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Mollie's Corporation produces a single product and has the following cost structure: Number of Units 6,597 Variable expenses Direct materials 50.94 Direct Labor 11.01 Variable Manufacturing Overhead 8.13 Variable Selling Expense 5.19 Fixed expenses Fixed manufacturing overhead 439,589 Fixed selling and administrative expense 108,437 Calculate the absorption cost product cost per unit: (to two decimal points xxx.xx)

141.90 50.94 + 11.01 + 8.13 + 5.19 + (439,589 / 6597) WRONG

Zither Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year based on direct labor-hours. Here are the numbers: Direct Labor Hours 54,212 Variable manufacturing overhead cost 3.56 Total fixed manufacturing overhead cost 87,054 Recently Job Z4429 was completed and required 103 direct labor-hours. Calculate the following: Calculate the amount of overhead applied to Job Z4429.

532.078 Est total Man hours = 87054 + (54212 * 3.56 ) = 280048.72 POHR = 280048.72 / 54212 = 5.166 Job Z4429 = 5.166 * 103

A profit center is responsible for generating revenue, but it is not responsible for controlling costs.

False

If the variable expense per unit increases, and all other factors remain the same, the contribution margin ratio will increase

False

In calculating the payback period where new equipment is replacing old equipment, any salvage value to be received on disposal of the old equipment should NOT be deducted from the cost of the new equipment.

False

When raw materials are purchased in a manufacturing company raw materials are purchased as an expense.

False

A cost driver in a hospital could be the number of patients.

True

A maintenance person's salary in a manufacturing company would be classified as an indirect cost with respect to a unit of product.

True

Direct materials costs are usually excluded from the costs that are allocated to activity cost pools in an activity-based-costing system

True

For performance evaluation purposes, any variance over budgeted fixed costs in a service department should be the responsibility of the service department and should not be charged to the departments that use the service.

True

In a make or buy decisions the company is deciding to perform the activity in-house or purchase from an outside supplier.

True

In the payback method, depreciation is added back to net operating income when computing the annual net cash flow.

True

Including a financial perspective in a Balanced Scorecard serves the purpose of holding organizations accountable for translating improvements in nonfinancial performance to "bottom line" results.

True

Nonmanufacturing as well as manufacturing costs may be assigned to products when a company implements activity-based-costing

True

Payment of overtime to a worker in order to relax a production constraint could increase the profits of a company.

True

Plywood and sawdust from the same lumber would be considered joint products

True

ROI and residual income are tools used to evaluate managerial performance in investment centers.

True

Sunk costs are never relevant in decision making

True

The standard price per unit for direct materials should include the freight cost, insurance related to the delivery, import tax and the cost of the materials.

True

To minimize its total quality costs, a company should usually try to redistribute its quality costs more toward prevention and appraisal

True

Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing

True

When completing a performance evaluation based on a budget variance analysis, if the actual level of activity is less than the planned level of activity a manager must lower the related variable costs

True

When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs.

True

Maddalena Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Sales 51.14 Variable Expenses 35.31 Fixed Expenses 104,731 Number of Units Sold 7,076 a. Calculate the net operating income if sales increase to 7,791 units. (To nearest dollar)

(51.14 - 35.31) * 7791 - 104731 = 18600.53

Giovanni's Corporation, which produces and sells a single product, has provided the following contribution format income statement for October: Sales 62.06 Variable Expenses 27.84 Fixed Expenses 138,447 Number of Units Sold 4,676 Calculate the net operating income. (To nearest dollar)

(62.06 - 27.84) 4676 - 138447 = 21565.72

You have unlimited attempts the problem will change with each attempt. Calculate the contribution margin dollars per unit sold based on a selling price of $ 26.16 Direct Labor 3.19 Direct Materials 7.90 Variable manufacturing overhead 1.17 Fixed manufacturing overhead $ 24,000.00 Sales commissions 1.68 per unit Variable administrative expense 0.93 Fixed selling and administrative expense $8,400.00

11.29 CM = Selling price - variable costs = 26.16 - 3.19 - 7.9 - 1.17 - 1.68 - 0.93

Magnolia Springs Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine hours 38,828 Total fixed manufacturing overhead cost 141,664 Variable manufacturing overhead cost 4.80 Calculate the estimated total manufacturing overhead for the year. (no decimals)

328038.4 = 141664 + (38828 * 4.8 )

A Balanced Scorecard includes the following key performance indicators: Customer, Financial, Internal Business Processes and Marketing.

