Accounting 202 Final

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040. At the end of the year, actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040. Overhead at the end of the year was:

$1,840 underapplied

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as:

manufacturing overhead.

Factory overhead is typically a(n):

mixed cost.

If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:

not change.

Which of the following would not affect the break-even point?

number of units sold

In process costing, a separate work in process account is kept for each:

processing department.

Property taxes on a company's factory building would be classified as a(n)

product cost

One full-time clerical worker is needed for every 750 accounts receivable. The total wages of the accounts receivable clerks is an example of a:

step-variable cost.

A cost incurred in the past that is not relevant to any current decision is classified as a(n):

sunk cost

An example of a committed fixed cost would be

taxes on real estate.

Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores?

the cost of corporate advertising aired during the Super Bowl

In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by:

the total activity for the activity cost pool.

When switching from a traditional costing system to an activity-based costing system that contains some batch-level costs:

the unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.

In the standard cost formula Y = a + bX, what does the "Y" represent?

total cost

Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:

units in beginning work in process and the units started.

For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a:

variable cost.

Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:

variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.

Within the relevant range, a difference between variable costs and fixed costs is:

variable costs per unit are constant and fixed costs per unit fluctuate.

Within the relevant range, variable costs can be expected to:

vary in total in direct proportion to changes in the activity level.

All of the following are examples of product costs except: -insurance on the factory equipment. -Depreciation on the company's retail outlets. -salary of the plant manager. -rental costs of factory equipment.

Depreciation on the company's retail outlets.

Which of the following costs is classified as both a prime cost and a conversion cost

Direct labor

Which of the following statements is true when referring to fixed costs?

Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

Which of the following is the correct formula to compute the predetermined overhead rate?

Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?

Production supplies

Contribution margin is:

Sales less variable production, variable selling, and variable administrative expenses.

Which of the following statements is true? I. Overhead can be applied slowly as a job is worked on. II. Overhead can be applied when the job is completed. III. Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.

Statements I, II, and III are all true.

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.

Which costs will change with a decrease in activity within the relevant range?

Unit fixed costs and total variable cost.

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

Manufacturing overhead is incurred only to support some jobs.

Which of the following costs could contain both variable and fixed cost elements with respect to the total output of the company?

Manufacturing overhead.

Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

debit to Manufacturing Overhead of $69,000

When the level of activity decreases within the relevant range, the fixed cost per unit will

increase

Assume there was no beginning work in process inventory and the ending work in process inventory is 70% complete with respect to conversion costs. Under the weighted-average method, the number of equivalent units of production with respect to conversion costs would be:

less than the units started during the period.

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (5,700 units) $ 319,200 Variable expenses 188,100 Contribution margin 131,100 Fixed expenses 106,500 Net operating income $ 24,600 If the company sells 5,300 units, its net operating income should be closest to:

$15,400

Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Direct materials $ 6,000 Direct labor $ 20,000 Rent on factory building $ 15,000 Sales salaries $ 25,000 Depreciation on factory equipment $ 8,000 Indirect labor $ 12,000 Production supervisor's salary $ 15,000 Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:

$2.50 per direct labor-hour

Jilk Inc.'s contribution margin ratio is 58% and its fixed monthly expenses are $36,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $103,000?

$23,740

Dearden 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 total fixed manufacturing overhead cost of $144,000, variable manufacturing overhead of $2.00 per machine-hour, and 60,000 machine-hours. The predetermined overhead rate is closest to:

$4.40 per machine-hour

Parker Corporation has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, manufacturing overhead and direct labor-hours for the year were estimated at $50,000 and 20,000 hours, respectively. In June, Job #461 was completed. Materials costs on the job totaled $4,000 and labor costs totaled $1,500 at $5 per hour. At the end of the year it was determined that the company worked 24,000 direct labor-hours for the year and incurred $54,000 in actual manufacturing overhead costs. The manufacturing overhead for the year was:

$6,000 overapplied

Parker Corporation has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, manufacturing overhead and direct labor-hours for the year were estimated at $50,000 and 20,000 hours, respectively. In June, Job #461 was completed. Materials costs on the job totaled $4,000 and labor costs totaled $1,500 at $5 per hour. At the end of the year it was determined that the company worked 24,000 direct labor-hours for the year and incurred $54,000 in actual manufacturing overhead costs. If Job #461 contained 100 units, the unit product cost on the completed job cost sheet would be

$62.50

Jersey Corporation has a process costing system in which it uses the weighted-average method. The equivalent units for conversion costs for the month were 47,500 units. The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was:

35,000 Units

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing.

As the level of activity increases, how will a mixed cost in total and per unit behave? In Total Per Unit A) Increase Decrease B) Increase Increase C) Increase No effect D) Decrease Increase E) Decrease No effect

Choice A

Direct labor cost is classified as: Conversion cost Prime Cost A) Yes Yes B) No No C) No Yes D) Yes No

Choice A

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,100 and is paid at the beginning of the first year. Sixty percent of the premium applies to manufacturing operations and forty percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? Product Period A) $280 $420 B) $420 $280 C) $700 $0 D) $0 $700

Choice B

Which of the following approaches to preparing an income statement includes a calculation of the gross margin? Traditional Approach Contribution Approach A) Yes Yes B) Yes No C) No Yes D) No No

Choice B

Which of the following would usually be found on a job cost sheet under a normal cost system? Act. direct mat. cost - Actual manuf. OH cost A) Yes Yes B) Yes No C) No Yes D) No No

Choice B

Which of the following will usually be found on an income statement prepared using absorption costing? Contribution Margin Gross Margin A) Yes Yes B) Yes No C) No Yes D) No No

Choice C

The costs of direct materials are classified as: Conversion cost Manufacturing cost Prime cost A) Yes Yes Yes B) No No No C) Yes Yes No D) No Yes Yes

Choice D

Which of the following is correct concerning reactions to INCREASES in activity? Total Variable Cost Variable Cost Per Unit A) Increase Decrease B) Constant Decrease C) Decrease Constant D) Increase Constant

Choice D

Wages paid to the factory warehouse foreman are considered an example of: Direct Labor Period Cost A) Yes Yes B) Yes No C) No Yes D) No No

D

Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies?

Fixed manufacturing overhead.

Which of the following statements is not correct concerning multiple overhead rate systems?

In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Which of the following statements about using a plantwide overhead rate based on direct labor is correct?

It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

Manufacturing overhead includes:

all manufacturing costs except direct labor and direct materials.

Direct costs:

can be easily traced to a particular cost object.

The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:

cost structure.

When computing the cost per equivalent unit, the weighted-average method of process costing considers:

costs incurred during the current period plus cost of beginning work in process inventory.

Which of the following costs at a manufacturing company would be treated as a product cost under variable costing?

direct material cost

Prime cost consists of

direct materials and direct labor.

For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have remained stable. This cost per unit increase may be due to ________ costs if the level of activity at Jinan is ________.

fixed, decreasing