 Machine operations Number of hours $5.22 Assembling Number of parts $0.35 Packaging Number of completed products $2.00

0.8

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $181 per hour; the related hourly variable costs are $71, and the related fixed operating costs are $12. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

110

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $183 per hour; the related hourly variable costs are $67, and the related fixed operating costs are $12. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

116

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $193 per hour; the related hourly variable costs are $73, and the related fixed operating costs are $13. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

120

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $196 per hour; the related hourly variable costs are $73, and the related fixed operating costs are $11. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is:

123

Direct material costs $2 per unit, direct labor costs $6 per unit, and overhead is applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred to the next department if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory?

140,000

ABC Corp., which has excess capacity, received a special order for 4,344 units at a price of $15 per unit. Currently, production and sales are anticipated to be 10,000 units without considering the special order. The budget information related to the current year is as follows: Sales $190,000 Less: Cost of goods sold 145,000 Gross margin $45,000 The cost of goods sold includes $30,000 of fixed manufacturing costs. If the special order is accepted, the company's income will increase by:

15,204 margin of error +/- 10%

ABC Corp., which has excess capacity, received a special order for 4,483 units at a price of $15 per unit. Currently, production and sales are anticipated to be 10,000 units without considering the special order. The budget information related to the current year is as follows: Sales $190,000 Less: Cost of goods sold 145,000 Gross margin $45,000 The cost of goods sold includes $30,000 of fixed manufacturing costs. If the special order is accepted, the company's income will increase by:

15,691

ABC Corp., which has excess capacity, received a special order for 4,836 units at a price of $16 per unit. Currently, production and sales are anticipated to be 12,000 units without considering the special order. The budget information related to the current year is as follows: Sales $252,000 Less: Cost of goods sold 180,000 Gross margin $72,000 The cost of goods sold includes $36,000 of fixed manufacturing costs. If the special order is accepted, the company's income will increase by:

19,344

ABC Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using direct labor hours.

2.50

ABC manufactures small and large blankets. It estimates $350,000 in overhead during the manufacturing of 75,000 small blankets and 25,000 large blankets. What is the predetermined overhead rate if a small blanket takes 1 machine hour and a large blanket takes 2 machine hours?

2.80

ABC, Inc. currently uses a traditional costing procedure. They apply $842,000 of overhead to products Z4 and Y1 on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours, production set-ups, and the number of parts components as cost drivers. Data on the cost pools and driver volumes are as follows: Pool 1 Driver: Direct labor hours Pool 2 Driver: Set-ups Pool 3 Driver: Part Components Product Z4 1,619 40 3,300 Product Y1 3,614 60 1,100 Pool Cost $174,000 $294,000 $374,000 The overhead cost allocated to Product Z4 by using activity-based costing procedures would be:

451,933 margin of error +/- 10%

ABC Co., currently makes 10,000 units of a product that has created a number of manufacturing problems. ABC's costs are as follows: Manufacturing Costs: Variable$540,000 Fixed 180,000Allocated corporate administrative costs 60,000 If ABC were to discontinue production, fixed manufacturing costs would be reduced by 61%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

649,800 margin of error +/- 1%

ABC Co., currently makes 10,000 units of a product that has created a number of manufacturing problems. ABC's costs are as follows: Manufacturing Costs: Variable $540,000 Fixed 178,065 Allocated corporate administrative costs 60,000 If ABC were to discontinue production, fixed manufacturing costs would be reduced by 70%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

664,646

Which statement is correct

Activity-based cost systems are more accurate than traditional cost systems.

Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top-selling cereal at a price of $22,000 for 20,000 pounds. The costs shown are associated with the production of 20,000 pounds of almond cereal: Direct material $13,000 Direct labor $5,000 Manufacturing overhead $7,000 The manufacturing overhead consists of $2,000 of variable costs, with the remaining balance allocated to fixed costs. Almonds treats should:

Continue making cereal because buying it results in $2,000 profit decrease

ABC Company is trying to decide whether to replace an old machine with a new one. The following data were analyzed. Cost savings per year on new machine $100,000 New machine cost $150,000 Revenue from sale of old machine $10,000 Book value of old machine $25,000 The purchase of a new machine would have what effect on net income?

Net decrease of $40,000

Which of the following is most likely to be a cost driver for a packaging and shipping activity?

Number of orders

ABC Co.,is analyzing whether to expand operations by adding a new product line. Which of the following choices correctly identifies the costs that should be considered in this decision?

Opportunity cost only

Round the Corner Bakery needs help defining the costs for its business. The owner wants to know which costs are relevant or irrelevant to business operating decisions. Rent Baker wages Educational costs of Baker (graduated last year) Bakery ingredients Storefront decorations for last holiday

Relevant Relevant Irrelevant Relevant Irrelevant

Which of the following best defines the concept of a relevant cost

a future cost that differs among alternatives

Which if the following costs are relevant to a decision making situation?

the cost of special electrical wiring in an equipment acquisition decision

The following costs are relevant to the decision situation cited except:

the cost to enhance an airlines beverage service in a decision to expand existing service to either Salt Lake City or Phoenix