Accounting 205 Department Final

Windsor Co. estimates that it will incur $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). Information about Windsor's two products and their estimated use of cost drivers is as follows: Product X Product Y Machining hours 1,000 3,000 Inspections 100 500 Orders packed 350 650 Direct labor hours 1,700 1,800 If ABC is used, how much overhead will be assigned to Product X? A. $252,500 B. $363,462 C. $510,000 D. $525,000

A. $252,500

Mark Sportswear manufactures a specialty line of T-shirts using a job order cost system. During May, the following costs were incurred in completing Job ICU2: direct materials $13,700, direct labor $4,800, administrative costs $1,400, and selling costs $5,600. Factory overhead was allocated at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the product cost per shirt would be: A. $5.50 B. $6.30 C. $5.70 D. $6.50

A. $5.50

Dobles Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly ..................... $228,060 18,000 machine-hours Processing orders ......... $34,068 1,200 orders Inspection .................... $288,960 1,720 inspection-hours The company makes 420 units of product D28K a year, requiring a total of 460 machine-hours, 80 orders, and 10 inspection-hours per year. The product's direct materials cost is $48.96 per unit and its direct labor cost is $25.36 per unit. According to the activity-based costing system, the unit cost of product D28K is closest to: A. $97.60 per unit B. $74.32 per unit C. $95.34 per unit D. $89.93 per unit

A. $97.60 per unit

A company budgeted its production for the upcoming month at a standard rate of $15.50 per labor hour. However, due to high seasonal demand, it had difficulty with hiring workers and had to pay a labor rate of $17.00 per hour. The most likely result of this action will be a(n) A. Unfavorable direct labor price variance B. Unfavorable direct labor quantity variance C. Favorable direct labor quantity variance D. Favorable direct labor price variance

A. Unfavorable direct labor price variance

Which of the following is a reason for a favorable material price variance? A. the purchasing manager bargaining effectively with suppliers B. the purchasing manager giving orders for small quantity to reduce storage cost C. the purchasing manager accepting a bid from the highest-priced supplier to ensure the quality of material D. the personnel manager hiring under-skilled workers

A. the purchasing manager bargaining effectively with suppliers

There are five production lines in the firm. The activity cost for machine setup and calibration totals $280,000. In the period, the firms incurred 40,000 machine hours, 2,000 set ups, 1,500 batches. The cost driver for machine setup activity is number of setups. Thus, what is the activity rate? A. $21.25 per set up B. $140 per set up C. $187 per batch D. $7 per set up

B. $140 per set up

Mansfield Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2021. The actual direct labor costs were $80,000 for job 1, $120,000 for job 2 and $190,000 for job 3 during 2021. Manufacturing overhead is allocated to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $172,000. The amount of overhead assigned to Job 3 during 2021 was: A. $60,000 B. $95,000 C. $160,000 D. $190,000

B. $95,000

Phillips Co. manufactures decorative pillows designed for use on outdoor patios. Phillips requires that 20% of the next month's sales be on hand at the end of each month. The following information is available regarding the budgeted sales of pillows: February March April May June Budgeted Unit Sales 25,000 22,000 30,000 44,000 60,000 What is the budgeted production for April? A. 30,000 B. 32,800 C. 34,200 D. 40,200

B. 32,800

A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n) A. Period cost B. Manufacturing overhead cost C. Direct material cost D. Direct labor cost

B. Manufacturing overhead cost

Activity-based costing (ABC) systems differ from traditional costing systems because ABC systems use A. Multiple activity cost pools and cost drivers to allocate direct costs B. Multiple activity cost pools and cost drivers to allocate overhead costs C. More automation and information technology to allocate overhead costs D. Less automation and information technology to allocate overhead costs

B. Multiple activity cost pools and cost drivers to allocate overhead costs

A static budget is not appropriate in evaluating a manager's effectiveness if a company has A. Substantial fixed costs B. Substantial variable costs C. Planned activity levels that match actual activity levels D. No variable costs.

B. Substantial variable costs

If the actual costs are greater than the budgeted costs, there is a(n) A. Normal variance B. Unfavorable variance C. Favorable variance D. Error in the accounting system

B. Unfavorable variance

Which of the following can lead to a favorable variance? A. budgeted costs are less than actual costs B. actual revenues exceed budgeted revenues C. actual fixed overhead cost is greater than the budgeted fixed overhead cost D. actual material purchase price is greater than the standard price

B. actual revenues exceed budgeted revenues

The flexible budget A. is prepared when management cannot agree on objectives for the company B. projects budget data for various levels of activity C. is only useful in controlling fixed costs D. cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results

