ACCT 2102 Final

Which of the following statement is not a question that can be answered by the Statement of Cash​ Flows? A. By how much did Assets exceed Liabilities at the end of the​ period? B. Why does Net Income for the period not equal ending cash reported on the Balance​ Sheet? C. Did the company operate within its means during the​ period? D. Were​ long-term assets either purchased or sold during the​ period? E. Were cash dividends paid to shareholders during the​ period?

A. By how much did Assets exceed Liabilities at the end of the​ period?

Which of the following variances can first be calculated at the point of​ purchase? A. direct material price B. direct material quantity C. direct labor efficiency D. direct labor rate

A. direct material price

Which of the following is a disadvantage of participative​ budgeting? A. Increased motivation of management. B. Increased likelihood of budgetary slack. C. Increased accuracy of budget.

B. Increased likelihood of budgetary slack.

Which of the following statements concerning product costs is​ correct? A. Period costs are only expensed when a related unit of product is sold. B. Product costs are initially inventoried on a​ company's Balance Sheet. C. Product costs are sometimes referred to as​ SG&A expenses. D. All links in the value chain can be considered product costs.

B. Product costs are initially inventoried on a​ company's Balance Sheet.

Which of the following represents the sequential series of inventory accounts that product costs pass through for a​ manufacturer? A. Research and​ Development, Design,​ Production, Marketing,​ Distribution, Customer Service B. Raw Material​ Inventory, Work in Process​ Inventory, Finished Goods Inventory C. Direct Material​ Inventory, Direct Labor​ Inventory, Manufacturing Overhead Inventory D. Sales​ Revenue, Cost of Good​ Sold, SG&A

B. Raw Material​ Inventory, Work in Process​ Inventory, Finished Goods Inventory

Which of the following is a reason why companies should​ budget? A. To justify the creation of budgetary slack by employees. B. To provide expectations against which actual operations can be compared. C. To provide an opportunity for managers to focus on the past. D. To determine current resources required for operations. E. All of the above are reasons why a company should budget.

B. To provide expectations against which actual operations can be compared.

Which of the following correctly lists the three categories of activities reported on the Statement of Cash​ Flows? A. assets, liabilities, and equity B. operating, investing, and financing C. ​revenue, expenses, and net income

B. operating, investing, and financing

Which of the following should not be used as allocation bases for MOH in a traditional costing​ system? A. direct labor hour B. units produced C. machine hours

B. units produced

Just for the​ Halibut, Inc. designs and manufactures custom made fishing rods. On June​ 1, it had one job started for Misterjaw with a beginning Work in Process balance of​ $525. During June the job was finished and sold. Direct labor for the job in June was​ $75 and direct materials used were​ $60. Direct laborers are paid a wage rate of​ $15 per hour and manufacturing overhead is applied to production at a rate of​ $9 per direct labor hour. The company marks up costs​ 35% to determine the selling price. What was the selling price of the​ job? A. $891.00 B. $939.60 C. $951.75 D. $1,059.75 E. $923.40

C. $951.75

The computer system for Number​ 14, LLC, a manufacturer of basketball​ jerseys, fell victim to an internet virus. The manager was able to determine from various sources that​ 2,000 fewer pounds were used in the production of​ 20,000 jerseys last period than purchased. Records show that the total direct material variances was​ $40,000 favorable. The direct material price variance was documented to be​ $120,000 unfavorable, which resulted from the actual cost per yard of direct material being​ $2 higher than the expected cost of​ $16 per yard. Additional documentation could not be found for the direct materials quantity variance. The amount of yards the company expected to use per jersey is A. 2.4556 yards B. 3.5000 yards C. 3.3875 yards D. 3.4000 yards E. None of the above.

C. 3.3875 yards

Who determines a​ company's sales​ mix? A. Management B. Shareholders C. Customers

C. Customers

Which of the following statements best explains why MOH is allocated rather than traced to​ jobs? A. MOH is sometimes considered a period cost. B. MOH is not a real cost of production. C. MOH is an indirect product cost.

C. MOH is an indirect product cost.

Which of the following correctly calculates segment​ margin? A. Sales Revenue​ - Cost of Goods Sold B. Gross Profit​ - Operating Expenses C. Sales Revenue​ - Variable Costs​ - Traceable Fixed Costs D. Sales Revenue​ - Variable Costs​ - Allocated Common Fixed Costs E. Sales Revenue​ - Variable Costs

C. Sales Revenue​ - Variable Costs​ - Traceable Fixed Costs

Which of the following questions does the cash collections budget​ answer? A. What is the​ company's expected cash balance at the end of the ​period? B. What are the​ company's expected cash outflows for the ​period? C. What are the​ company's expected cash inflows for the ​period?

