ACCT 2302 Final

Penn Company has a division that manufactures a component that sells for $50 and has variable costs of $25 and fixed costs of $10. Another division wants to purchase the component. What is the minimum transfer price if the division is operating at capacity?

$50 If the division is operating at capacity, it can set its minimum transfer price at the market price, that is, $50 in order to increase profits for the company

Which of the following would be true for a service company?

ABC helps the company make more informed decisions about service

Companies enjoy many benefits from using JIT. Which is not a benefit of adopting JIT?

Ability to continue production despite disruptions in delivers of raw materials

Winters, Inc is preparing financial statements to be distributed to investors and creditors. The company should prepare the income statement using

Absorption costing because it follows GAAP

Which company is least likely to use a process costing system?

Accounting firm

Suppose Francine Dunkelberg's Sweets is considering investing in warehouse management software that costs $550,000, has $75,000 residual value, and should lead to cost savings of $130,000 per year for its five-year life. In calculating the ARR, which of the following figures should be used as the equations denominator (average amount invested in the asset)

Accounting rate of return = Average annual net income / Average amount invested Average amount invested = Amount invested + Residual value / 2 =$550,000 + $75,000 / 2 *= $312,500

Would an advertising agency use job order or process costing? What about a cell phone manufacturer?

Advertising agency- job order costing; Cell phone manufacturer- process costing

When pricing a product or service, managers must consider which of the following?

All costs

From the information above, how much magnification overhead would Gell allocate?

Allocated overhead = Predetermined Overhead Allocation rate x Actual Number of machine hour Overhead Rate = 93,000/12,000 hours Overhead Rate = 7.75 Per Machine Hour Allocated overhead = 7.75 per machine hour x 16,000 machine hours *Allocated overhead= 124,000

Spending on testing a product before shipment to customers is which type of quality cost?

Appraisal cost

Suppose a bakery reports the following information: Beginning raw materials inventory $6000 Ending raw materials inventory 5000 Beginning work in process inventory 3000 Ending work in process inventory 2000 Beginning finished goods inventory 4000 Ending finished good inventory 6000 Direct Labor 29000 Purchases of Raw Materials 102,000 Manufacturing Overhead 20,000 What is the cost of direct materials used?

Beginning Raw Materials Inventory 6,000 Add: Purchases of Raw Materials +102,000 Raw Materials Available for use 108,000 Less: Ending Raw Materials Inventory -5,000 *=Direct Materials Used 103,000

Use information for the question above What is the cost of goods manufactured?

Beginning work in process inventory 3,000 Add: Direct Materials used +103,000 Direct Labor +29,000 Manufacturing Overhead +20,000 Total Manufacturing Costs Incurred during the year: 152,000 Total Manufacturing Costs to Account for: 155,000 Less: Ending Work in Process Inventory -2,000 *=Cost of Goods Manufactured 153,000

Using the information above, which pizza should Sammie's Pizza promote to maximize profits?

Both should be promoted equally because they have the same contribution margin per unit

Using the information above, what is MajorNet's direct labor efficiency variance for August?

Budgeted direct labor hours for 84 connectors = (Budgeted direct labor hours per connector) x (Actual number of units sold) = 3 hours per connector x 84 = 252 hours Direct labor efficiency variance = (Budgeted direct labor hours) - (Actual direct labor hours worked) x Standard direct labor cost per hour = (252 hours - 189 hours) x $17 = 63 hours x $17 *= $1,071 (F)

Using the information above, compute the total amount budgeted for product costs for July

Budgeted production costs for July = Number of 10 inch skillets to be produced by July x (Cost of direct material per skillet + cost of direct labor per skillet + cost of manufacturing overhead per skillet) = 550 x ($9 + $1 + $2) = 550 x $12 *= $6,600

Using the information above, compute the budgeted gross profit for July

Budgeted sales revenue = $10,000 ($20 x 500 skillets) Budgeted cost of goods sold = $6,000 (from above) Budgeted gross profit = Budgeted sales revenue - Budgeted cost of goods sold = $10,000 - $6,000 *= $4,000

