Managerial Accounting Exam 2- Lonestar College

United Corporation, which adds materials at the beginning of production, uses a weighted-average process-costing system. Consider the data that follow Number of Units Cost of Material Beginning work in process 30,000 22,600 Started in May 80,000 72,000 Production completed 85,000 Ending work in process 25,000 The company's cost per equivalent unit for materials is:

A. $0.86.

. Last year, Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory decreased by 600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorption costing net operating income last year? A. $64,200 B. $63,000 C. $63,600 D. $600

B.$63,000

Tsuchiya Corporation manufactures a variety of products. Last year, the company's variable costing net operating income was $57,500. Fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $35,400. What was the absorption costing net operating income last year? A. $22,100 B. $35,400 C. $57,500 D. $92,900

D. $92,900

The following information pertains to Lap Co.'s Palo Division for the month of April: (GRAPH) All materials are added at the beginning of the process. Using the weighted-average Method, the cost per equivalent unit in materials is:

D. 0.43

. Property taxes are an example of a (n):

committed fixed cost.

Assume the following information: Volume Total Cost 80 units $1,200 88 units $1,300 96 units $1,400 What is the variable cost per unit? a. $15.00 b. $14.78 c. $13.75 d. $12.50

d. $12.50 ($1,400 - $1,200)/(96 - 80) = $12.50

5. Companies that use a process-cost accounting system would:

establish a separate Work-in-Process Inventory account for each manufacturing department.

. Lawson's variable cost per copy is: A. $0.03. B. $0.04. C. $0.05. D. $0.06. E. an amount other than those given above.

. $0.03.

Which of the following is a key document in a typical process-costing system?

. Departmental production report.

Which of the following is not an example of a committed fixed cost?

. Outlays for advertising programs.

Which of the following data are needed to calculate total equivalent units under the weighted-average method?

. Units completed during the period, work-to-date on ending work in process.

Hamilton, .which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hamilton should make a journal entry on December 31 that includes:

. a credit to Work-in-Process Inventory for $432,000.

When calculating unit costs under the weighted-average process-costing method, the unit cost is based on:

. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current period.

. Within the relevant range of activity, costs:

. can be estimated with reasonable accuracy.

. In regression analysis, the variable that is being predicted is known as the: A. Independent variable. B. dependent variable. C. explanatory variable. D. interdependent variable. E. functional variable.

. dependent variable.

. The relevant range is that range of activity:

. where management expects the firm to operate.

. Hitchcock, Inc. uses the high-low method to analyze cost behavior.The company observed that at 12,000 machine hours of activity, total maintenance costs averaged $7.00 per hour. When activity jumped to 15,000 machine hours, which was still within the relevant range, the average cost per machine hour totaled $6.40. On the basis of this information, the variable cost per machine hour was: A. $4.00. B. $6.40. C. $6.70. D. $7.00. E. an amount other than those listed above.

A. $4.00.

The ARB Company has two divisions: Electronics and DVD/Video Sales. Electronics has traceable fixed expenses of $146,280 and the DVD/Video Sales has traceable fixed expenses of $81,765. If ARB Company has a total of $322,490 in fixed expenses, what are its common fixed expenses? A. $94,445 B. $322,490 C. $228,045 D. $47,223

A. $94,445 X

. Gangwer Corporation produces a single product and has the following cost structure: The absorption costing unit product cost is: A. $95 B. $119 C. $61 D. $56

A. $95

What were Jeff equivalent units of production using the FIFO method?

A. 244,000

Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year. The company incurs conversion cost evenly throughout manufacturing. If Ohio started work on 3,000 units during the period and these units were 70% of the way through manufacturing, it would be correct to say that the company has:

A. 3,000 physical units in production.

19. Which of the following is a key document in a typical process-costing system?

A. Departmental production report

Which of the following are considered to be product costs under variable costing? I. Variable manufacturing overhead. II. Fixed manufacturing overhead. III. Selling and administrative expenses. A. I. B. I and II. C. I and III. D. I, II, and III.

A. I

Which of the following statements about operation costing are true? I. Conversion costs are accumulated by department. II. Direct material costs are accumulated by batch. III. Operation costing is a hybrid product-costing system. A. I, II, and III. B. II and III. C. I and III. D. I and II. E. I only.

A. I, II, and III.

Of the following methods, which is generally thought to be the most accurate with respect to determining cost behavior? A. Least-squares regression. ' B. The high- low method. C. The visual-fit method. D. Account analysis. E. The scatter diagram method.