False

A baker's labor cost would be considered as manufacturing overhead at a bakery.

False

A change in sales has no effect on margin and turnover.

False

A cost that will be incurred regardless of which alternative is selected is relevant when choosing between the alternatives.

False

A duration driver provides a simple count of the number of times that an activity occurs

False

A salesperson's labor cost for selling a manufactured product is an indirect costs in manufacturing.

False

A special order is a one-time order that is considered part of the company's normal ongoing business and normal costs be should be applied.

False

Activity-based costing is best proposed, designed and implemented by the accounting department without requiring time of busy managers

False

Allocating common fixed costs to segments on segmented income statements increases the usefulness of such statements.

False

An increase in the number of units sold will decrease a company's break-even point.

False

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

False

Fixed costs increase as unit volume increases.

False

Fixed costs should be ignored when evaluating how well a manager has controlled costs

False

For a capital intensive, automated company the break-even point will tend to be lower and the margin of safety will be higher than for a less capital intensive company with the same sales.

False

From the buying division's perspective, when a transferred item can be purchased from an outside supplier, the price charged by the outside supplier represents an lower bound on the charge that should be made on transfers between the selling and buying divisions.

False

In a bakery, flour would be considered a fixed cost.

False

In a decision to drop a product, the product should be charged for rent in proportion to the space it occupies even if the space has no alternative use and the rental payment is unavoidable.

False

In a manufacturing company, all costs are product costs (materials, labor, selling and delivery costs to the customer.

False

In absorption costing all manufacturing costs are assigned to a specific product, so janitorial costs in the factory would not be included.

False

In activity-based costing, all manufacturing costs must be included in product costs

False

In general, the production manager is responsible for the materials price variance

False

Managerial accounting is focused on providing information for outside stakeholders in a timely manner

False

Monthly equipment depreciation for an oven used to bake cookies, would be considered a period cost in a Nabisco plant.

False

Move time is considered value-added time.

False

Net operating income computed by using absorption costing will always be less than net operating income computed using variable costing.

False

Segment margin is sales less variable expenses less traceable common fixed expenses

False

The budgeted balance sheet is typically prepared before the budgeted income statement

False

The standard labor rate per hour should not include employment taxes

False

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio.

False

When a company has a production constraint, total contribution margin will be maximized by emphasizing the product with the lowest contribution margin per unit of the constrained resource

False

When discounted cash flow methods of capital budgeting are used, the working capital required for a project is ordinarily counted as a cash inflow at the beginning of the project and as a cash outflow at the end of the project.

False

A shift in the sales mix from high-margin items to low-margin items can cause total profits to decrease even though total sales may increase.

True

Activity-based costing is a costing method designed to provide managers with product cost information for internal decision-making

True

As long as the incremental revenue from further processing of a joint product exceeds the incremental processing costs it is considered profitable.

True

Common fixed expenses should not be allocated to business segments when performing break-even calculations and making decisions

True

Direct labor costs are usually referred to as "touch" costs and would include employee benefits (healthcare, vacations, etc.)

True

It may be a good decision to replace an asset before its original cost has been fully recovered through increased revenues or decreased costs.

True

Lance received an order for 500 silk screened T-Shirts. In order to determine his product cost, he would use cost of shirt, related materials, labor and that would be sufficient to determine the unit product cost. The cost of electricity to run the press would be considered a period expense.

True

Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a negative residual income, then its return on investment is less than 12%.

True

The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity

True

The required rate of return is the minimum rate of return that an investment project must yield to the acceptable based on a company's policy.

True

The salary paid to a store manager is a traceable fixed expense of the store

True

When a company is cash poor, a project with a short payback period but a low rate of return may be preferred to a project with a long payback period and a high rate of return.

True


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