ACC 241 Exam 1 Practice Questions Chapters 1,2,3,4,6

Volume-based (traditional, plant-wide)) cost systems tend to

Under-cost low-volume products and over-cost high-volume products

Mr. Quick Printers documented the number of copies it made for customers as well as total overhead costs for the past five months as follows: month... number of copies... total overhead costs October... 230,000... $7,400 November... 240,000... $7,500 December... 280,000... $8,000 January... 265,000... $7,700 February... 248,000... $7,550 Using the high/low method, what is the overhead cost equation?

Y = $5,566 + $0.08x v = ($8,000 - $7,400) / 280,000 - 230,000 = $0.012 f - $8,000 - 280,000($0.012) = $4,640

Dallas, Inc. an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology. The research and testing costs associated with the new ovens is said to arise from a:

competitive-level activity

Traditional overhead allocation methods that use unit-based cost drivers are never accurate

False

The relevant range is the range of activity for which the assumed cost relationships are valid

True

A plantwide overhead is calculated by dividing the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year

True

H.K. Corporation has provided the following data from its activity-based costing system: Activity Cost Pool... Total Cost; Total Activity; Assembly... $698,950.00; 35,000 machine-hours Processing orders... $85,101.0; 1,900 orders Inspection... $107,440.00; 1,580 inspection-hours Data concerning the company's product P58Z appear below: Annual unit production and sales... 400 Annual machine-hours... 1,000 Annual number of orders... 90 Annual inspection-hours... 30 Direct material cost... $34.78 per unit Direct labor cost... $23.52 per unit According to the activity-based costing system, the unit product cost of product P58Z is closest to:

$123.40

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 30 parts and requires 3 hours of machine time. Additional information follows: Activity; Allocation Base; Cost Allocation Rate Materials handling; Number of parts; $0.50 per part Machining; Machine hours; $14.00 per machine hour Assembling; Number of parts; $1.00 per part Packaging; Number of finished units; $2.00 per finished unit What is the cost of machining per phone?

$15,000 30 parts x .50 = $15,000

The cost of warranty work is an example of a(n)

External failure cost

Cost distortion occurs when some products are overcosted while other products are undercosted by the cost allocation system

True

Sunnybrook Orange Groves processes a variety of fresh juices. The company has the following expenses for July: Depreciation expense on bottling machines 63,000 Glass juice bottles 54,000 Commissions for salespeople 27,000 Salaries of nutrition researchers 89,000 Costs of maintaining website used for customer orders 4,000 Wages of factory workers 75,000 Freshness seals/caps for juice bottles 3,000 Reconfiguring the factory layout 102,000 Customer help line 2,000 Costs of refrigerated trucks used to deliver juice 17,000 What is the total cost for the production category (manufacturing costs) of the value chain?

$195,000 $75,000 + $3,000 +$63,000 + $54,000 = $195,000

The following is selected financial data from Ryan Manufacturing for the most recent year: Ending raw materials inventory $19,000 Ending work in process inventory $42,000 Ending finished goods inventory $54,1000 Amount of underallocated (underapplied) manufacturing overhead $3,100 Cost of goods sold for year $81,000 Cost of raw materials purchased during year $45,300 Cost of direct materials requisitioned during year $41,700 Cost of indirect materials requisitioned during year $7,100 Cost of goods completed during year $110,000 Manufacturing overhead allocated $60,000 Manufacturing overhead % of direct labor cost 125% What is the beginning work in process inventory?

$2,300 Beg Bal + DM Used + DL + MOH Applied - End Bal = COGM x + 41,700 + (60,000/1.25) + 60,000 - 42,000 = 110,000 x = 2,300

In a manufacturing firm, manufacturing costs and product costs are the same

True

Diane Clothing Co.'s accounts reflect the following: Cost of Goods Manufactured $550,000 Beg. Finished Goods Inventory $300,000 End. Finished Goods Inventory $350,000 GOGS ? Applied overhead $220,500 Actual overhead $200,000 If Sales were $800,000 and the company closes the over/under applied overhead balance to COGS, how much gross profit would the company report (after the overhead adjustment)?