Suppose Mallcentral sells 1,000 hardcover books a day at an average price of $30. Assume that Mallcentral's purchase price for the books is 75% of the selling price it charges retail customers. Mallcentral has no beginning inventory, but it wants to have a three-day supply of ending inventory. Assume that operating expenses are $1,000 per day. Compute Mallcentrals budgeted sales for the next (seven-day) week

Budgeted units to be sold for 7 days = 1,000 x 7 = 7,000 Budgeted units to be sold x Selling price per unit = 7,000 x $30 *=$210,000

Using the information above, the cost per equivalent unit for direct materials is

Cost per unit of EUP for direct materials = Total direct material cost / EUP for direct materials Beginning WIP 200 Units Started 1500 Units to be accounted for 1700 Completed and transferred out 1550 (Number of units completed and transferred out = (beginning units + units started) - ending units (200 units + 1,500 units) - 150 units = 1,550 units Ending work in progress 150 Total Units 1700 Cost per unit of EUP for direct materials = Total Direct Material Cost / EUP for Direct Materials Cost per unit of EUP for direct materials = 3,400/1,700 *Cost per unit of EUP for direct materials = $2 per EUP

If a company increases its sales price per unit for Product A, the new break-even point will

Decrease

Which of the following expenses would NOT appear in the cash budget

Depreciation expense

Which of the following is NOT part of manufacturing overheard for producing a computer?

Depreciation on delivery trucks

In computing the IRR on an expansion at Mountain Creek Resort, Vernon Valley would consider all of the following except

Depreciation on the assets built in the expansion

The Best Appliances had the following revenue over the past five years: 2011 $600,000 2012 $700,000 2013 $900,000 2014 $800,000 2015 $1,000,000 To predict revenues for 2016, The Best Appliances uses the average for the past five years. The company's break-even revenue is $800,000 per year. What is The Best Appliances predicted margin of safety in dollars for 2016?

Expected sales= $600,000 + $700,000 + $900,000 + $800,000 + $1,000,000 / 5 = $4,000,000 /5 = $800,000 Margin on safety in units = Expected sales - Break-even sales = $800,000 - $800,000 *=0

The cost of lost future sales after a customer finds a defect in a product is which type of quality cost?

External failure cost

Which statement is accurate concerning the FIFO method for assigning costs in a process costing system?

FIFO method assumes the first costs incurred are transferred out

The budgeted balance sheet is part of which element of the master budget?

Financial budget

A manufacturing company completed work on a job. The cost of the job is transferred into ______ with a ______.

Finished Goods Inventory; debit

For Frank's Funky Sounds, straight-line depreciation on the trucks is a

Fixed Cost

Using the information above, what is the unit product cost using absorption costing?

Fixed Manufacturing Overhead per unit = Total fixed manufacturing overhead / total number of units = $10,000 / 500 = $20 per unit Direct Materials 10 Direct Labor 25 Variable Manufacturing Overhead 15 Fixed Manufacturing Overhead 20 *Total Product Cost per Unit 70

MajorNet Systems is a start-up company that makes connectors for high-speed Internet connections. The company has budgeted variable costs of $145 for each connector and fixed costs of $7,500 per month. MajorNet's static budget predicted production and sales of 100 connectors in August, but the company actually produced and sold only 84 connectors at a total cost of $21,000. MajorNets total flexible budget cost for 84 connectors per month is:

Flexible budget cost for 84 connectors = (Number of connectors x Variable cost per connector) + fixed cost per month = (84 x $145) + $7,500 = $12,180 + $7,500 *= $19,680

The performance evaluation of a cost center is typically based on its

Flexible budget variance

Using the information above, calculate the variable overhead efficiency variance for FrontGrade

For 100 connectors, budgeted machine hours to be used = 1,100 hours For 110 connectors, budgeted machine hours to be used 1100/100 X 110 =1,210 hours Budgeted variable overhead cost per connector = Variable manufacturing overhead costs per month / standard machine hours per month = $5,500 / 1,100 = $5 Variable overhead efficiency variance = (Budgeted machine hours worked - Actual machine hours worked) x Budgeted variable overhead cost per connector = (1,210 hours - 1,000 hours) x $5 = 210 hours x $5 *= $1,050 (F)

For which of the following reasons would David Laugherty, owner of the Laugherty Associates law firm, want to know the total costs of a job (serving a particular client)?

