Cost Acc- 3365 Puffer Final Review
Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCT121, are as follows: Direct materials $ 70 Direct manufacturing labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 32 Sales commissions (2% of sales) 5 Administrative salaries 16 Total $158 What are the inventoriable costs per unit associated with Product DCT121? A) $137 B) $140 C) $143 D) $88
A) $137 Explanation: A) $70 + $20 + $15 + $32 = $137
Fixed costs remain constant at $400,000 per month. During high-output months variable costs are $320,000, and during low-output months variable costs are $80,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 16,000 for high-output months and 4,000 for low-output months? A) $45.00 per hour; $120.00 per hour B) $45.00 per hour; $45.00 per hour C) $25.00 per hour; $20.00 per hour D) $56.20 per hour; $120.00 per hour
A) $45.00 per hour; $120.00 per hour Explanation: A) $400,000 / 16,000 = $25.00 $400,000 / 4,000 = $100.00 $320,000 / 16,000 = 20.00 $80,000 / 4,000 = 20.00 High Month = $45.00 Low Month = $120.00
For 2014, Bakers Manufacturing uses machine-hours as the only overhead cost-allocation base. The direct cost rate is $3.00 per unit. The selling price of the product is $20.00. The estimated manufacturing overhead costs are $240,000 and estimated 40,000 machine hours. The actual manufacturing overhead costs are $300,000 and actual machine hours are 50,000. Using job costing, the 2014 actual indirect-cost rate is ________. A) $6.00 per machine-hour B) $5.80 per machine-hour C) $6.50 per machine-hour D) $6.75 per machine-hour
A) $6.00 per machine-hour Explanation: A) $300,000 / 50,000 mh = $6.00
Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%? A) 200 dresses B) 170 dresses C) 150 dresses D) 145 dresses
A) 200 dresses Explanation: A) $1,000N - $400N - $90,000 = $18,000 / (1 - 0.4); $600N - $90,000 = $30,000; N = 200 units
Which of the following is the mathematical expression of contribution margin ratio? A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars) B) Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars) C) Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars) D) Contribution margin ratio = Contribution margin percentage × Operating leverage
A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars)
________ is the process of distributing indirect costs to products. A) Cost allocation B) Job cost recording C) Cost pooling D) Cost tracing
A) Cost allocation
Which of the following is an assumption of CVP analysis? A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. B) When graphed, total costs curve upward. C) The unit-selling price is variable as it is subject to demand and supply. D) Total costs can be divided into inventoriable and period costs with respect to the level of output.
A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.
Process costing ________. A) allocates all product costs, including materials, and labor B) results in different costs for different units produced C) is commonly used by general contractors who construct custom-built homes D) is used exclusively in manufacturing
A) allocates all product costs, including materials, and labor
Which of the following companies will use a process costing system? A) an oil refining company B) a manufacturer of ships C) a custom watch manufacturer D) an advertising firm
A) an oil refining company
Period costs ________. A) are treated as expenses in the period they are incurred B) are directly traceable to products C) are treated as expenses in the following period they are incurred D) are also referred to as manufacturing overhead costs
A) are treated as expenses in the period they are incurred
The budgeted indirect-cost rate is calculated ________. A) at the beginning of the year B) during the year C) at the end of each quarter D) at the end of the year
A) at the beginning of the year
The budgeted indirect-cost rate for each cost pool is computed as ________. A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base
A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base. A) budgeted; actual B) budgeted; budgeted C) actual; budgeted D) actual; actual
A) budgeted; actual
A ________ links an indirect cost to a cost object. A) cost-allocation base B) cost pool C) cost assignment D) cost tracing
A) cost-allocation base
The actual indirect-cost rate is calculated by ________. A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base B) multiplying actual total indirect costs by the actual total quantity of the cost-allocation base C) dividing the actual total quantity of the cost allocation base by actual total indirect costs D) multiplying the actual total quantity of the cost allocation base by actual total indirect costs
A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base
Which of the following is true if the production volume decreases? A) fixed cost per unit increases B) average cost per unit decreases C) variable cost per unit increases D) variable cost per unit decreases
A) fixed cost per unit increases
Management accounting ________. A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results B) provides information about the company as a whole C) reports information that has occurred in the past that is verifiable and reliable D) provides information that is generally available only on a quarterly or annual basis