$320,500 Beg. FG + COGM - End FG = Unadjusted COGS $300,000 + $550,000 - $350,000 = $500,000 Applied OH - Actual OH = $220,500 - $200,000 = $20,500 Overapplied Adjusted COGS: $500,000 - $20,500 = $479,500 Sales - Adjusted COGS = GP $800,000 - $479,500 = $320,500

Squire Corporation charged Job 110 with $13,400 of direct materials and $11,900 of direct labor. Allocation for manufacturing overhead is 75% of direct labor costs. What is the total cost of Job 110?

$34,225 $13,400 + 11,900 + 75% (11,900) = $34,225

Last month Dallas Manufacturing Company had the following operating results: Beginning finished goods inventory $90,000 Ending finished goods inventory $63,000 Sales $412,000 Gross Profit/Margin $62,000 What is the cost of goods manufactured for the month?

$350,000 Sales - COGS = GM $412,000 - $350,000 = $62,000 Beg F.G. + COGM - End F.G. = COGS $90,000 + $323,000 - $63,000 = $350,000

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. Activity... Est.Indirect Activity Cost... Allocation base... Cost allocation rate Materials... $75,000... Material moves... $3.00/move Assembling... $225,000... Direct labor hours... $10.00/dir. labor hour Packaging... $90,000... # of finished units... $1.00/finished unit The following parts were produced in October with the following information: Part... # Produced... Materials Costs... # Moves... Dir. Labor Hrs. A... 2,250... $3,000... 900... 250 B... 4,000... $6,500... 1,700... 325 C... 4,750... $9,000... 2,500... 1,500 Total manufacturing costs for part C is

$36,250 Direct material costs = $9,000 Materials 2,500 moves x $3 = 7,500 Assembling 1,500 hr x $10 = 15,000 Packaging 4,750 units x $1.00 = 4,750 Total = $36,250

James Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $35 per machine hour, while the Sanding Department uses a departmental overhead rate of $20 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments: Actual results Assembly Department 8 DL 10 MH Sanding Department 5 DL 7 MH The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 542 is $1,400. How much manufacturing overhead would be allocated to Job 603 using departmental overhead rates?

$450 Assembly Dept. $35 x 10 machine hrs = 350.00 Sanding Dept. $20 x 5 direct hrs = 100.00 Total 450.00

Swiss Furniture Company manufactures bookshelves and uses an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of May: Activity; Estimated Indirect Activity Costs; Allocation Base; Estimated Quantity of Allocation Base Materials handling; $6,400; Number of parts; 3,200 parts Assembling; $11,200; Number of parts; 3,200 parts Packaging; $2,240; Number of bookshelves; 800 bookshelves Each bookshelf consists of 4 parts. The direct materials cost per bookshelf is $30.00. What is the total manufacturing cost per bookshelf?

$54.80 Direct materials = 30.00 Handing ($6,400 / 3,200 parts) x 4 parts = 8.00 Assembling ($11,200 / 3,200 parts) x 4 parts = 14.00 Packaging $2,240 / 800 = 2.80 Total = 54.80

As output decreases fixed costs per unit will also decrease

False

If the finished goods inventory decreases between the beginning and the end of a period, then the cost of goods manufactured for the period is larger than the cost of goods sold

False

Regarding activity-based costing systems, which of the following statements is true? ABC systems accumulate overhead costs by departments. ABC costing systems are less complex​ and, therefore, less costly than traditional systems. ABC costing systems can be used in manufacturing firms only. ABC costing systems have separate indirect cost allocation rates for each activity.

ABC costing systems have separate indirect cost allocation rates for each activity

Geiger Construction currently uses traditional costing where overhead is applied based on direct labor hours Using traditional costing, the applied overhead rate is $20 per direct labor hour. They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities: Activity... Allocation Base... Overhead rate Material delivery and handling... Number of deliveries... $100 per delivery Inspections... Number of inspections... $75 per inspection Supervision... Hours of supervisor time... S30 per supervisor hour Purchasing... Number of purchase orders... S60 per purchase order One of the company's current jobs has the following information available: Direct labor hours 50 hours Number of delivers 2 Number of inspections 3 Number of supervisor time 2 Number of purchase orders 5 Which of the following statements is true when comparing the total overhead allocated (applied) to the job using traditional (plantwide) versus ABC costing?