A. Least-squares regression. '

2. Which of the following costs changes in direct proportion to a change in the activity level?

A. Variable cost.

A portion of the total fixed manufacturing overhead cost incurred during a period may: A. be excluded from cost of goods sold under absorption costing. X B. be charged as a period cost with the remainder deferred under variable costing. C. never be excluded from cost of goods sold under absorption costing. D. never be excluded from cost of goods sold under variable costing.

A. be excluded from cost of goods sold under absorption costing.

. Equivalent-unit calculations are necessary to allocate manufacturing costs between:

A. cost of goods manufactured and ending work in process.

Process costing is used to account for:

A. large numbers of identical products that are produced in a continuous manufacturing environment

5. A mixed cost is often known as a:

A. semi variable cost.

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are termed:

A. step-fixed costs.

Unit Cost of Labor and overhead (conversion)

B. $ 2.20

Sugiki Corporation has two divisions: the Alpha Division and the Delta Division. The Alpha Division has sales of $820,000, variable expenses of $369,000, and traceable fixed expenses of $347,300. The Delta Division has sales of $460,000, variable expenses of $294,400, and traceable fixed expenses of $134,100. The total amount of common fixed expenses not traceable to the individual divisions is $97,300. What is the company's net operating income? A. $135,200 B. $37,900 C. $616,600 D. $519,300

B. $37,900 X

. The fixed utilities cost per month is: A. $3,764. B. $4,400. C. $4,760. D. $5,100. E. an amount other than those listed above.

B. $4,400.

. Roy Corporation produces a single product. During July, Roy produced 10,000 units. Costs incurred during the month were as follows: Under absorption costing, any unsold units would be carried in the inventory account at a unit product cost of: A. $5.10 B. $4.40 C. $3.80 D. $3.50

B. $4.40 X 10,000 +20,000+ 5,000+ 9,000 = 44,000/ 10,000 Units = 4.40

Sam Co. had 4,000 units of work in process on April 1. During April, 11,000 units were completed and as of April 30, 6,000 units remained in production. How many units were started during April?

B. 13,000.

2- Equivalent units of production for labor & overhead (conversion) are

B. 17,000

- What were Jeff equivalent units of production using the Weighted average method?

B. 272,000

. Which of the following are considered to be product costs under absorption costing? I. Variable manufacturing overhead. II. Fixed manufacturing overhead. III. Selling and administrative expenses. A. I, II, and III. B. I and II. C. I and III. D. I.

B. I and II

Montgomery Company has a variable selling cost. If sales volume increases, how will the total variable cost and the variable cost per unit behave?

B. Increase Remain constant

The total costs to account for equal:

B. The costs in the beginning inventory plus current period costs.

. If the number of units produced exceeds the number of units sold, then net operating income under absorption costing will: A. be equal to the net operating income under variable costing. B. be greater than net operating income under variable costing. C. be equal to the net operating income under variable costing plus total fixed manufacturing costs. D. be equal to the net operating income under variable costing less total fixed manufacturing costs.

B. be greater than net operating income under variable costing. X

. The difference between the weight average method and FIFO method of calculating unit costs lies in the treatment of: A. ending work in process inventory. B. beginning work in process inventory. C. direct labor cost for current period. D. manufacturing overhead cost for the current period.

B. beginning work in process inventory

Net operating income reported under absorption costing will exceed net operating income reported under variable costing for a given period if: A. production equals sales for that period. B. production exceeds sales for that period. C. sales exceed production for that period. D. the variable manufacturing overhead exceeds the fixed manufacturing overhead.

B. production exceeds sales for that period.

11. A common cost that should not be assigned to a particular product on a segmented income statement is: A. the product's advertising costs. B. the salary of the corporation president. C. direct materials costs. D. the product manager's salary.

B. the salary of the corporation president. X

. Cockriel Inc., which produces a single product, has provided the following data for its most recent month of operations: There were no beginning or ending inventories. The variable costing unit product cost was: A. $42 B. $43 C. $37 D. $48

C. $37 X DM + DL + VMOH (14 +22+1= 37)

. Sproles Inc. manufactures a variety of products. Variable costing net operating income was $90,500 last year and its inventory decreased by 3,500 units. Fixed manufacturing overhead cost was $6 per unit. What was the absorption costing net operating income last year? A. $90,500 B. $21,000 C. $69,500 D. $111,500

C. $69,500 X

Jeff Company had beginning work in process of 40,000 units that were 70% complete. During the period, Jeff started 250,000 units into production. The ending work in process consisted of 30,000 units that were 40% complete. Use the following information to answer: 1- How many units did Jeff transfer to finished goods?

