ACCT 202 Exam #1
Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job? a) $5,000 b) $5,200 c) $6,000 d) $6,200
$10 x 100 direct labor-hours = $1000 + $4,000 + $1,200 = $6,200. d) $6,200
Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours? a) $2,000 b) $4,000 c) $6,000 d) $10,000
$200,000/10,000 direct labor-hours = $20 x 200 direct labor-hours = $4,000. b) $4,000
Mansfield, Inc., has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct-labor hours (DHLs) in the Packaging Department. At the beginning of the year, the company made the following estimates for the Assembly Department: Direct labor-hours: 5,200 Machine-hours: 68,400 Total fixed manufacturing overhead cost: $390,000 Variable manufacturing overhead per MH: $3.00 What is the estimated total manufacturing overhead in the Assembly Department? a) $595,200 b) $651,600 c) $809,000 d) $1,246,700
$390,000 + ($3.00 x 68,400 MHs) = $595,200. a) $595,200
Kubin Company's relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows: Direct materials: $8.40 Direct labor: $5.40 Variable manufacturing overhead: $2.90 Fixed manufacturing overhead: $6.40 Fixed selling expense: $4.90 Fixed administrative expense: $3.90 Sales commissions: $2.40 Variable administrative expense: $1.90 For financial accounting purposes, what is the total amount of period costs incurred to sell 27,500 units?
$4.90 + $3.90 + $2.40 + $1.90 = $13.10 x 27,500 units = $360,250
Mansfield, Inc., has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct-labor hours (DHLs) in the Packaging Department. At the beginning of the year, the company made the following estimates for the Assembly Department: Direct labor-hours: 62,000 Machine-hours: 11,900 Total fixed manufacturing overhead cost: $419,000 Variable manufacturing overhead per DHL: $3.75 What is the predetermined overhead rate for the Packaging Department? a) $8.70 per DHL b) $9.61 per DHL c) $10.51 per DHL d) $18.28 per DHL
$419,000 + ($3.75 per DLH x 62,000 DHLs) = $651,500/62,000 DLHs = $10.51 c) $10.51 per DLH
Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost per audio controller? a) $52 b) $62 c) $100 d) $124
$6,200/50 = $124 d) $124
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. it withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to to finished goods. Of the cars completed during the month, 30% were unsold at April 30th. Determine the cost of batteries that would appear in the selling expense account on April 30th.
100 x $80 = $8,000
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. it withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to to finished goods. Of the cars completed during the month, 30% were unsold at April 30th. Determine the cost of batteries that would appear in the cost of goods sold account on April 30th.
6,750 batteries - 2,025 batteries = 4,725 batteries x $80 = $378,000
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. it withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to to finished goods. Of the cars completed during the month, 30% were unsold at April 30th. Determine the cost of batteries that would appear in the finished goods account on April 30th.
7,500 batteries - 750 batteries = 6,750 batteries. 6,750 batteries x .30 = 2,025 batteries x $80 = $162,000
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. it withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to to finished goods. Of the cars completed during the month, 30% were unsold at April 30th. Determine the cost of batteries that would appear in the work in process account on April 30th.
7,600 batteries - 100 batteries = 7,500 batteries. 7,500 x .10 = 750 batteries x $80 = $60,000
Suppose that your car could be sold now for $5,000. Is this a sunk cost?
No, it is not a sunk cost.
Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either but you don't want to waste money needlessly. Is the annual cost of licensing your car relevant in this decision?
No, the licensing cost is not relevant.
If your fixed monthly utility charge is $40, your variable cost is $0.03 per kilowatt hour, and you monthly activity level is 2,000 kilowatt hours, what is the amount of your utility bill?
Y = a + bX Y = $40 + ($0.03 x 2,000) = $100
Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either, but you don't want to waste money needlessly. Is the cost of the train ticket relevant in this decision?
Yes, the cost of the train ticket is relevant.
Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ______. a) $25,000 b) $15,000 c) $10,000 d) $20,000
a) $25,000
Manufacturing costs include all of the following categories except ______. a) administrative costs b) direct labor c) direct materials d) manufacturing overhead
a) administrative costs
Which of the following statements is true? (Check all that apply) a) product costs are expensed on the income statement in the period incurred. b) direct labor is a manufacturing cost and a product cost. c) conversion costs include direct materials and direct labor. d) nonmanufacturing costs are treated as period costs.
b) direct labor is a manufacturing cost and a product cost. d) nonmanufacturing costs are treated as period costs.