For inventory valuation, to determine the fees to charge clients, for external reporting

Today's business environment is characterized by

Global competition, time based competition, a shift toward a service economy

In deciding whether to drop its electronics product line, Smith Company should consider

How dropping the electronics product line would affect sales of its other products, the costs it would save by dropping the product line, the revenues it would lose from dropping the product line

What is the second step of capital budgeting?

Identifying potential projects

The primary difference between variable costing and absorption costing is

In absorption costing, fixed manufacturing overhead is a product cost

Which is NOT one of the potential advantages of decentralization?

Increase goal congruence

From the information above, what is Gell's actual manufacturing overhead cost?

Indirect labor 11,000 Depreciation on planet 48,000 Machinery repair 11,000 Plant supplies 6,000 Planet utilities 7,000 *=Total Manufacturing Overhead Cost 83,000

A management accountant who avoids conflicts of interest meets the ethical standard of

Integrity

The Quaker Food division of PepsiCo is most likely treated as a(n)

Investment center

Using the information above, what are the kitting and boxing costs assigned to one desktop computer?

Kitting costs assigned to one computer = predetermined overhead cost x number of parts required for one computer = $0.03 x 125 parts *= $3.75 Boxing costs assigned to one computer = Predetermined overhead cost x cubic foot space required for one computer = $1.1 x 10 cubic feet *= $11

Which of the following balanced scorecare perspectives essentially asks, "Can we continue to improve and create value?"

Learning and growth

When a manufacturing company uses indirect materials, it accumulates the costs by debiting

Manufacturing Overhead

What entry would Gell make to adjust the manufacturing overhead account for over allocated or under allocated overhead?

Manufacturing overhead 41,000 Cost of Goods Sold 41,000

Which of the following is the most reliable method for making capital budgeting?

NPV method

Assume the Residential Division of Kipper Faucets had the following results last year: Net sales $4,160,000 Operating income 1,040,000 Average total assets 5,200,000 Management's target rate of return 18% What is the divisions profit margin ratio?

The profit margin ratio of company K = Operating Income / Net sales = $1,040,000 / $4,160,000 *= 25%

Using the information above, what is the division's RI?

The residual income of Company K = Operating income - (Target rate of return x Average total assets) = $1,040,000 - (18% x $5,200,000) = $1,040,000 - $936,000 *= $104,000

Using the information above, what is the division's ROI?

The return on investment of Company C = Operating Income / Average Total Assets = $1,040,000 / $5,200,000 *= 20%

Which of the following is the cornerstone of the master budget?

The sales budget

Which of the following affects the present value of an investment?

The type of investment (annuity versus single lump sum), the number of time periods (length of the investment), the interest rate

When making outsourcing decisions, which of the following is true?

The variable cost of producing the product in-house is relevant

MajorNet System's managers could set direct labor standards based on

Time-and-motion-studies, continuous improvement, benchmarking

Assume Intervale Railway is considering hiring a reservation agency to handle passenger reservations. The agency would charge a flat fee of $13,000 per month, plus $3 per passenger reservation. What is the total reservation cost if 200,000 passenger take the trip next month?

Total Reservation Cost = Per month flat fee + (Number of passengers x Per passenger reservation charge) = $13,000 + (200,000 x $3) = $13,000 + $600,000 *= $613,000

Which characteristic is the same in both job order costing systems and process costing systems?

Types of product costs

Department 1 completed work on 500 units and transferred them to Department 2. The cost of units was $750. What is the journal entry to record the transfer?