C. 260,000

. Gray Company uses a weight average process costing system. The cost per equivalent units was $10. The beginning work in process inventory was $ 20,000. Costs added during the period were $ 350,000. What were the equivalent units of production?

C. 37,000

. Under variable costing, costs that are treated as period costs include: A. only fixed manufacturing costs. B. both variable and fixed manufacturing costs. C. all fixed costs. D. only fixed selling and administrative costs.

C. All are fixed costs.

. Kentucky Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?

C. Materials, 100%; conversion cost, 40%.

A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably true?

C. The company is studying a fixed cost, and total volume has increased.

21. Which of the following are needed under weighted-average process costing to calculate the cost of goods completed during the period? Cost of Beginning Unit Cost Equivalent Units Work in Process A. No No Yes B. Yes Yes No C. Yes Yes Yes D. Yes No Yes E. Yes No No

C. Yes Yes Yes

Which of the following are needed to calculate the total cost of the ending work-in-process inventory under the weighted-average process-costing method? Cost of Beginning Unit Cost Equivalent Units Work in Process No A. No No Yes B. Yes Yes No C. Yes Yes Yes D. Yes No Yes E. Yes No No

C. Yes Yes yes

. The relationship between cost and activity is termed: A. cost estimation. B. cost prediction. C. cost behavior. D. cost analysis. E. cost approximation.

C. cost behavior.

. Straight-line depreciation is a typical example of a:

C. fixed cost.

10. Over an extended period of time in which the final ending inventories are zero, the accumulated net operating income figures reported under absorption costing will be: A. greater than those reported under variable costing. B. less than those reported under variable costing. C. the same as those reported under variable costing. D. higher or lower since no generalization can be made.

C. the same as those reported under variable costing.

Unit Cost of material is

D. $1.76

. Lawson's monthly fixed fee is: A. $38. B. $75. C. $86. D. $110. E. an amount other than those given above.

D. $110.

. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the total period cost for the month under variable costing? A. $185,000 B. $117,600 C. $273,200 D. $302,600

D. $302,600

. Hitchcock, Inc., uses the high-low method to analyze cost behavior. The company observed that at 12,000 machine hours of activity, total maintenance costs averaged $7.00 per hour. When activity jumped to 15,000 machine hours, which was still within the relevant range, the average cost per machine hour totaled $6.40. On the basis of this information, the company's fixed maintenance costs were: A. $3,600. B. $4,500. C. $12,000. D. $36,000. E. an amount other than those listed above.

D. $36,000.

Atlanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year: Month Utilities Machine Hours January $8,700 800 February 8,360 720 March 8,950 810 April 9,360 920 May 9,625 950 June 9,150 900 24. The variable utilities cost per machine hour is: A. $0.18. B. $4.50. C. $5.00. D. $5.50. E. an amount other than those listed above.

D. $5.50.

. Using the high-low method, the utilities cost associated with 980 machine hours would be: A. $9,510. B. $9,660. C. $9,700. D. $9,790. E. an amount other than those listed above.

D. $9,790.

15. Michael, Inc. uses a process-costing system. A newly hired accountant has identified the following procedures that must be performed by the close of business on Friday: 1 - Calculation of equivalent units 2 - Analysis of physical flows of units 3 - Assignment of costs to completed units and units still in process 4 - Calculation of unit costs Which of the following choices correctly expresses the proper order of the preceding tasks?

D. 2,1,4,3.

The WISCO Company uses a weighted average process costing system. The following data are available: Beginning inventory o Units started in production 20,000 Units Finished during period 16,000 Units in process at end of period (complete as to material; ¼ as conversion) 4,000 Cost of material used $35,200 Labor and overhead (conversion) $37,400 Use the above information to answer 1, 2, 3 and 4 1- Equivalent units of production for material are

D. 20,000

Which of the following manufacturers would most likely not use a process-cost accounting system

D. A builder of customized yachts.

6. Which of the following statements is false?

D. In process costing, the total cost of each unit is found by dividing the total factory costs by the number of units completed.

. Selling and administrative expenses are considered to be: A. a product cost under variable costing. B. a product cost under absorption costing. C. part of fixed manufacturing overhead under variable costing. D. a period cost under variable costing.

D. a period cost under variable costing.

. As a firm begins to operate outside the relevant range, the accuracy of cost estimates for fixed and variable costs: Fixed Variable A. increases increases B. increases decreases C. decreases increases D. decreases decreases E. decreases remains unchanged

D. decreases decreases

10. Unit costs in a process-costing system are derived by using:

D. equivalent units.

. The high-low method and least-squares regression are used by accountants to: A. evaluate divisional managers for purposes of raises and promotions. B. choose among alternative courses of action. C. maximize output. D. estimate costs. E. control operations.

