ACC-202 Exam 1 Practice (Ch. 1-6)

Purves Corporation is used in a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $121,000 and 10,000 direct labor hours for the period. The company incurred actual total fixed manufacturing overhead of $113,000 and 10,900 total direct labor-hours during the period. The predetermined overhead rate is closest to:

$12.10

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (5,700 units) $ 319,200 Variable expenses 188,100 Contribution margin 131,100 Fixed expenses 106,500 Net operating income $ 24,600 If the company sells 5,300 units, its net operating income should be closest to:

$15,400

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?

(Fixed expenses + Target net profit)/Contribution margin ratio

The Assembly Department started the month with 24,000 units in its beginning work in process inventory. An additional 309,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 29,000 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month?

304,000

Kelchner Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) $ 180,000 Variable expenses 108,000 Contribution margin 72,000 Fixed expenses 62,400 Net operating income $ 9,600 The contribution margin ratio is closest to:

40%

Which of the following statements is correct with regard to a Cost-Volume-Profit graph?

A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.

Which of the following types of companies would typically use process costing rather than job-order costing?

A breakfast cereal manufacturer.

The salary paid to the president of a company would be classified on the income statement as a(n):

Administrative Expense

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing.

Direct labor cost is classified as: Conversion cost Prime Cost A) Yes Yes B) No No C) No Yes D) Yes No

Choice A

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? Contribution Margin Ratio Break-even Point A) Increase Decrease B) Decrease Decrease C) Increase No effect D) Decrease No effect

Choice A

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 Product B) Product Period C) Period Product D) Period Period

Choice B

Which of the following would usually be found on a job cost sheet under a normal cost system? Actual direct material cost Actual manufacturing overhead cost A) Yes Yes B) Yes No C) No Yes D) No No

Choice B

Which of the following would usually be found on a job cost sheet under a normal cost system? Actual direct material cost Actual manufacturing overhead cost A) Yes Yes B) Yes No C) No Yes D) No No

Choice B

Which of the following will usually be found on an income statement prepared using absorption costing? Contribution Margin Gross Margin A) Yes Yes B) Yes No C) No Yes D) No No

Choice C

In the cost reconciliation report under the weighted-average method, the "Costs to be accounted for" section contains which of the following items?

Cost of beginning work in process inventory

In the cost reconciliation report under the weighted-average method, the "Total cost accounted for" equals:

Cost of ending work in process inventory + Cost of units transferred out

A cost driver is a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes direct costs.

False

Entry (11) in the below T-account could represent overhead cost applied to Work in Process. Work In Process Debit Credit Balance 40,000 (11) 330,000 (2) 100,000 (3) 90,000 (7) 120,000 Balance 20,000

False

Entry (4) in the below T-account could represent the cost of overhead applied to Work in Process. Manufacturing Overhead Debit Credit (2) 4,000 (7) 180,000 (3) 30,000 (4) 80,000 (5) 40,000 (6) 36,000 190,000 180,000 Balance 10,000

False

Generally speaking, when going through the process of computing a predetermined overhead rate, the estimated total manufacturing overhead cost is determined before estimating the amount of the allocation base.

False

If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account and will be recorded on the job cost sheets.

False

In a process costing system, costs are traced directly to jobs.

False

In a process costing system, manufacturing overhead cost is also called conversion cost.

False

In a process costing system, overhead is allocated to departments after being applied to units of product.

False

In calculating cost per equivalent unit under the weighted-average method, prior period costs are combined with current period costs.

False

In process costing, the equivalent units computed for materials is generally the same as that computed for conversion costs.

False

Net operating income computed using absorption costing will always be less than net operating income computed using variable costing.

False

The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin.

False

The following journal entry would be made in a processing costing system when units that have been completed in the final processing department are transferred to the finished goods warehouse: Debit Credit Finished Goods XXX Materials XXX

False

The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing overhead cost

False

When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials.

False

Which of the following statements is not correct concerning multiple overhead rate systems?

In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Which of the following is an assumption underlying standard CVP analysis?

In multiproduct companies, the sales mix is constant.

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

Net operating income

Refer to the T-account below: Manufacturing Overhead Debit Credit (2) 4,000 (9) 150,000 (3) 15,000 (4) 80,000 (5) 30,000 (6) 25,000 154,000 150,000 Balance 4,000 Entry (4) could represent which of the following except?

Overhead cost applied to Work in Process.

In a job-order costing system that is based on machine-hours, which of the following formulas is correct?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

Which of the following is the correct formula to compute the predetermined overhead rate?

Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

All of the following statements are correct when referring to process costing except:

Process costing would be appropriate for a jeweler who makes custom jewelry to order.

Which of the following statements is true? I. Overhead can be applied slowly as a job is worked on. II. Overhead can be applied when the job is completed. III. Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.

Statements I, II, and III are all true.

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.

Refer to the T-account below: Work In Process Debit Credit Balance 30,000 (12) 270,000 (4) 90,000 (6) 70,000 (9) 110,000 Balance 30,000 Entry (12) could represent which of the following?

The cost of goods manufactured transferred to Finished Goods.

When using data from a segmented income statement, the dollar sales for a segment to break even is equal to:

Traceable fixed expenses ÷ Segment CM ratio

A shift in the sales mix from high-margin items to low-margin items can cause total profits to decrease even though total sales may increase.

True

Absorption costing treats all manufacturing costs as product costs.

True

Advertising costs should NOT be charged to the Manufacturing Overhead account.

True

An employee time ticket is an hour-by-hour summary of the employee's activities throughout the day.

True

Entry (4) in the below T-account could represent the cost of property taxes and insurance incurred on the factory. Manufacturing Overhead Debit Credit (2) 4,000 (7) 180,000 (3) 30,000 (4) 80,000 (5) 40,000 (6) 36,000 190,000 180,000 Balance 10,000

True

Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have positive net operating income.

True

In a Cost-Volume-Profit graph (sometimes called a break-even chart), unit volume is represented on the horizontal (X) axis and dollars on the vertical (Y) axis.

True

Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources.

True

The absorption cost approach provides for the absorption of all manufacturing costs, fixed and variable, into units of product.

True

The following entry would be used to record depreciation on manufacturing equipment: Debit Credit Manufacturing Overhead XXX Accumulated Depreciation XXX

True

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio.

True

The units in beginning work in process inventory plus the units started into production must equal the units transferred out of the department plus the units in ending work in process inventory.

True

Under variable costing, all variable production costs are treated as product costs.

True

Under variable costing, fixed manufacturing overhead is treated as a product cost.

True

Under variable costing, only variable production costs are treated as product costs.

True

When raw materials are purchased, they are recorded as an asset.

True

Which costs will change with a decrease in activity within the relevant range?

Unit fixed costs and total variable cost.

Which of the following is true of a company that uses absorption costing?

Unit product costs can change as a result of changes in the number of units manufactured.

For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a:

Variable cost

The journal entry to record applying overhead during the production process is:

Work In Process XXX Manufacturing Overhead XXX

An example of a committed fixed cost is:

a long-term equipment lease.

If the contribution margin is not sufficient to cover fixed expenses:

a loss occurs

Manufacturing overhead includes:

all manufacturing costs except direct labor and direct materials.

Direct costs:

can be easily traced to a particular cost object.

When computing the cost per equivalent unit, the weighted-average method of process costing considers:

costs incurred during the current period plus cost of beginning work in process inventory.

Gullett Corporation had $26,000 of raw materials on hand on November 1. During the month, the Corporation purchased an additional $75,000 of raw materials. The journal entry to record the purchase of raw materials would include a:

debit to Raw Materials of $75,000

All of the following are examples of product costs except:

depreciation on the company's retail outlets.

Which of the following costs is classified as both a prime cost and a conversion cost?

direct labor

Which of the following costs at a manufacturing company would be treated as a product cost under variable costing?

direct material cost

Prime cost consists of:

direct materials and direct labor

A process costing system is employed in those situations where:

manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as:

manufacturing overhead

If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:

not change

Refer to the T-account below: Manufacturing Overhead Debit Credit (2) 9,000 (12) 167,000 (3) 15,000 (4) 80,000 (5) 30,000 (6) 25,000 159,000 167,000 Balance 8,000 The ending balance of $8,000 represents which of the following?

overapplied overhead

Property taxes on a company's factory building would be classified as a(n):

product cost

When manufacturing overhead is applied to production, it is added to:

the Work in Process account.

Which of the following is correct? The break-even point occurs on the Cost-Volume-Profit graph where:

total contribution margin equals total fixed expenses.

Break-even analysis assumes that:

unit variable expense is constant

The costing method that treats all fixed costs as period costs is:

variable costing

Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:

variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.

A cost that would be included in product costs under both absorption costing and variable costing is:

variable manufacturing costs

Within the relevant range, variable costs can be expected to:

vary in total in direct proportion to changes in the activity level.