C. What are the​ company's expected cash inflows for the ​period?

Before the year​ began, Mighty Mouse with​ Wings, Inc. estimated that its manufacturing overhead costs for the year would be​ $400,000. The company esimated that​ 5,000 direct labor hours and​ 10,000 machine hours would be logged during production. The company uses the most appropriate manufacturing overhead allocation base for its highly automated manufacturing environment. During the​ year, the company received an order from Rufous Hummingbird for 12 identical units of its most popular product.​ $1,000 in direct materials were requisitioned and​ $1,500 in direct labor costs were incurred during the production of the units. A total of 14 machine hours were logged during the production of the units. Direct laborers were paid at a rate of​ $30 per direct labor hour logged. Given a sales price of​ $750, what is the gross profit per unit for​ Rufous' order? A. $399 B. $255 C. $208 D. $495 E. $507

D. $495

Which of the following is not an assumption made during CVP​ analysis? A. Revenue is linear throughout the relevant range. B. Sales mix remains constant. C. Costs can be classified according to cost behavior. D. Inventory levels fluctuate.

D. Inventory levels fluctuate.

Which of the following differs between job costing and process​ costing? A. The product cost categories used. B. The basic accounts used in the accounting system. C. The ultimate cost object. D. The initial cost object.

D. The initial cost object.

Zero​ Waste, Inc. manufactures eco friendly snack containers. The company uses standard costs to judge performance. Recently an employee mistakenly threw away some of the production records for the previous operating period and only partial data exists. The company documented a favorable total direct labor variance of​ $300 for the​ period, actual direct labor hours logged of​ 6,000, and actual direct labor costs of​ $62,400. The actual direct labor rate was​ $0.60 less per hour than expected. How many containers were produced during the period assuming a standard direct labor unit cost of​ $2.20? A. ​31,999 B. 28,228 C. 82,500 D. 30,136 E. 28,500

E. 28,500

Which of the following is not a model used to develop a cost behavior​ formula? A. Account Analysis B. Regression C. High-Low D. Scatterplot E. Derivative

E. Derivative

If the calculated direct labor efficiency variance is​ favorable, which of the following statements would always be​ true? A. The quantity of direct material used in production was more than the quantity of direct material purchased during the period. B. The actual direct labor wage rate was lower than the standard direct labor wage rate. C. The total actual direct cost was lower than the total expected direct labor costs for the actual output. D. The actual price paid for each unit of direct material was more than the standard price. E. Less direct labor hours were logged in production than expected for the actual output level.

E. Less direct labor hours were logged in production than expected for the actual output level.

Hawkins Audio Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras. A supplier has been identified who can sell the part to Hawkins at a price of $6.90 per unit. Currently, 60,000 units of the part were made last year. At this production level, the company incurred $354,000 of total variable direct product costs. Manufacturing overhead increased by $0.10 for each unit produced. Fixed manufacturing overhead costs equaled $50,000. If the part were purchased from the outside supplier, 75% of the total fixed manufacturing overhead cost would continue, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be $22,000 per year. 1. Assume a supplier has not yet been identified and that the company will need 57,500 units of the part next year. At what purchase price per unit will Hawkins be economically indifferent between making and buying the part from the outside supplier? a. $6.90 b. $6.60 c. $6.22 d. $6.93 e. $5.83

b. $6.60 Chapter 8

1. Holding all other variables constant, in which of the following situations will the breakeven point decrease? a. Variable expenses increase. b. Contribution margin percentage increases. c. Sales price decreases. d. Contribution margin decreases. e. Fixed expenses increase.

b. Contribution margin percentage increases. Chapter 7

Upon review of Make Your Mark, Inc.'s Statement of Cash Flows, the following was noted: Cash Flows from Operating Activities - $25,000 Cash Flows from Investing Activities - ($70,000) Cash Flows from Financing Activities - $60,000 From this information, the most likely explanation is that Make Your Mark is a. using cash from operations and selling long term assets to pay back long term debt. b. using cash from operations and issuing common stock to purchase long term assets. c. using cash from operations to purchase long term assets and buy back treasury stock. d. issuing stock to fund operations and purchase long term assets. e. selling long term assets to fund operations and buy back treasury stock.

b. using cash from operations and issuing common stock to purchase long term assets.