B. projects budget data for various levels of activity

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2015, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.Standard Quantity Standard Price Direct materials 0.30 pounds $20 per poundDirect labor 0.20 hours $12 per hour. During July, GII produced and sold 3,000 containers using 1,000 pounds of direct materials at an average cost per pound of $19 and 625 direct manufacturing labor hours at an average wage of $11.75 per hour. 2. The direct material quantity variance during July is ________. A. $1,000 unfavorable B. $1,100 favorable C. $2,000 unfavorable D. $1,000 favorable

C. $2,000 unfavorable

Assembly line workers at Thompson Manufacturing worked a total of 9,300 direct labor hours to produce 36,000 units. The standard for producing one unit is 0.25 hour at a ACCT 205 Spring 2022 Prof. Xu standard hourly wage rate of $10.50. Thompson's direct labor quantity variance is __________. A. $2,000 favorable B. $3,000 favorable C. $3,150 unfavorable D. $4,500 unfavorable

C. $3,150 unfavorable

Johnson Manufacturing Company purchased 14,000 switches to make 6,000 units. The standard quantity is 2 switches per unit. Johnson budgeted $0.75 per switch, but had to pay $0.80 per switch. What is Johnson's direct materials price variance for the period? A. $500 unfavorable B. $600 unfavorable C. $700 unfavorable D. $725 unfavorable

C. $700 unfavorable

Star Co. uses a predetermined rate based on machine-hours to allocate manufacturing overhead to jobs. The company manufactures parts to customer specifications. The following data pertain to Job 121, which was started and completed in May: Direct materials used ...................................................... $4,200 Direct labor-hours worked .............................................. 300 Direct labor rate per hour ................................................ $8.00 Machine-hours used ........................................................ 200 Predetermined overhead rate per machine-hour ............. $15.00 What is the total manufacturing cost for Job 121 when it was completed in May? A. $8,800 B. $11,100 C. $9,600 D. $10,300

C. $9,600

If a company plans to sell 68,000 units of product but actually sells 60,000 units, the most appropriate comparison of the cost data associated with the sales to evaluate the manager's performance will be by a budget based on A. the original planned level of activity B. 8,000 units of activity C. 60,000 units of activity D. 68,000 units of activity

C. 60,000 units of activity

Which one of the following costs would not be a product cost? A. Wages for factory maintenance workers B. Depreciation on factory equipment C. Sales commissions D. Direct labor costs

C. Sales commissions

If the actual cost of direct materials smaller than the standard cost of direct materials, then A. The direct materials quantity variance will be favorable B. The direct materials quantity variance will be unfavorable C. The direct materials price variance will be favorable D. The direct materials price variance will be unfavorable

C. The direct materials price variance will be favorable

Simmons Inc. applies overhead to production at a predetermined rate of 40% direct labor cost. Job No. 250, the only job still in process at the end of August, has been charged with manufacturing overhead of $8,100. The amount of direct material charged to Job No. 250 was $9,000. What was the amount of total manufacturing costs? A. $17,100 B. $20,250 C. $20,340 D. $37,350

D. $37,350

Johnson Corporation used 20,000 pounds of material to make 18,000 bottles of Glime. The standard allows 1.2 pounds of material at a cost of $3.00 per pound for each bottle of Glime. Johnson's direct materials quantity variance is A. $6,000 unfavorable B. $4,800 unfavorable C. $6,000 favorable D. $4,800 favorable

D. $4,800 favorable

Max Deane purchased a lower grade of material than specified by the standard. A likely result of this purchase will be A. An unfavorable direct materials price variance B. A favorable direct materials price variance C. An unfavorable direct materials quantity variance D. Both B and C

D. Both B and C

If the actual direct labor hours worked is more than the standard number of hours allowed for actual production, it will result in A. Favorable direct labor price variance B. Unfavorable direct labor price variance C. Favorable direct labor quantity variance D. Unfavorable direct labor quantity variance

D. Unfavorable direct labor quantity variance

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n) A. ideal standard B. loose standard C. tight standard D. normal standard

D. normal standard

Vest Construction Company's cost of renting a crane for the last four months is as follows: Month Hours of Operation Rental Cost January 35 $1,200 February 42 $1,350 March 45 $1,400 April 40 $1,290 Using the high-low method, what is the company's estimated variable and fixed component of operating expenses? a. $20 variable/$500 fixed b. $21.42 variable/$500 fixed c. $22 variable/$450 fixed d. $20 variable/$450 fixed

a. $20 variable/$500 fixed

Portman Company's activity for the first three months of 2022 are as follows: Machine Hours Electrical Cost January 2,100 $4,800 February 2,600 $5,800 March 2,900 $6,400 Using the high-low method, what is the variable cost per machine hour? a. $2.00 b. $3.00 c. $2.26 d. $1.78