A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results
Cost behavior refers to ________. A) how costs react to a change in the level of activity B) whether a cost is incurred in a manufacturing, merchandising, or service company C) classifying costs as either perpetual or period costs D) whether a particular expense is expensed in the same or the following period
A) how costs react to a change in the level of activity
Problems with costing occur when ________. A) incorrect job numbers are recorded on source documents B) bar coding is used to record materials used on the job C) a computer screen requests an employee number before that employee is able to work on information related to a specific job D) incorrect product delivery forms are entered into the system
A) incorrect job numbers are recorded on source documents
An actual cost is ________. A) is the cost incurred B) is a predicted or forecasted cost C) is anything for which a cost measurement is desired D) is the collection of cost data in some organized way by means of an accounting system
A) is the cost incurred
Overcosting a particular product may result in ________. A) loss of market share B) pricing the product too low C) operating efficiencies D) understating total product costs
A) loss of market share
Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates? A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs B) longer the period, the greater is the influence of seasonal patterns on the amount of costs C) shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs D) longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs
A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs
3) Cost accumulation is ________. A) the collection of cost data in some organized way by means of an accounting system B) anything for which a cost measurement is desired C) anything for which a profit measurement is desired D) the collection of profit data in some organized way by means of an accounting system
A) the collection of cost data in some organized way by means of an accounting system
If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then on a graph the ________. A) total revenue line and the total cost line will intersect at $30,000 of revenue B) total cost line will be zero at zero units sold C) revenue line will start at $10,000 D) total revenue line and the total cost line will intersect at $40,000 of revenue
A) total revenue line and the total cost line will intersect at $30,000 of revenue
Each indirect-cost pool of a manufacturing firm ________. A) utilizes a separate cost-allocation rate B) is a subset of total direct costs C) relates to multiple cost centres D) utilizes the same cost-allocation rate for all costs incurred
A) utilizes a separate cost-allocation rate
When fixed costs are $50,000 and variable costs are 60% of the selling price, then breakeven sales are ________. A) $115,000 B) $125,000 C) $175,000 D) $275,000
B) $125,000 Explanation: B) $50,000 / (1 − 0.60) = $125,000 in BE sales
Fixed costs equal $15,000, unit contribution margin equals $25, and the number of units sold equal 1,150. Operating income is ________. A) $28,750 B) $13,750 C) $15,000 D) $14,750
B) $13,750 Explanation: B) (1,150 × $25) − $15,000 = $13,750
Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. Contribution margin per software is ________. A) $10.00 B) $30.00 C) $40.00 D) $36.00
B) $30.00 Explanation: B) ($440,000 − $110,000) / 11,000 = $30 per software
Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose management believes that a $75,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure? A) 1,698 units B) 1,500 units C) 1,550 units D) 1,339 units
B) 1,500 units Explanation: B) $80X − $30X − $75,000 = 0; X = 1,500 units to cover the expenditures
For 2014, Bakers Manufacturing uses machine-hours as the only overhead cost-allocation base. The direct cost rate is $3.00 per unit. The selling price of the product is $20.00. The estimated manufacturing overhead costs are $240,000 and estimated 40,000 machine hours. The actual manufacturing overhead costs are $300,000 and actual machine hours are 50,000. What is the profit margin earned if each unit requires two machine-hours? A) 53.33% B) 33.33% C) 66.67% D) 58.73%
B) 33.33% Explanation: B) $20 − $3.00 − ($6.00 × 2) = $5; $5/$15 = 33.33%
Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. The contribution margin percentage is ________. A) 66.67% B) 65.0% C) 37.5% D) 75.0%
B) 65.0% Explanation: B) ($100,000 − $35,000) / $100,000 = 65%
Which of the following statements is true of a peanut-butter costing system? A) A peanut-butter costing system typically has more-homogeneous indirect cost pools. B) A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects. C) A peanut-butter costing system assumes that all costs are variable. D) In a peanut-butter costing system, costs of activities are used to assign costs to other cost objects such as products or services based on the activities the products or services consume.
B) A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.
Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate A) ACDB B) CADB C) BACD D) DCAB
B) CADB
Which of the following statements about the direct/indirect cost classification is true? A) Indirect costs are always traced. B) Indirect costs are always allocated. C) The design of sales target affects the direct/indirect classification. D) The direct/indirect classification depends on the cost control measures.
B) Indirect costs are always allocated.
5) Cost tracing is ________. A) the assignment of direct costs to the chosen cost object B) a function of cost allocation C) the process of tracking both direct and indirect costs associated with a cost object D) the process of determining the actual cost of the cost object
B) a function of cost allocation
Fixed costs depend on the ________. A) amount of resources used B) amount of resources acquired C) volume of production D) total number of units sold
B) amount of resources acquired
A revenue driver is defined as ________. A) any factor that affects costs and revenues B) any factor that affects revenues C) the only factor that can influence a change in selling price D) the only factor that can influence a change in demand
B) any factor that affects revenues
Direct costs ________. A) are anything for which a measurement of costs is desired B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner C) focus specifically on the costing needs of the CFO D) are costs related to a particular cost object that cannot be traced to that cost object in a cost-effective manner
B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner
Inventoriable costs ________. A) include administrative and marketing costs B) are expensed in the accounting period in which the products are sold C) are expensed in the accounting period in which the products are manufactured D) are also referred to as nonmanufacturing costs
B) are expensed in the accounting period in which the products are sold
The margin of safety is the difference between ________. A) budgeted expenses and breakeven expenses B) budgeted revenues and breakeven revenues C) actual operating income and budgeted operating income D) actual sales margin and budgeted sales margin
B) budgeted revenues and breakeven revenues
Managers use management accounting information to ________. A) help external users such as investors, banks, regulators, and suppliers B) communicate, develop, and implement strategies C) communicate a firm's financial position to investors, banks, regulators, and other outside parties D) ensure that financial statements are consistent with the SEC rules
B) communicate, develop, and implement strategies
Comparing budgeted costs to actual costs helps managers to improve ________. A) coordination B) control C) implementation D) planning
B) control
The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________. A) cost accumulation B) cost assignment C) cost tracing D) conversion costing
B) cost assignment
The planned operating income is calculated by ________. A) dividing net income by tax rate B) dividing net income by 1 − tax rate C) multiplying net income by tax rate D) multiplying net income by 1 − tax rate
B) dividing net income by 1 − tax rate
One of the first steps to take when using CVP analysis to help make decisions is ________. A) calculating the break-even point B) identifying the variable and fixed costs C) calculation of the degree of operating leverage for the company D) estimating the volume of sales to make a good profit
B) identifying the variable and fixed costs
Variable costs ________. A) are always indirect costs B) increase in total when the actual level of activity increases C) include most personnel costs and depreciation on machinery D) are never considered a part of prime cost
B) increase in total when the actual level of activity increases
Costs that are initially recorded as assets and expensed when goods sold are called ________. A) period costs B) inventoriable costs C) irrelevant costs D) research and development costs
B) inventoriable costs
Financial accounting ________. A) focuses on the future and includes activities such as preparing next year's operating budget B) must comply with GAAP (generally accepted accounting principles) C) is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization D) is prepared for the use of department heads and other employees
B) must comply with GAAP (generally accepted accounting principles)
If indirect-cost rates are calculated monthly, distortions might occur because of ________. A) rental costs paid monthly B) property tax payments made in July and December C) routine monthly preventive-maintenance costs that benefit future months D) salary hikes at the beginning of the financial year
B) property tax payments made in July and December
For a given job the direct costs associated with the job are ________. A) actual overhead B) raw materials C) sunk costs D) fixed costs
B) raw materials
Job costing ________. A) cannot be used by the service industry B) records the flow of costs for each product or service C) allocates an equal amount of cost to each unit made during a time period D) is used when each unit of output is identical
B) records the flow of costs for each product or service
Managers use cost-volume-profit (CVP) analysis to ________. A) forecast the cost of capital for a given period of time B) to study the behavior of and relationship among the elements such as total revenues, total costs, and income C) estimate the risks associated with a given job D) analyse a firm's profitability and help to decide wealth distribution among its stakeholders
B) to study the behavior of and relationship among the elements such as total revenues, total costs, and income
Job costing is ________. A) used by businesses to price identical products B) used by businesses to price unique products for different jobs C) used to calculate equivalent units D) used to calculate the percentage of work completed