Work In Process Inventory- Department 2 750 Work In Process Inventory- Department 1 750

When a manufacturing company uses direct labor, it assigns the cost by debiting

Work in Process Inventory

When a manufacturing company uses direct materials, it assigns the cost by debiting

Work in Process Inventory

MajorNet's System static budget predicted production of and sales of 100 connectors in August, but the company actually produced and sold only 84 connectors. Direct materials were budgeted at $95 per connector. The company purchased and used direct materials that cost $8,148. What is the journal entry for the direct material used?

Work in Process Inventory 7,980 Direct Materials Efficiency Variance 168 Raw Materials Inventory 8,148

The mixing department incurred the following costs during the month: Beginning WIP: Transferred in 250 Direct Materials 50 Direct Labor 25 Manufacturing Overhead 80 Added this month: Transferred in 1000 Direct Materials 225 Direct Labor 150 Manufacturing Overhead 500 Total: Transferred in 1250 Direct Materials 275 Direct Labor 175 Manufacturing Overhead 580 What is the journal entry to record the costs incurred during the month?

Work in process inventory - Debited Raw Materials inventory - Credited Wages payable - Credited Manufacturing overhead - Credited Assets = Liabilities + Stockholders Equity +875 (Work in process inventory) = +150 +550 -225 (Raw Materials Inventory) (Wages Payable) (Manufacturing overhead) *Work in process inventory 875 Raw Material Inventory 225 Wages Payable 150 Manufacturing Overhead 500

Which account is not used in JIT costing?

Work-in-Process Inventory

Which statement is false?

The predetermined overhead allocation rate is based on actual costs

The person probably most responsible for the direct labor efficiency variance is

The production manager

Ian Corp. is considering two expansion projects. The first project streamlines the company's warehouse facilities. The second project automates inventory utilizing bar code scanners. Both projects generate positive NPV, yet Ian Corp. only chooses the bar coding project. Why?

The company is practicing capital rationing

FrontGrade Systems allocates manufacturing overhead based on machine hours. Each connector should require 11 machine hours. According to the static budget, FrontGrade expected to incur the following: 1,100 machine hours per month (100 connectors X 11 machine hours per connector) $5,500 in variable manufacturing overhead costs $8,250 in fixed manufacturing overhead costs During August, FrontGrade actually used 1,000 machine hours to make 110 connectors and spent $5,600 in variable manufacturing costs and $8,300 in fixed manufacturing overhead costs FrontGrade's standard variable manufacturing overhead allocation rate is

Budgeted variable overhead allocation cost = (Budgeted variable manufacturing overhead costs per month) / Budgeted machine hours per month = $5,500 / 1,100 *= $5 per machine hour

Using the information above, calculate the variable overhead cost variance for FrontGrade

Budgeted variable overhead cost per connector = Variable manufacturing overhead costs per month / standard machine hours per month = $5,500 / 1,100 = $5 Actual variable overhead cost per connector = Actual variable manufacturing overhead cost per month / Actual machine hours per month = $5,600 / 1000 = $5.60 Variable overhead cost variance = (Budgeted variable overhead cost - actual variable overhead cost) x Actual machine hours worked = ($5.00 - $5.60) x 1,000 hours = 0.60 x 1,000 hours *=$600 (U)

Using the information above, of the 3,400 total costs for direct materials, what amount will be transferred out?

Completed and transferred out 1550 (Number of units completed and transferred out = (beginning units + units started) - ending units (200 units + 1,500 units) - 150 units = 1,550 units Number of equivalent units of direct materials = 1,700 The total cost of direct materials = 3,400 Cost per unit of EUP for direct materials = Total Direct Material Cost / EUP for Direct Materials Cost per unit of EUP for direct materials = 3,400/1,700 Cost per unit of EUP for direct materials = $2 per EUP Cost of direct materials for the equivalents units of production of transferred out = [(number of units completed and transferred out) X (Cost per unit of EUP for direct materials)] Cost of direct materials for the equivalents units of production of transferred out = 1,550 x 2.00 *Cost of direct materials for the equivalents units of production of transferred out = 3,100

If Intervale Railway's fixed costs total $90,000 per month, the variable cost per passenger is $45, and tickets sell for $75, what is the contribution margin per unit and contribution margin ratio?