a. ($6,400 - $4,800) / (2,900 - 2,100) = $2.00

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales for the first quarter are: January $360,000 February 216,000 March 540,000 Budgeted cash receipts for the month of March are a. $406,800 b. $307,800 c. $324,000 d. $388,800

a. 406,800 ($540,000 x 60%) + ($216,000 x 30%) + ($360,000 x 5%) = $406,800

The following information is taken from the production budget for the first quarter: Beginning finished goods units 1,200 Expected sales units 426,000 Capacity in units of production facility 472,000 How many units of finished goods should be produced during the quarter if the company desires 3,200 finished goods units available to start the next quarter? a. 428,000 b. 424,000 c. 474,000 d. 429,200

a. 428,000 3,200 + 426,000 - 1,200 = 428,000

Assume total fixed costs of $240,000, variable costs per unit of $8, and contribution margin per unit of $4. How many units must be sold to meet a target profit of $60,000? a. 75,000 units b. 45,000 units c. 80,000 units d. 5,000 units

a. 75,000 units

On the breakeven graph, if sales price and variable cost remain constant and fixed costs increase, the total cost line will: a. Shift upward b. Shift downward c. Does not change d. Not enough information

a. Shift upward

Assume that actual sales exceed the budgeted sales for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true? a. The year-to-date results will show a favorable difference. b. The year-to-date results will show an unfavorable difference. c. The difference for the first quarter can be ignored. d. The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.

a. The year-to-date results will show a favorable difference.

A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues $120,000 $120,000 Variable costs 60,000 70,000 Fixed costs 35,000 35,000 Which of the following are relevant in choosing between the alternatives? a. Variable costs b. Revenues c. Fixed costs d. Variable costs and fixed costs

a. Variable costs

Activity-based costing a. allocates overhead to activity cost pools and then assigns the activity cost pools to products and services by means of cost drivers. b. accumulates overhead in one cost pool and then assigns the overhead to products and services by means of a cost driver. c. assigns activity cost pools to products and services and then allocates overhead back to the activity cost pools. d. allocates overhead directly to products and services based on activity levels.

a. allocates overhead to activity cost pools and then assigns the activity cost pools to products and services by means of cost drivers.

Activity-based costing a. allocates overhead to activity cost pools and then assigns the activity cost pools to products and services by means of cost drivers. b. accumulates overhead in one cost pool and then assigns the overhead to products and services by means of a cost driver. c. assigns activity cost pools to products and services and then allocates overhead back to the activity cost pools. d. allocates overhead directly to products and services based on activity levels.

a. allocates overhead to activity cost pools and then assigns the activity cost pools to products and services by means of cost drivers.

Benny Books sells first edition books. Benny purchases the books from his supplier for $100 a book and sells them through his website for $225 a book. Benny's fixed costs are $87,000. Benny's breakeven point in sales dollars is nearest to: a. $195,750 b. $156,600 c. $87,075 d. $60,300

b. $156,600

Chambers, Inc. uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is $64,000 for variable costs and $180,000 for fixed costs. If Chambers had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs? a. $2,000 unfavorable. b. $2,000 favorable. c. $6,000 unfavorable. d. $8,000 favorable.

b. $2,000 favorable.

Billings Company incurred the following costs to produce 100,000 units: Variable costs $600,000 Fixed costs 900,000 An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $165,000. None of the fixed costs are avoidable. The net increase (decrease) in the net income as a result of accepting the supplier's offer is a. $285,000 b. $315,000 c. $(15,000) d. $840,000

b. ($600,000 + $165,000) - ($4.50 x 100,000) = $315,000

The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price variance is a. $2,400 unfavorable. b. $2,400 favorable. c. $3,000 unfavorable. d. $3,000 favorable.

b. 2,400 favorable DL Price Variance = (AR - SR) * AH = ($117,600/6,000 - $20) * 6,000 = 2,400 F

Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. What is the contribution margin ratio? a. 25% b. 35% c. 65% d. 75%

b. 35%

Fornelli, Inc. can produce 100 units of a component part with the following costs: Direct Materials $15,000 Direct Labor 6,500 Variable Overhead 16,000 Fixed Overhead 11,000 If Fornelli, Inc. can purchase the 100 units component part externally for $44,000, only $4,000 of the fixed costs can be avoided, but the idle capacity can be used for producing another component, which can generate $3,000 income. In this case, what is the correct make-or-buy decision? a. Make and save $500 b. Buy and save $500 c. Make and save $2,500 d. Buy and save $6,500

b. Buy and save $500

Boland Manufacturing prepared a 2022 budget for 120,000 units of product. Actual production in 2022 was 130,000 units. To be most useful, what amounts should a performance report for this company compare? a. The actual results for 130,000 units with the original budget for 120,000 units b. The actual results for 130,000 units with a new budget for 130,000 units c. The actual results for 130,000 units with last year's actual results for 134,000 units d. All of these comparisons are equally useful.

b. The actual results for 130,000 units with a new budget for 130,000 units

What is the primary difference between a static budget and a flexible budget? a. The static budget includes only fixed costs while the flexible budget includes only variable costs. b. The static budget is prepared for a single level of activity while a flexible budget is adjusted for different activity levels. c. The static budget is constructed using input from only upper level management while a flexible budget obtains input from all levels of management. d. The static budget is prepared only for units produced while a flexible budget reflects the number of units sold.

b. The static budget is prepared for a single level of activity while a flexible budget is adjusted for different activity levels.