The following partial Income Statement was prepared for Wooden Wick, a merchandiser of candles: Wooden Wick Partial Income Statement For the year ended December 31, 2019 Operating Income - $25,100 Gain on Sale of Equipment - 5,500 Net Income - $30,600 All of the company's sales are made on account. For 2019, sales revenue equaled $47,000. At the beginning of the year, the accounts receivable balance was $3,500. The balance had increased to $9,200 by year-end. The company uses the direct write off method to account for bad debts. No accounts were written off or reinstated during the year. All of the company's inventory purchases are made on account, and accounts payable consists solely of inventory purchases. At the beginning of the year, the Inventory balance was $2,400. By year-end, the balance had increased by $900. The net decrease in the accounts payable balance during the year was $100. The company's selling and administrative expenses for 2019 were $3,900 and included $150 of noncash expenses. Cash selling and administrative expenses are paid when incurred. Which of the following statements is correct with respect to the company's operating activities? a. The cash operating expenses for the year totaled $22,750. b. Cash received from customers during the year equaled $56,200. c. The cash flows from operating activities for the year were $18,550. d. $18,900 was paid to suppliers during the year for inventory purchases. e. $5,500 related to the sale of equipment is included as a source of cash in the operating section.

c. The cash flows from operating activities for the year were $18,550. Chapter 13

The computer system for Get Cha Head in the Game, LLC, a manufacturer of basketball jerseys, fell victim to an internet virus. The following data was gathered from various sources: Standard Cost of Direct Material - $16 per yard Actual Cost of Direct Material - $18 per yard Actual Output - 20,000 jerseys Direct Material Price Variance - $120,000 U Total Direct Material Variances - $40,000 F Beginning Direct Material Inventory - 5,000 yards Ending Direct Material Inventory - 5,000 yards The amount of yards the company expected to use per jersey is a. 2.75 yards b. 2.63 yards c. 3.25 yards d. 3.50 yards e. 2.50 yards

d. 3.50 yards Chapter 11

1. Why would a manufacturer who produces its product in small batches choose to use job costing to track its manufacturing costs? a. The direct material and direct labor costs are not easily identifiable for each batch. b. Each batch is typically completed in the period in which it is started. c. The conversion process is identical for all batches worked on during the period. d. Each batch requires different product costs for completion. e. To minimize the risk of cost distortion related to overhead allocation.

d. Each batch requires different product costs for completion. Chapter 3

A merchandiser has created a sales budget for its first five months of operations. The sales budget includes unit sales and sales revenue. The company has a policy that each month's ending inventory in units must equal 15% of the next month's anticipated unit sales. Given this information, the company can prepare purchases budgets for how many months? a. Two b. One c. Five d. Four e. Three

d. Four Chapter 9

1. Hold That Plank manufactures a single line of yoga mats and is based in Nashville, Tennessee. The company is considering relocating its operations to Franklin, Tennessee in an effort to increase profit. For the year ended December 31, 2019, the company manufactured and sold a total of 15,000 mats. The following additional information was prepared for 2019: Sales Revenue = $750,000 Contribution Margin - $450,000 Fixed Costs - $275,000 If the company relocates to Franklin, the sales price will not change, but the variable manufacturing costs per mat will decrease to $18. No other variable costs will be affected. Annual fixed costs will increase by $50,040. Based on the above information, which of the following statements is correct? a. The company's operating income for 2019 was $25,000. b. If the company relocates to Franklin, the unit contribution margin will decrease by $12. c. At an annual sales level of 4,170 units, the company be indifferent between remaining in Nashville and moving to Franklin. d. If the company relocates to Franklin, 21,095 mats must be sold to achieve a target profit of $350,000. At an annual sales level above the indifference point, the company should choose to remain in Nashville

d. If the company relocates to Franklin, 21,095 mats must be sold to achieve a target profit of $350,000. Chapter 7

Which of the following statements concerning budget preparation for a merchandiser is incorrect? a. Bad debt expense under the percentage of sales method is calculated by multiplying total sales on account by the estimated uncollectible percentage. b. Timing differences can cause operating expenses to differ from operating cash outflows. c. For the cash disbursements budget, it is assumed that the company will take advantage of all available purchase discounts. d. The operating expense budget includes both variable product costs and variable period costs. e. The purchases budget is prepared using the cost of sales.

d. The operating expense budget includes both variable product costs and variable period costs. Chapter 9

Fueled by Caffeine Company is a manufacturer of travel mugs. Fueled has recently experienced turnover in its accounting department and is unable to find documentation of the prior period standard rate per direct labor hour. The company needs this information to begin the budgeting process for the next period. Fueled has determined that the total direct labor variance in the prior period was an unfavorable​ $390 and that direct laborers were paid​ $0.50 less per hour than expected. Management expected​ 5,200 direct labor hours to be logged during production based on the actual number of travel mugs​ produced; however, 260 more actual direct labor hours were logged during production. What was the prior​ period's standard direct labor rate per​ hour? A. ​$12.00 per direct labor hour B. $10.50 per direct labor hour C. ​$8.00 per direct labor hour D. $9.00 per direct labor hour E. $8.50 per direct labor hour