ABC costing will yield $215 less in overhead cost being allocated to the job Plant wide: 50 x $20 = $1000 overhead ABC: ($100 x 2) + ($75 x 3) + ($30 x 2) + ($60 x 5) = $785 overhead Difference: $1,000 - $785 = $215

If a frozen pizza plant (factory) is the cost object, classify each of the following costs as direct or indirect, respectively: property insurance, plant supervisor wages, and janitorial supplies

All are direct

Dietrich Company has the following data for August: Direct materials cost $35,000 Direct labor hours 6,000 Direct labor cost $30,000 Actual manufacturing overhead $25,000 Machine hours worked 3,000 Given the information above, if manufacturing overhead is applied at the rate of 80% of direct labor cost, overhead for August is:

Answer: $1,000 underapplied Applied MOH: $30,000 x .8 = $24,000 $25,000 actual - $24,000 applied = $1,000 underapplied

What is a predetermined manufacturing overhead rate computed?

Can be done at any time

Which of the following statements is true concerning the effect that automation has had on cost estimation? Cost estimation approaches may be improved with the inclusion of non unit cost drivers Companies no longer need to pay attention to estimating overhead Direct labor is playing an increasingly important role in cost determination A unit level approach to estimating costs is more appropriate than previously believed

Cost estimation approaches may be improved with the inclusion of non unit cost drivers.

When the level of activity increases within the relevant range, how does each of the following change? Mixed cost per unit Total variable cost Fixed cost per unit

Decreases Increases Decreases

Claire Corp. allocates (applies) Overhead based on direct labor hours. Here is selected Data from the Jacob Corp.: est. manufacturing overhead (MOH) 500,000 actual manufacturing overhead (MOH) 480,000 estimated DLH 50,000 actual DLH 55,000 since actual MOH is 20,000 less than est. MOH, then overhead must have been over-allocated by 20,000

False Applied Overhead = $500,000 Est MOH / 50,000 Est DLH = $10/DLH PDOR $10 PDOR x 55,000 actual DLH = $550,000 Applied Actual MOH - Applied MOH = $480,000 - $550,000 = $70,000 OVER-applied

Choosing the method of allocating costs to products (ie plantwide vs ABC) can have an impact on the total manufacturing costs

False Direct Costs don't change, MOH potentially change at individual product level but not overall

Which of the following is NOT true about cost of goods manufactured? Includes some costs incurred in prior periods Includes only current period cost Included some costs incurred during the period Shows total cost of items completed during the period

Includes only current period cost

Which of the following statements correctly distinguishes between financial and managerial accounting? Financial accounting is oriented toward the future Managerial accounting focuses on the whole organization Financial accounting is primarily concerned with providing information for internal users Financial accounting is oriented toward the planning and control aspects of management Managerial accounting uses both financial and non-financial measures of performance

Managerial accounting uses both financial and non-financial measures of performance

Planning, directing, and controlling are a manager's three primary responsibilities

True

The actual manufacturing overhead incurred at Jeffry Corporation during January was $73,000, while the manufacturing overhead applied to Work in Process was $78,000. The company's Cost of Goods Sold was $349,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

Manufacturing overhead was overapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $344,000 Actual MOH $73,000 - Applied MOH 78,000 = $5,000 Overapplied Since applied MOH exceeds actual MOH, MOH is overapplied Beg COGS = $349,000; overapplied manufacturing reduces the COGS so the adjusted COGS is: $349,000 - $5,000 = $344,000

You are given the following cost and volume information: Volume (in units): 500 1,000 1,500 Cost per unit (in $) 6 3 2 Which type of cost is given?

Mixed All three costs same in total of $3,000 but vary on per unit basis

Product (inventoriable) costs differ from period expenses because

Product costs may appear on the balance sheet as assets

Products and their costs flow through a production facility in the following order:

Raw materials, work-in-process, finished goods, cost of goods sold

In ABC, how is the activity allocation rate computed?

The total estimated activity cost pool is divided by the total estimated activity allocation base