B) used by businesses to price unique products for different jobs
For 2014, Thomas Manufacturing uses machine-hours as the only overhead cost-allocation base. The estimated manufacturing overhead costs are $300,000 and estimated machine hours are 50,000. The actual manufacturing overhead costs are $420,000 and actual machine hours are 70,000. What is the difference between the budgeted and the actual manufacturing overhead using job costing? A) $0.20 B) $0.50 C) $1.00 D) $1.20
C) $1.00 Explanation: C) Actual manufacturing overhead is $420,000/70,000 = $7.00 per machine hour. Difference is $7.00 - $6.00 = $1
Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Contribution margin per unit is ________. A) $4.00 B) $11.00 C) $10.00 D) $8.00
C) $10.00 Explanation: C) ($7,000 − $3,000) / 400 units = $10 per unit
Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCT121, are as follows: Direct materials $ 70 Direct manufacturing labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 32 Sales commissions (2% of sales) 5 Administrative salaries 16 Total $158 What are the period costs per unit associated with Product DCT121? A) $4 B) $16 C) $21 D) $52
C) $21 C) $5 + 16 = $21
Kamrock applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials of $50,000; 600 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs. Manufacturing overhead cost estimates for this special order total ________. A) $46,000 B) $34,000 C) $36,000 D) $40,000
C) $36,000 Explanation: C) $60 × 600 dlh = $36,000
Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable costs are $500 per table. He currently plans to sell 175 tables this month. What is the budgeted operating income for the month assuming that Alex sells 175 tables? A) $45,250 B) $37,000 C) $36,250 D) $36,750
C) $36,250 Explanation: C) Budgeted operating income = $148,750 − [(175 × $500) + $25,000] = $148,750 − $112,500 = $36,250
Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000. A) $65,000 B) $80,000 C) $75,000 D) $2,500
C) $75,000 Explanation: C) $3,000 + $2,000 + (($2,000/20) × $25) = $7,500 Profit earned on 50 units = ($9,000 − $7,500) × 50 units = $75,000
How many units would have to be sold to yield a target operating income of $23,000, assuming variable costs are $25 per unit, total fixed costs are $2,000, and the unit selling price is $30? A) 4,800 units B) 4,400 units C) 5,000 units D) 5,200 units
C) 5,000 units Explanation: C) Desired sales = ($2,000 + $23,000) / ($30 − $25) = 5,000 units Diff: 3
Aqua Company produces two products-Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta's cost is shared between design and setup costs, while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua? A) Aqua will overcost Beta's direct costs as it is using a single cost pool to allocate indirect costs. B) Aqua will undercost Alpha's indirect costs because alpha has high direct costs. C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs. D) Aqua will overcost Beta's indirect costs because beta has high indirect costs.
C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs.
In a costing system, ________. A) cost tracing allocates indirect costs B) cost allocation assigns direct costs C) a cost-allocation base can be either financial or nonfinancial D) a cost object should be a product and not a department or a geographic territory
C) a cost-allocation base can be either financial or nonfinancial
As per CVP, operating income calculations use ________. A) net income and dividends B) income tax expense and net income C) contribution margins and fixed costs D) nonoperating revenues and nonoperating expenses
C) contribution margins and fixed costs
Which of the following includes both traced direct costs and allocated indirect costs? A) cost tracing B) cost pools C) cost assignments D) cost allocations
C) cost assignments
A ________ is a grouping of individual indirect cost items. A) cost allocation base B) cost assignment C) cost pool D) job-costing system
C) cost pool
The primary user of financial accounting information is a ________. A) factory shift supervisor B) distribution manager C) current shareholder D) department manager
C) current shareholder
Job costing information is used ________. A) to determine target customers B) to calculate the percentage of completion C) for internal financial reporting D) to enhance public relations
C) for internal financial reporting
Period costs ________. A) include only fixed costs B) seldom influence financial success or failure C) include the cost of selling, delivering, and after-sales support for customers D) should be treated as an indirect cost rather than as a direct manufacturing cost
C) include the cost of selling, delivering, and after-sales support for customers
In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. A) direct materials B) direct labor C) manufacturing overhead costs D) total costs
C) manufacturing overhead costs
Product-cost cross-subsidization ________. A) exists when one overcosted product results in more than one other product being overcosted B) means that if a company undercosts more than one of its products, it will overcost more than one of its other products C) means that if a company undercosts one of its products, it will overcost at least one of its other products D) exists only when one overcosted product results in all other products being overcosted
C) means that if a company undercosts one of its products, it will overcost at least one of its other products
For a company with diverse products, undercosting overhead of a product will lead to ________. A) misallocating direct labor costs of the product. B) misallocating direct material costs of the product C) misallocating indirect costs of another product D) misallocating direct costs of another product
C) misallocating indirect costs of another product