D. estimate costs.

Richard Hamilton has a fast-food franchise and must pay a franchise fee of $35,000 plus 3% of gross sales. In terms of cost behavior, the fee is a:

D. semi variable cost.

12. Segment margin is sales minus: A. variable expenses. B. traceable fixed expenses. C. variable expenses and common fixed expenses. D. variable expenses and traceable fixed expenses.

D. variable expenses and traceable fixed expenses. X

. Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturin overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours? A. Total manufacturing overhead is represented by the variable "X." B. The company anticipates $495,000 of fixed manufacturing overhead. C. "X" is commonly known as the dependent variable. D. "X" represents the number of machine hours. E. Both "B" and "D" are true.

E. Both "B" and "D" are true.

. Morrison, Inc., which uses a process-cost accounting system, passes completed production from Department A to Department B for further manufacturing. The journal entry to record completed production in Department A requires:

E. a debit to Work-in-Process Inventory Department B and a credit to Work-in-Process Inventory: Department A.

Process costing would be used in all of the following industries except:

E. automobile repair.

7. In a process-costing system, manufacturing costs are accumulated by:

E. department or process, and time period.

. Which of the following statements regarding similarities between process costing and Job-order costing are true?

I. Both systems assign production costs to units of output. II. Both systems require extensive knowledge of financial accounting. 111. The flow of costs through the manufacturing accounts is essentially the same. B I and III only.

Fixed manufacturing overhead is included in product costs under: A. Option A B. Option B C. Option C D. Option D

OPTION D, ( YES ABSORPTION COSTING, NO VARIABLE COSTING)

Multiple choice questions 1. Would the following costs be classified as product or period costs under variable costing at a retail clothing store? A. Option A B. Option B C. Option C D. Option D

Option D (PERIOD PERIOD)

The following cost functions were developed for manufacturing overhead costs: Manufacturing Overhead Cost Cost Function Electricity $200 + $20 per direct labor hour Maintenance $400 + $30 per direct labor hour Supervisors' salaries $20,000 per month Indirect materials $16 per direct labor hour If June production is expected to be 2,000 units requiring 3,000 direct labor hours, estimated manufacturing overhead costs would be a. $218,600. b. $198,000. c. $152,600. d. $20,733.

a. $218,600.

. If materials were added at the beginning of the process, how many equivalent units of production for conversion costs would there be for Irvin using the FIFO costing method? a. 101,500 units b. 110,000 units c. 105,500 units d. 116,500 units

a. 101,500 units

An accounting firm had the following data concerning tax returns for January (output is measured in the number of returns): Units, beginning work in process -0- Units started 12,000 Units completed 7,000 Units, ending work in process (25% complete) 5,000 What are the equivalent units processed?

a. 8,250

Total costs may be computed as follows: a. Fixed costs + (Variable costs per unit X Unit volume) b. (Fixed costs per unit X Unit volume) + Variable costs c. Fixed costs per unit + (Variable costs per unit X Unit volume) d. (Fixed costs per unit Unit volume) + Variable costs per unit

a. Fixed costs + (Variable costs per unit X Unit volume)

. Lee Corporation manufactures and sells party items. The following representative direct labor hours and production costs are provided for a four-month period: Month Direct Labor Hours Production Costs January 3,600 $15,000 February 4,800 17,500 March 6,000 20,000 April 4,800 15,000 Total 19,200 $67,500 Let a = Fixed production costs per month b = Variable production costs per direct labor hour n = Number of months X = Direct labor hours per month Y = Total monthly production costs = Summation Monthly production costs can be expressed as follows: a. X = aY + b b. Y = a + bX c. X = a + bY d. Y = b + aX

b. Y = a + bX

6. Holly Corporation has the following costs for 1,000 units: Total Cost Cost per Unit Direct materials $ 1,500 $ 1.50 Direct labor 7,500 7.50 Depreciation on building 30,000 30.00 What is the total amount of direct materials for 100 units? a. $1.50 b. $3.00 c. $150.00 100 $1.50 = $150 d. $225.00

c. $150.00 100 $1.50 = $150

Materials are added at the beginning of the process. Round unit costs to two decimal places.

c. $2.88.

English Corporation analyzed the relationship between total factory overhead and changes in direct labor hours. It found the following: Y = $6,000 + $6X The Y in the equation is an estimate of a. total variable costs. b. total direct labor hours. c. total factory overhead. d. total fixed costs.

c. total factory overhead.