Contribution Margin Per Unit = (Sales price per ticket) - (Variable cost per passenger = $75 - $45 *= $30 Contribution Margin Ratio = (Contribution margin per unit / sales per unit) x 100 = ($30/$75) x 100 *=40%

If Intervale Railway's fixed costs total $90,000 per month, the variable cost per passenger is $45, and tickets sell for $75, what is the break-even point in units?

Contribution Margin Per Unit = (Sales price per ticket) - (Variable cost per passenger) = $75 - $45 = $30 Break-even point in units = Fixed costs / Contribution margin per unit = $90,000 / $30 *=3,000 passengers

Rocky Mountain Water-park sells half of its tickets for the regular price of $75. The other half go to senior citizens and children for the discounted price if $35. Variable cost per guest is $15 for both groups, and fixed costs total $60,000 per month. What is Rocky Mountain's break-even point in total guests? Regular guests? Discount guests?

Contribution Margin Per Unit = (Sales price per ticket) - (Variable cost per ticket) = $75 - $15 = $60 = $60 x 0.5 = $30 = $35 - $15 = $20 = $20 x 0.5 = $10 Contribution margin = regular guests + discounted gusts = $30 + $10 = $40 Weighted average contribution margin = Contribution margin / Sales mix = $40 / 1 = $40 Break-even sales in total guests = Fixed Costs + Target Profit / Weighted Average Contribution Margin = $60,000 + $0 / $40 *= $1,500 Break-even sales in regular guests = 1,500 x .05 *= 750 Break-even sales in discounted guests = 1,500 x .05 *= 750

If Intervale Railway's fixed costs total $90,000 per month, the variable cost per passenger is $45, and tickets sell for $75, how much revenue must the Railway generate to earn $120,000 in operating income per month?

Contribution Margin Ratio = (Contribution margin per unit / sales per unit) x 100 = ($30/$75) x 100 =40% Required sales = (Fixed costs + Target Profit) / Contribution Margin Ratio = ($90,000 + $120,000) / 40% *= $525,000

In deciding which product lines to emphasize when a production constraint exists, the company should focus on the product line that has the highest

Contribution margin per unit of the constraint

Compute It can use ABC information for what decisions?

Cost cutting, Pricing, & Product Mix

Which of the following accounts does a manufacturing company have that a service company does not have?

Cost of Goods Sold

Which of the following is a direct cost of manufacturing a sport boat?

Cost of the boat engine

Which of the following is relevant to Kictchenware.com's decision to accept a special order at a lower sale price from a large customer in China?

The cost of shipping the order to the customer

Suppose Iron City manufactures cast iron skillets. One model is a 10-inch skillet that sells for $20. Iron City projects sales of 500 10-inch skillets per month. The production costs are $9 per skillet for direct materials, $1 per skillet for direct labor, and $2 per skillet for manufacturing overhead. Iron City has 50 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 20% of the next months sales. Selling and administrative expenses for this product line are $1,500 per month. How many 10-inch skillets should Iron City product in July?

Desired ending inventory of July = 20% x 500 skillets = 100 skillets Budgeted 10-inch skillets to be sold 500 Add: Desired ending inventory of July 100 Total 600 Less: Beginning inventory of July 50 *10 inch skillets to be produced in July 550

Donovan Company incurred the following costs while producing 500 units: direct materials, $10 per unit; direct labor, $25 per unit; variable manufacturing overhead, $15 per unit; total fixed manufacturing overhead costs, $10,000; variable selling and administrative costs, $5 per unit; total fixed selling and administrative costs, $7,500. There are no beginning inventories. What is the unit product cost using variable costing?

Direct Materials 10 Direct Labor 25 Variable Manufacturing Overhead 15 *Total Product Cost per Unit 50

MajorNet Systems has budgeted three hours of direct labor per connector, at a standard cost of $17 per hour. During August, technicians actually worked 189 hours completing 84 connectors. All 84 connectors actually produced were sold. MajorNet paid the technicians $17.80 per hour. What is MajorNet's direct labor cost variance for August?