The difference between actual costing and normal costing is ________. A) normal costing uses actual quantities of direct-costs B) actual costing uses actual quantities of direct-costs C) normal costing uses budgeted indirect-costs D) actual costing uses actual quantities of cost-allocation bases
C) normal costing uses budgeted indirect-costs
Costs expensed on the income statement in the accounting period incurred are called ________. A) direct costs B) indirect costs C) period costs D) inventoriable costs
C) period costs
Budgeted costs are ________. A) the costs incurred this year B) the costs incurred last year C) planned or forecasted costs D) competitor's costs
C) planned or forecasted costs
If the breakeven point is 1,000 units and each unit sells for $50, then ________. A) selling 1,040 units will result in a loss B) selling $60,000 will result in a loss C) selling $50,000 will result in zero profit D) selling $45,000 will result in profit
C) selling $50,000 will result in zero profit Explanation: C) 1,000 × $50 = $50,000 of BE sales
Managers and accountants collect most of the cost information that goes into their systems through ________. A) an information databank B) computer programs C) source documents D) time surveys
C) source documents
Cost allocation is ________. A) the process of tracking both direct and indirect costs associated with a cost object B) the process of determining the opportunity cost of a cost object chosen C) the assignment of indirect costs to the chosen cost object D) made based on material acquisition document
C) the assignment of indirect costs to the chosen cost object
Within the relevant range, if there is a change in the level of the cost driver, then ________. A) total fixed costs and total variable costs will change B) total fixed costs and total variable costs will remain the same C) total fixed costs will remain the same and total variable costs will change D) total fixed costs will change and total variable costs will remain the same
C) total fixed costs will remain the same and total variable costs will change
ocess costing is ________. A) used to enhance employees' job satisfaction B) used by businesses to price unique products or identical products produced in batches C) used by businesses to price identical products D) used by businesses when manufacturing goods above normal capacity
C) used by businesses to price identical products
Actual costing is a costing system that traces direct costs to a cost object by ________. A) using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs B) using the actual direct costs rates times the budgeted quantities of the direct-cost inputs C) using the actual direct cost rates times the actual quantities of the direct-cost inputs D) using the budgeted direct cost rates times the actual quantities of the direct cost inputs
C) using the actual direct cost rates times the actual quantities of the direct-cost inputs
Which of the following is true if the volume of sales increases? A) fixed cost increases B) variable cost decreases C) variable cost increases D) fixed cost decreases
C) variable cost increases
Inventoriable costs are expensed on the income statement ________. A) when direct materials for the product are purchased B) after the products are manufactured C) when the products are sold D) when the goods move from work-in process to finished goods account
C) when the products are sold
Outside the relevant range, variable costs, such as direct material costs ________. A) will decrease proportionately with changes in sales volumes B) will remain the same with changes in production volumes C) will not change proportionately with changes in production volumes D) will increase proportionately with changes in sales volumes
C) will not change proportionately with changes in production volumes
In CVP analysis, focusing on target net income rather than operating income ________. A) will increase the breakeven point B) will decrease the breakeven point C) will not change the breakeven point D) will help managers construct a better capital policy
C) will not change the breakeven point
If selling price per unit is $40, variable costs per unit are $25, total fixed costs are $20,000, the tax rate is 30%, and the company sells 5,000 units, net income is ________. A) $32,158 B) $26,548 C) $28,500 D) $38,500
D) $38,500 D) Net income = [(($40 − $25) × 5,000) − $20,000] × (1.0 − 0.3) = $38,500
Bernard Company's budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate? A) $47.00 B) $56.00 C) $75.00 D) $55.00
D) $55.00 Explanation: D) $3,300,000/60,000 hours = $55.00
For 2014, Thomas Manufacturing uses machine-hours as the only overhead cost-allocation base. The estimated manufacturing overhead costs are $300,000 and estimated machine hours are 50,000. The actual manufacturing overhead costs are $420,000 and actual machine hours are 70,000. Using job costing, the 2014 budgeted manufacturing overhead rate is ________. A) $6.50 per machine-hour B) $4.80 per machine-hour C) $5.50 per machine-hour D) $6.00 per machine-hour
D) $6.00 per machine-hour Explanation: D) $300,000 / 50,000 mh = $6 per machine-hour
Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. If sales increase by $60,000, operating income will increase by ________. A) $10,000 B) $40,000 C) $45,000 D) $60,000
D) $60,000 Explanation: D) Price = $440,000 / 11,000 = $40.00
Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Calculate the variable cost per unit. A) $11.00 B) $7.00 C) $8.00 D) $7.50
D) $7.50 $3,000 / 400 = $7.50
Which of the following statements about normal costing is true? A) Direct costs and indirect costs are traced using an actual rate. B) Direct costs and indirect costs are traced using budgeted rates. C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate. D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.