Product costs consist of a. direct materials and direct labor only. b. direct materials, direct labor, and manufacturing overhead. c. selling and administrative expenses. d. period costs.

b. direct materials, direct labor, and manufacturing overhead.

In preparing a direct labor budget, the number of direct labor hours required is calculated using the a. sales forecast b. production budget c. direct materials budget d. sales budget

b. production budget

Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000. What amount is considered sunk costs? a. $2,400 b. $9,000 c. $17,800 d. $20,200

c. $17,800

A company has three product lines, one of which has the following results: Sales $215,000 Variable expenses 125,000 Contribution margin 90,000 Fixed expenses 130,000 Net loss $ (40,000) If this product line is eliminated, 60% of the fixed expenses will be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will a. increase by $40,000. b. decrease by $90,000. c. decrease by $12,000. d. increase by $12,000.

c. $90,000 - ($130,000 x .60) = $12,000 (decrease)

Which of the following is an irrelevant cost? a. An avoidable cost b. An incremental cost c. A sunk cost d. An opportunity cost

c. A sunk cost

What amounts appear on a flexible budget report? a. Original budgeted amounts at the static budget activity level b. Actual costs for the budgeted activity level c. Budgeted amounts for the actual activity level achieved d. Actual costs for the estimated activity level

c. Budgeted amounts for the actual activity level achieved

A company has three product lines, one of which has the following results: Sales $215,000 Variable expenses 125,000 Contribution margin 90,000 Fixed expenses 130,000 Net loss $ (40,000) If this product line is eliminated, 60% of the fixed expenses will be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will a. Increase by $12,000 b. Decrease by $9,000 c. Decrease by $12,000 d. Increase by $40,000

c. Decrease by $12,000

Which one of the following items would not be included on a cash budget? a. Office salaries expense b. Interest expense c. Depreciation expense d. Travel expense

c. Depreciation expense

At Devoe Manufacturing, the Southern Division is responsible for the production and selling of products in fifteen states. This division is an example of which of the following responsibility centers? a. Cost center b. Revenue center c. Profit center d. Investment center

c. Profit Center

At Devoe Manufacturing, the Southern Division is responsible for the production and selling of products in fifteen states. This division is an example of which of the following responsibility centers? a. Cost center b. Revenue center c. Profit center d. Investment center

c. profit center

In July, Dora Inc. had $150,000 in cash available to spend. Ending cash balance is $112,000, and cash disbursements were $50,000. What is Dora's short-term financing needs for July? a. $150,000 b. $138,000 c. $212,000 d. $12,000

d. $12,000

Wrist Watch Co. sells watches for $75 per unit. The variable cost per unit is $42, and total fixed costs are $330,000. What is Pelton's breakeven point on the watches? a. 7,858 units b. 4,400 units c. 5,000 units d. 10,000 units

d. 10,000 units

If selling price is $500 per unit, variable cost is $350 per unit, and fixed cost is $1,000, calculate the contribution margin ratio. a. 70% b. 35% c. 50% d. 30%

d. 30%

Which kind of budgets are most likely to experience budgetary slack? a. Participative budgeting b. Top-down budgeting c. Bottom-up budgeting d. Both A and C

d. Both A and C

Which of the following is not an operating budget? a. Direct labor budget b. Sales budget c. Production budget d. Cash budget

d. Cash budget

Which of the following can be concluded from a comparison between top-down and bottom-up approaches to budgeting? a. For greater protection against budgetary slack, the bottom-up approach is better b. For a more efficient budget creation process, the bottom-up approach is better c. To achieve a higher budget commitment from operating management, the top-down approach is better d. For a more efficient budget creation process, the top-down approach is better

d. For a more efficient budget creation process, the top-down approach is better

If costs are not responsive to changes in activity level, then these costs can be best described as a. mixed. b. flexible. c. variable. d. fixed.

d. fixed

A static budget report a. shows costs at only two or three different levels of activity. b. is appropriate in evaluating a manager's effectiveness in controlling variable costs. c. should be used when the actual level of activity is materially different from the master budget activity level. d. may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

d. may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.