Direct labor cost variance = (Budgeted direct labor cost - actual direct labor cost) x Actual direct labor hours worked = ($17 - $17.80) x 189 hours = ($0.80) x 189 hours *= $151.20 (U)

Conversion costs are

Direct labor plus manufacturing overhead

Dunaway Company reports the following costs for the year: Direct Materials Used 120,000 Direct Labor Incurred 150,000 Manufacturing Overhead Incurred 75,000 Selling and Administrative Expenses 175,000 How much are Dunaway's period costs?

Direct material used, direct labor incurred, and manufacturing overhead incurred are product costs Selling and administrative expenses is a period cost *=175,000

What is not a characteristic of managerial accounting information?

Emphasizes the external financial statements

Using the information above, what is the ending balance in Finished Goods Inventory using variable costing if 450 units are sold?

Ending balance in finishing goods inventory = Product cost per unit x (units produced - units sold) = $50 x (500-450) = $50 x 50 *= $2,500

Using the information above, compute the budgeted cost of goods sold for July

Ending inventory = 20% of projected sales = 20/100 x 500 skillets = 100 skillets Number of skillets to be produced to achieve the projected skillets = Projected sales + Beginning inventory - ending inventory = 500 skillets + 50 skillets - 100 skillets = 450 skillets Cost of 50 skillets = Beginning inventory x cost of each skillet = 50 skillets x $12 = $600 Cost of 450 skillets = Beginning inventory x cost of each skillet = 450 skillets x $12 = $5,400 Beginning inventory $600 Skillets produced and sold $5,400 *Budgeted costs of goods sold $6,000

World-class businesses use which of these systems to integrate all of a company's worldwide functions, departments, and data into a single system?

Enterprise resource planning

The manager of Gilbert Company used the production cost report to compare budgeted costs to actual costs and then based bonuses on the results. This is an example of using the reports to

Evaluate performance

Using the information above, MajorNets sale volume variance for total costs is:

Expected cost in flexible budget for 84 connectors = (Number of units actually sold x Variable cost per connector) + fixed cost per month = (84 x $145) + $7,500 = $12,180 + $7,500 = $19,680 Expected cost in flexible budget for 100 connectors = (Number of units actually sold x Variable cost per connector) + fixed cost per month = (100 x $145) + $7,500 = $14,500 + $7,500 = $22,000 Sales volume variance = (Budgeted cost in flexible budget) - (Budgeted cost in static budget) = $19,680 - $22,000 *= $2,320 (F)

Using the information above, MajorNets flexible budget variance for total costs is:

Expected cost in flexible budget for 84 connectors = (Number of units actually sold x Variable cost per connector) + fixed cost per month = (84 x $145) + $7,500 = $12,180 + $7,500 = $19,680 Flexible budget variance for 84 connectors = Actual cost incurred - budgeted cost = $21,000 - $19,680 *=$1,320 (U)

During a recent month, Cleveland Company planned to provide cleaning services to 30 customers for $25 per hour. Each job excepted to take 3 hours. The company actually served 10 more customers than expected, but the average time spent on each job was only 2.5 hours each. Cleveland's revenues for the month were:

Expected revenue = (Number of customers) x (hours spent per customer) x (price per hour) = 30 x 3 x $25 = $2,250 Actual number of customers served = 10 more customers than expected = 10 + 30 = 40 Actual revenue = (number of customers) x (hours spent per customer) x (price per hour) = 40 x 2.5 x $25 = $2,500 Difference in revenues = Actual revenue - expected revenue = $2,500 - $2,250 *=$250 * 250 more than expected

Using the information above, Compute It contracts with its suppliers to pre-kit certain component parts before delivering them to Compute It. Assume this saves $2,000,000 of the kitting costs and reduces the total number of parts by 200,000,000 (because Compute It considers each pre-kit as one part). If a desktop now uses 90 parts, what is the new kitting costs assigned to one desktop?