D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.
The contribution margin income statement ________. A) reports gross margin B) is allowed for external reporting to shareholders C) categorizes costs as either direct or indirect D) can be used to predict future profits at different levels of activity
D) can be used to predict future profits at different levels of activity
The selling price per unit less the variable cost per unit is the ________. A) fixed cost per unit B) gross margin C) margin of safety D) contribution margin per unit
D) contribution margin per unit
The determination of a cost as either direct or indirect depends upon the ________. A) accounting standards B) tax system chosen C) inventory valuation D) cost object chosen
D) cost object chosen
Assigning direct costs to a cost object is called ________. A) cost allocation B) cost assignment C) cost pooling D) cost tracing
D) cost tracing
The cost allocation base ________. A) is a grouping of individual indirect cost items B) are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way C) is anything for which a measurement of costs is desired D) is a systematic way to link an indirect cost or group of indirect costs to cost objects
D) is a systematic way to link an indirect cost or group of indirect costs to cost objects
Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________. A) fixed costs increases by $6 per unit B) operating profits decreases by $6 per unit C) fixed costs decreases by $6 per unit D) operating profits increases by $6 per unit
D) operating profits increases by $6 per unit
A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________. A) average range B) cost-allocation range C) cost driver range D) relevant range
D) relevant range
The contribution income statement highlights ________. A) gross margin B) the segregation of costs into period costs and inventoriable costs C) different product lines D) variable and fixed costs
D) variable and fixed costs
In 2015, Craylon Company has sales of $1,000,000, variable costs of $250,000, and fixed costs of $200,000. In 2016, the company expects annual property taxes to decrease by $15,000. Required: a. Calculate operating income and the breakeven point for 2015. b. Calculate the breakeven point for 2016.
a. In 2015, operating income is $1,000,000 sales revenue − $250,000 variable costs − $200,000 fixed costs = $550,000. The breakeven point for 2015 is $266,667 in total sales dollars. Contribution margin ratio = ($1,000,000 - $250,000) / $1,000,000 = 0.75. Breakeven sales = $200,000 / 0.75 = $266,667. b. The breakeven point for 2016 is $246,667 in total sales dollars. Estimated fixed costs for 2016 = $200,000 − $15,000 = $185,000. Breakeven sales = $185,000 total fixed costs / 75% CM ratio = $246,667.
Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs total $9,600. Required: a. What is the contribution margin per lamp? b. What is the breakeven point in lamps? c. How many lamps must be sold to earn a pretax income of $8,000? d. What is the margin of safety, assuming 1,500 lamps are sold?
b. N = Breakeven point in lamps $30N - $22N - $9,600 = 0 $8N - $9,600 = 0 N = $9,600/$8 = 1,200 lamps c. N = Target sales in lamps $30N - $22N - $9,600 - $8,000 = 0 $8N - $17,600 = 0 N = $17,600/$8 = 2,200 lamps d. Margin of safety= Sales - Breakeven sales= ($30.00 × 1,500) - $36,000 = $9,000