Which of the following costs would be considered a period cost rather than a product cost in a manufacturing company? a) manufacturing equipment depreciation b) property taxes on corporate headquarters c) direct materials costs d) electrical costs to light the production facility e) sales commissions
b) property taxes on corporate headquarters e) sales commissions
Differential costs are always ______. a) irrelevant in making business decisions b) relevant in making business decisions c) a sunk cost
b) relevant in making business decisions
Within the relevant range, fixed costs: (Check all that apply) a) per unit become progressively larger as the level of activity increases b) remain constant in total regardless of changes in activity c) should not be expressed on a per unit basis when making decisions d) generally include rent and supervisor salaries
b) remain constant in total regardless of changes in activity c) should not be expressed on a per unit basis when making decisions d) generally include rent and supervisor salaries
Within the relevant range of activity, variable costs ______. (Check all that apply) a) remain constant in total b) remain constant per unit c) vary per unit d) vary in total
b) remain constant per unit d) vary in total
Which of the following is always an irrelevant cost? a) differential cost b) sunk cost c) opportunity cost
b) sunk cost
A contribution approach income statement: (Check all that apply) a) reports both gross margin and net income b) is prepared primarily for external reporting purposes c) can assist with management decision making d) separates costs into their fixed and variable components.
c) can assist with management decision making d) separates costs into their fixed and variable components
Costs that can be easily and conveniently traced to a specific product are called ______ costs. a) indirect b) common c) direct d) period
c) direct
Selling and administrative costs are ______ costs. a) always direct b) always indirect c) direct or indirect
c) direct or indirect
The ______ requires that the costs incurred to generate a particular revenue should be recognized in the same period that the revenue is recognized. a) materiality concept b) consistency concept c) matching principle d) going concern assumption
c) matching principle
If a firm increases its activity level, ______. a) costs will remain the same b) all costs will rise c) some costs will change, other costs will remain the same
c) some costs will change, other costs will remain the same
Sales revenue minus variable expenses equals ______ ______.
contribution margin
The traditional income statement uses which of the following cost categories? a) variable expenses and fixed expenses b) cost of goods sold and fixed expenses c) operating expenses and selling and administrative expenses d) cost of goods sold and selling and administrative expenses
d) cost of goods sold and selling and administrative expenses
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______. a) indirect labor b) period costs c) direct materials d) manufacturing overhead
d) manufacturing overhead
Classify the following item as either a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine: Cost of X-ray film used in the old machine.
differential cost
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: The wages of employees who assemble computers from components.
direct labor cost
A manufacturing cost that cannot be easily traced to a specific cost object is (an) ______ cost.
indirect
The cost of producing one more unit is the ______ cost. a) sunk b) marginal c) differential d) opportunity
marginal
Manufacturing costs can be divided into three categories: direct ______, ______ labor. and manufacturing ______.
materials; direct; overhead
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: Rent on the space occupied by Radiology.
none
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: The salary of the head of the Radiology Department.
none
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: The salary of the the head of the Laboratory Department.
none
Classify the following cost as either a product cost or a period cost: The wages of the receptionist in the administrative offices.
period
Classify the following cost as either a product cost or a period cost: Depreciation on chairs and tables in the factory lunchroom.
product
Classify the following cost as either a product cost or a period cost: Factory supervisors' salaries.
product
Classify the following cost as either a product cost or a period cost: Heat, water, and power consumed in the factory.
product
Order-getting and order-filling are other names for ______ costs.
selling
Within the relevant range of activity, which type of cost changes in total, in direct proportion to changes in activity level?
variable
Kubin Company's relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows: Direct materials: $8.40 Direct labor: $5.40 Variable manufacturing overhead: $2.90 Fixed manufacturing overhead: $6.40 Fixed selling expense: $4.90 Fixed administrative expense: $3.90 Sales commissions: $2.40 Variable administrative expense: $1.90 For financial accounting purposes, what is the total amount of period costs incurred to sell 24,000 units?
$5.61 + $4.47 + $2.40 + $1.90 = $14.38 x 24,000 units = $345,200
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. it withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to to finished goods. Of the cars completed during the month, 30% were unsold at April 30th. Determine the cost of batteries that would appear in the raw materials account on April 30th.
8,000 batteries - 7,600 batteries = 400 batteries x $80 = $32,000
Which of the following statements are true? (Check all that apply) a) The relevant range of activity is approximated by a straight line. b) Within the relevant range of activity total variable costs do not change. c) Within the relevant range of activity, fixed costs remain constant in total.
a) The relevant range of activity is approximated by a straight line. c) Within the relevant range of activity, fixed costs remain constant in total.
The direct materials required to manufacture each unit of product are listed on a ______. a) bill of materials b) materials requisition form c) materials ticket d) job order cost sheet
a) bill of materials
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: The salary of the company's accountant.
administrative cost
Which of the following costs would be variable with respect to the number of ice cream cones sold at a Baskin & Robbins? a) the cost of lighting the store b) the wages of the store manager c) the cost of ice cream d) the cost of napkins for customers
c) the cost of ice cream d) the cost of napkins for customers
A ______ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.
common
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: Heating the hospital; the pediatric department.
indirect cost
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ______ ______.
opportunity cost
Classify the following cost as either a product cost or a period cost: Advertising costs.
period
Classify the following cost as either a product cost or a period cost: Lubricants used for machine maintenance.
product
Kubin Company's relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows: Direct materials: $8.40 Direct labor: $5.40 Variable manufacturing overhead: $2.90 Fixed manufacturing overhead: $6.40 Fixed selling expense: $4.90 Fixed administrative expense: $3.90 Sales commissions: $2.40 Variable administrative expense: $1.90 For financial accounting purposes, what is the total amount of product costs incurred to make 31,000 units?
