Chapter 18

Commonwealth Company has the following unit costs: direct materials $2, direct labor $4, variable overhead $1, fixed overhead $3. Under the absorption costing method, what is the total unit cost? Multiple choice question. $5 $7 $10 $6

$10

The formula to determine the materials to be purchased is

(units to produce times materials required for each unit) plus desired ending materials inventory minus beginning materials inventory

A manufacturing company would typically prepare all of the following budgets except: Multiple choice question. Factory overhead budget Cash budget Merchandise inventory budget Production budget

Merchandise inventory budget

(absorption, variable) costing is acceptable for external reporting under U.S. GAAP.

absorption

Cost information from (neither, both) costing method(s) is helpful to management in setting prices.

both

A(n) is a formal statement of a company's plans in dollars.

budget

The _____ function requires that management evaluate operations against some norm.

control

List the individual budgets of the master budget in the order in which they are prepared, with the first on top. Instructions Choice 1 of 4. Sales budget toggle button Sales budget Choice 2 of 4. Cash budgets toggle button Cash budgets Choice 3 of 4. Direct materials, Direct labor and Factory Overhead budgets toggle button Direct materials, Direct labor and Factory Overhead budgets Choice 4 of 4. Production budget toggle button Production budget

sales direct direct cash

A contribution margin income statement shows:

sales-variable costs

Budgeted performance considers all of the following in relation to a benchmark: (Select all that apply). Multiple select question. Past performance factors Industry factors Economic factors Company factors

Industry factors Economic factors Company factors

True or False Question True or false: Depreciation on non-manufacturing assets and property taxes are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget.

True

costing system which is considered acceptable for external reporting under U.S. GAAP is Multiple choice question. fixed costing variable costing absorption costing internal costing

absorption

Most companies prepare a(n) ______ budget that is separated into ______ budgets. Multiple choice question. annual; quarterly or monthly three to five year; annual monthly; weekly or daily

annual; quarterly or monthly

All of the following are guidelines that should be followed for budgets to be a positive motivating force except: Multiple choice question. evaluations offer opportunities to explain differences between actual and budgeted amounts employees should help prepare the budget budgets should be prepared using a top-down approach goals should be challenging but attainable

budgets should be prepared using a top-down approach

An income statement which shows the excess of sales over variable costs is referred to as ____ ____ a income statement.

contribution margin

The percent by which a product's unit selling price exceeds its total unit variable cost is the: Multiple choice question. margin of safety. contribution margin per unit. fixed cost per unit. contribution margin ratio.

contribution margin ratio.

Trudy Company is using variable costing. Which of the following items would be included in Trudy's product costs? Select all that are correct. (Check all that apply). Multiple select question. fixed overhead direct materials direct labor variable overhead

direct materials direct labor variable overhead

The primary purpose of using short-term budgets is to: Multiple choice question. keep employees uncomfortable about missing budgetary projections plan for plant asset purchases and disposals evaluate performance and take necessary corrective action

evaluate performance and take necessary corrective action

Production planning is important because producing too much can lead to (excess, insufficient) inventory.

excess

A system of rewarding managers by linking bonuses to income computed under absorption costing may result in: Multiple choice question. excess inventory buildup sales negatively affected insufficient inventory no effect on inventory

excess inventory buildup

Under absorption costing, fixed overhead is allocated to products sold, so when production is greater than units sold, net income will be (greater, less) than income calculated under variable costing.

greater

When units produced are less than units sold, net income computed under variable costing will be ____ F(greater, less) than net income computed under absorption.

greater

Managers should accept special orders if the special-order price Multiple choice question. is greater than fixed cost is equal to fixed and variable costs. is greater than variable cost is equal to the variable cost

is greater than variable cost

Over the _ run, selling prices must cover both fixed and variable costs.

long

Budgeting guidelines that help insure budgeting is a positive motivating force include: (Check all that apply.) Multiple select question. pressure to meet budgeted results. budgetary slack. the opportunity to explain differences between actual and budgeted amounts. participatory budgeting. attainable goals.

the opportunity to explain differences between actual and budgeted amounts. participatory budgeting. attainable goals.

Differences in income between variable costing and absorption costing is due to Multiple choice question. reporting timing sales expenses

timing

The formula to compute the budgeted direct labor cost is

units to produce times direct labor required per unit times direct labor cost per hour

The variable costing method includes all of the following costs (select all that apply): Multiple select question. variable overhead direct labor direct materials fixed overhead selling overhead

variable overhead direct labor direct materials

Since service firms do not produce inventory, they should focus primarily on Multiple choice question. customer costs. fixed costs. variable costs.

variable costs.

Loudon Company has the following unit costs: direct materials $6, direct labor $3, variable overhead $2, fixed overhead $1. Under absorption costing, total unit cost is:

$12

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $.

60000

Regardless of whether variable costing or absorption costing is used, if quantity produced differs from quantity sold, income will be (similar, different, indeterminable).

different

Characteristics of budgets include: (Check all that apply.) Multiple select question. typically cover a month, quarter or one year. a focus on the past. expressed in dollars. typically span 5 to 10 years. formal statement of a company's plans. expressed in nonfinancial terms.

typically cover a month, quarter or one year. expressed in dollars. formal statement of a company's plans.

List the individual budgets of the master budget in the order in which they are prepared, with the first on top. Instructions Choice 1 of 4. Sales budget toggle button Sales budget Choice 2 of 4. Cash budgets toggle button Cash budgets Choice 3 of 4. Direct materials, Direct labor and Factory Overhead budgets toggle button Direct materials, Direct labor and Factory Overhead budgets Choice 4 of 4. Production budget toggle button Production budget

1. Sales budget 2. production budget 3. Direct materials, Direct labor and factory overhead budgets 4. Cash Budgets

A company expects to sell 500 units during the second quarter and 550 units in the third quarter. Currently, during the second quarter, they have 46 units in beginning inventory. If they desire ending inventory of 10% of the next quarter's sales, units will need to be produced in the second quarter.

509

True or false: When units produced are less than units sold, net income under absorption costing will be less than net income computed under variable costing. True false question.TrueFalse

True

Which costing method can be helpful to management in setting prices because it reflects full costs that sales must exceed for the company to be profitable? Multiple choice question. Variable costing Absorption costing

absorption costing

A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells for $10 each, the total sales for the first quarter of the year will be $.

13240

A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $.

201700

A merchandising company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $.

25800

If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, total product cost per unit is $.

33

A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $.

49350

The contribution margin ratio is interpreted as the percent of: Multiple choice question. each variable cost dollar that remains after deducting fixed costs each sales dollar that remains after deducting unit variable cost each sales dollar that remains after deducting fixed costs

each sales dollar that remains after deducting unit variable cost

When using absorption costing when production is greater than sales, a portion of fixed overhead is allocated to: Multiple choice question. contribution margin ending inventory selling expenses expenses

ending

Service firms should focus on _____ costs in managerial decisions. Multiple choice question. variable fixed

variable