New estimated overhead costs = Total estimated overhead costs - reduced estimated costs = $12,000,000 - $2,000,000 = $10,000,000 New estimated parts = Total estimated parts - reduced estimated parts =400,000,000 parts - 200,000,000 parts = 200,000,000 parts Predetermined overhead allocation rate = New estimated overhead costs / New estimated parts used =$10,000,000 / 200,000,000 parts =$0.05 per part Kitting costs assigned to one computer = predetermined overhead allocation rate x number of parts required for one computer =$0.05 x 90 parts *=$4.50

Which of the following is true regarding capital rationing decisions?

None of the above

Using the information above, determine Mallcentrals budgeted purchases for the next (seven-day) week.

Number of books sold per week = Number of books sold per day x 7 days = 1,000 books x 7 days = 7,000 books Cost of each book = 75% of $30 = 22.5 Budgeted cost of goods sold = Number of books sold per week x cost of each book = 7,000 books x $22.5 = $157,500 Desired ending inventory = Number of days supply required for ending inventory x Number of books sold each day = 3 days x 1,000 books = 3,000 books Cost of desired ending inventory = Desired ending inventory x cost of each book = 3,000 books x $22.5 = $67,500 Budgeted purchases = Budgeted cost of goods sold + Desired ending merchandise inventory - beginning merchandise inventory = $157,500 + $67,500 -0 *= $225,000

Burton Company uses the weighted average method in its process costing system. The packaging department started the month with 200 units in process that were 70% complete, received 1,500 units from the Finishing department, and had 150 units in process at the end of the period. All materials are added at the beginning of the process, and conversion costs are incurred uniformly. The units in process at the end of the month are 20% complete with respect to conversion costs. Transferred in: Beginning WIP 700 Added this month 12,900 Total 13,600 Direct Materials: Beginning WIP 200 Added this month 3,200 Total 3,400 Conversion Costs: Beginning WIP 500 Added this month 5,820 Total 6,320 Total: Beginning WIP 1,400 Added this month 21,920 Total 23,320 How many units were completed and transferred out?

Number of units completed and transferred out = Beginning units + Units started - Ending units) Number of units completed and transferred out = 200 units + 1,500 units - 150 units *Number of units completed and transferred out = 1,550

Using the information above: for conversion costs, the equivalent units of production are

Number of units completed and transferred out = Beginning units + Units started - Ending units) Number of units completed and transferred out = 200 units + 1,500 units - 150 units Equivalent units of production for conversion cost = Number of units completed and transferred out + (Number of ending units X % of completion) Equivalent units of production for conversion cost = 1,550 units + 20% of 150 units Equivalent units of production for conversion cost = 1,550 units + 30 units *Equivalent units of production for conversion cost = 1,580 units

Gell Corporation manufactures computers. Assume that Gell: Allocates manufacturing overhead based on machine hours Estimated 12,000 machine hours & 93,000 of manufacturing overhead costs Actually used 16,000 machine hours and incurred the following actual costs: Indirect labor 11,000 Depreciation on plant 48,000 Machinery repair 11,000 Direct labor 75,000 Plant supplies 6,000 Plant Utilities 7,000 Advertising 35,000 Sales commissions 27,000 What is Gell's predetermined overhead allocation rate?

Overhead Rate = Estimated Overhead Cost / Allocation Base Overhead Rate = 93,000/12,000 hours *Overhead Rate = 7.75 Per Machine Hour

Your rich aunt has promised to give you $2,000 per year at the end of each of the next four years to help you pay for college. Using a discount rate 12%, the present value of the gift can be stated as

PV = $2,000 (Annuity PV factor, i = 12%, n = 4)

Which of the following methods does not consider the investment's profitability

Payback

When deciding whether to sell as is or process a product further, managers should ignore which of the following?

The costs of processing the product thus far

The budgeted statement of cash flows is part of which element of the master budget?

The financial budget

The IRR is

The investment rate at which the NPV of the investment is zero

On a CVP graph, the total line intersects the vertical (dollars) axis at

The level of the fixed costs

Compute it uses activity-based costing. Two of Compute It's production activities are kitting (assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that compute it spends $12,000,000 per month on kitting and $22,000,000 per month on boxing. Compute It allocates the following: -Kitting costs based on the number of parts used in the computer -Boxing costs based on the cubic feet of space the computer requires Suppose Compute It estimates it will use 400,000,000 parts per month and ship products with a total volume of 20,000,000 cubic feet per month Assume that each desktop computer requires 125 parts and has a volume of 10 cubic feet. What are the predetermined overhead allocation rates?