$8.40 + $5.40 + $2.90 + $5.68 = $22.38 x 31,000 units = $693,700
Kubin Company's relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows: Direct materials: $8.40 Direct labor: $5.40 Variable manufacturing overhead: $2.90 Fixed manufacturing overhead: $6.40 Fixed selling expense: $4.90 Fixed administrative expense: $3.90 Sales commissions: $2.40 Variable administrative expense: $1.90 For financial accounting purposes, what is the total amount of product costs incurred to make 27,500 units?
$8.40 + $5.40 + $2.90 + $6.40 = $23.10 x 27,500 units = $635,250
Indirect labor costs can include: (Check all that apply) a) assembly-line supervisor salary b) assembly-line worker wages c) factory security guard wages d) administrative assistant salary
a) assembly-line supervisor salary b) factory security guard wages
Which of the following are most likely fixed costs? (Check all that apply) a) factory insurance b) factory rent c) administrative salaries d) electricity to operate factory machines
a) factory insurance b) factory rent c) administrative salaries
Minor items such as nails and glue are usually considered to be: a) indirect materials b) direct materials c) administrative costs d) selling costs
a) indirect materials
Which of the following statements is true? (Check all that apply) a) indirect materials and indirect labor are included in manufacturing overhead. b) examples of selling costs include sales commissions, advertising, shipping, and the costs of operating the finished goods warehouse. c) for financial accounting purposes, product costs include direct materials, direct labor, and manufacturing overhead. d) for financial accounting purposes, period costs are also referred to as inventoriable costs.
a) indirect materials and indirect labor are included in manufacturing overhead. b) examples of selling costs include sales commissions, advertising, shipping, and the costs of operating the finished goods warehouse. c) for financial accounting purposes, product costs include direct materials, direct labor, and manufacturing overhead.
How should the wages of a sheet metal worker in a fabrication plant be classified? a) product cost b) period cost c) nonmanufacturing cost d) administrative cost
a) product cost
What type of cost is never relevant and should be disregarded when making decisions? a) sunk b) marginal c) incremental d) opportunity
a) sunk
Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are ______ fixed costs.
committed
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: Cost of electricity to run the X-ray machines
differential cost
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: Cost of the new color laser printer.
differential cost
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: The cost of maintaining the old machine.
differential cost
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) ______ of the branch.
direct
Materials that become an important component of the finished product whose cost can easily and conveniently be traced to the finished product are ______ materials.
direct
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: Catered food served to patients; a particular patient.
direct cost
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: Lab test by outside contractor; a particular department.
direct cost
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: Lab tests by outside contractor; a particular patient.
direct cost
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: Prescription drugs; a particular patient.
direct cost
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: The salary of the head of pediatrics; the pediatric department.
direct cost
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: The wages of pediatric nurses; the pediatric department.
direct cost
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: The cost of a hard drive installed in a computer.
direct materials cost
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) ______ of selling a tour package.
indirect
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: Hospital chaplain's salary; a particular patient.
indirect cost
Indicate whether the following cost would most likely be a direct or indirect cost based on the cost object: The salary of the head of pediatrics; a particular pediatric patient.
indirect cost
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: Depreciation on equipment used to test assembled computers before release to customers.
manufacturing overhead cost
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: The salary of the assembly shop's supervisor.
manufacturing overhead cost
Classify the following item as either a differential cost, a sunk cost, an opportunity cost, or none of the above in the decision to replace the old X-ray machine with a new machine: Benefits from a new DNA analyzer.
opportunity cost
Classify the following cost as either a product cost or a period cost: Cost of leasing the corporate jet used by the company's executives.
period
Classify the following cost as either a product cost or a period cost: Depreciation of salespersons' cars.
period
Classify the following cost as either a product cost or a period cost: Materials used for boxing products for shipment overseas (Units are not normally boxed).
period
Classify the following cost as either a product cost or a period cost: Salaries of personnel who work in the finished goods warehouse.
period
Classify the following cost as either a product cost or a period cost: The cost of renting rooms at a Florida resort for the annual sales conference.
period
Classify the following cost as either a product cost or a period cost: Rent on equipment used in the factory.
product
Classify the following cost as either a product cost or a period cost: Soap and paper towels used by factory workers at the end of a shift.
product
Classify the following cost as either a product cost or a period cost: The cost of packaging the company's product.
product
Classify the following cost as either a product cost or a period cost: Workers' compensation insurance for factory employees.
product
Inventoriable costs is another terms for ______ costs.
product
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: Sales commissions paid to the company's salespeople.
selling cost
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. For the following cost, indicate whether it would most likely be classified as materials, direct labor, manufacturing overhead, selling, or an administrative cost: The cost of advertising in the Puget Sound Computer User newspaper.
selling cost
Classify the following item as either a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine: Cost of the old X-ray machine
sunk cost