Predetermined overhead allocation rate = Total estimated overhead cost / Total estimated quantity of the overhead allocation base = $12,000,000 / 400,000,000 *= *$0.03 per part = $22,000,000 / 20,000,000 *= $1.1 per cubic foot

If a company increases its fixed costs for Product B, then the contribution margin per unit will

Remain the same

Information technology has made it easier for managers to perform all of the following tasks except

Removing budgetary slack from the budget

Which of the following is NOT a goal of performance evaluation systems?

Reprimanding unit managers

When making decisions, managers should consider

Revenues that differ between alternatives

Using the information above, what is the operating income using absorption costing if 500 units are sold for $100 each?

Sales Revenue = Selling Price Per Unit x Total number of units sold = $100 x 500 = $50,000 Cost of Goods Sold = Product Cost Per Unit x Total number of units sold = $70 x 500 = $35,000 Total Variable Selling and Administrative Costs = Variable selling and administrative cost per unit x Number of units sold = $5 x 500 = $2,500 Sales Revenue 50,000 Cost of Goods Sold (35,000) Gross Profit = 15,000 Variable Selling and Administrative Costs 2,500 (3) = 7,500 Fixed Selling and Administrative Costs 7,500 | (10,000) *Operating Income ((7,500 + 7,500) - 10,000) = 5,000

Using the information above, what is the operating income using variable costing if 450 units sold for $100 each?

Sales revenue = Selling price per unit x Total number of units sold = $100 x 450 = $45,000 Costs of goods sold = Product cost per unit x Total number of units sold =$50 x 450 = $22,500 Total variable selling and administrative costs = Variable selling and administrative cost per unit x number of units sold = $5 x 450 = $2,250 Sales Revenue 45,000 Variable Cost of Goods Sold 22,500 (2) Variable Selling and Administrative Costs 2,250 (3) | (24,750)=22,500 + 2,250 Contribution Margin 20,250 (45,000 - 24750) Fixed Cost of Goods Sold 10,000 Fixed Selling and Administrative Costs 7,500 | (17,500) *Operating Income 2,750 (20,250 - (10,000 + 7,500))

In making short-time business decisions, what should you do?

Separate variable from fixed costs

Sammie's Pizza sells an average of 150 pizzas per week, of which 20% are single-topping pizzas and 80% are supreme pizzas with multiple toppings. Single sell for $8 each and incur variable costs of $2. Supreme sell for $12 each and incur variable costs of $6. The contribution margin per unit and total contribution margin for Singles and Supremes are:

Single Contribution margin per unit = Selling price per unit - Variable cost per unit = $8 - $2 = $6 Number of units sold = 20% of average pizzas 20 / 100 x 150 = 30 Total contribution margin = Number of units sold x Contribution margin per unit = 30 x $6 *= $180 Supreme Contribution margin per unit = Selling price per unit - Variable cost per unit = $12 - $6 = $6 Number of units sold = 80% of average pizzas 80 / 100 x 150 = 120 Total contribution margin = Number of units sold x Contribution margin per unit = 120 x $6 *= $720

A company prepares a five-year budget. This budget would be considered a(n)

Strategic Budget

Which of the following costs are irrelevent to business decisions?

Sunk costs

When companies are price-setters their products and services

Tend to be unique

Using the information above, what is the division's asset turnover ratio?

The asset turnover ratio of Company K = Net sales / Average total assets = $4,160,000 / $5,200,000 *= 0.80

A company can expect to receive which of the following benefits when is starts its budgeting process?

The budget provides managers with a benchmark against which to compare actual results for performance evaluation. The budget helps motivate employees to achieve sales growth and cost-reduction. The planning required to develop the budget helps managers foresee and avoid potential problems before they occur.