A. $12.00 per direct labor hour

Four of​ Wands, LLC generated​ $255,000 in sales during September 2021. Of this​ amount, 30% was for cash. The remaining​ 70% of sales were made on account. The October 2021 sales on account were​ $180,000, which accounted for​ 60% of the total sales during the month. The company budgeted​ $350,000 in sales for November 2021 and expects sales in December 2021 to be​ 10% lower than​ November's sales.​ 15% of the total budgeted sales are for​ cash; the remaining budgeted sales are expected to be made on account. Sales on account carry credit terms of net 30. ​Historically, 70% of sales on account are collected in the month following the month of sale.​ 25% of sales on account are collected in the second month following the month of sale.​ 4% of sales on account are collected in the third month following the month of sale. The remaining​ 1% is deemed uncollectible. Given the above​ information, calculate the total expected cash receipts in December. ​ A. $307,640 B. ​$327,920 C. $260,390 D. $377,450 E. $323,150

A. $307,640

Which of the following would be considered a direct product cost for a computer​ manufacturer? (assume the​ company's cost object is a unit of​ product) A. Hard drive used in computers B. Rent paid on the manufacturing facility C. Wages paid to factory supervisors D. Commissions paid to sales staff

A. Hard drive used in computers

Which of the following questions best describes a​ keep/drop decision? A. Should we continue to operate the ​segment? B. Should we continue making the part in ​house? C. Should we accept a one​ time, large volume order at a reduced sales ​price? D. What should we charge for our ​product? E. In what order should we fill ​demand?

A. Should we continue to operate the ​segment?

Which of the following statements best describes the​ break-even point? A. The point at which operating income is equal to​ $0. B. The point at which variable costs equal fixed costs. C. The point at which sales revenue equals contribution margin

A. The point at which operating income is equal to​ $0.

​Sitting, Waiting,​ Wishing, Inc. is a manufacturer of chairs. Given direct material is measured in​ feet, which of the following correctly pairs the listed variable with the appropriate label included in either the direct material variances or the direct labor​ variances? A. actual​ price: dollar per foot B. quantity​ purchased: chairs C. actual​ output: feet D. direct labor standard input​ ratio: feet per chair E. standard​ rate: dollar per chair

A. actual​ price: dollar per foot

Why would a manufacturer who produces its product in small batches choose to use job costing to track its manufacturing​ costs? A. The conversion process is identical for all batches worked on during the period. B. Each batch requires different product costs for completion. C. To minimize the risk of cost distortion related to overhead allocation. D. Each batch is typically completed in the period in which it is started. E. The direct material and direct labor costs are not easily identifiable for each batch.

B. Each batch requires different product costs for completion.

Which of the following statements is true regarding the indifference point​ calculation? A. If sales volume is expected to be higher than the indifferent​ point, management should choose the cost structure with higher variable costs. B. If sales volume is expected to be higher than the indifferent​ point, management should choose the cost structure with higher fixed costs.

B. If sales volume is expected to be higher than the indifferent​ point, management should choose the cost structure with higher fixed costs.

Which of the following statements is​ correct? A. If MOH is overallocated to a job that has been​ sold, and the company calculates sales price by marking up job​ costs, the job will likely be underpriced. B. If the​ over/underallocated MOH is fairly large and the majority of the units have not been​ sold, the balance in MOH should be prorated between​ WIP, FG, and COGS. C. To calculate the decrease to WIP for allocated MOH​ costs, the POHR is multiplied by the actual amount of the allocation based used by the cost object. D. "Number of​ units" is typically an appropriate allocation base for MOH because the​ company's products consume equal overhead resources. E. The formula to arrive at the POHR is total actual manufacturing overhead divided by total estimated allocation base.

B. If the​ over/underallocated MOH is fairly large and the majority of the units have not been​ sold, the balance in MOH should be prorated between​ WIP, FG, and COGS.

Which of the following equations best represents the formula for calculating​ profit? A. Cash In​ - Cash Out B. Revenue​ - Expenses C. Assets​ - Liabilities D. Sales​ - Costs

B. Revenue​ - Expenses

Which of the following statements best defines the direct material price​ variance? A. The difference between the actual quantity of input used during the period to the standard quantity of input allowed during the period. B. The difference between the actual cost per unit of input and the standard cost per unit of input.

B. The difference between the actual cost per unit of input and the standard cost per unit of input.

Why would a manufacturer who operates in a mass production environment choose to use process costing to track its manufacturing​ costs? A. Each unit is typically completed in the period in which it is started. B. The output is homogenous. C. To minimize the risk of cost distortion related to overhead allocation. D. The direct material and direct labor costs are not easily traced to the departments. E. Each batch requires different product costs for completion.

B. The output is homogenous.

In which of the following situations is a company most likely to benefit from implementing​ ABC? A. When the company has very few competitors. B. When the company operates in an environment where the risk of cost distortion is high. C. When the company produces and sells a single product. D. When the company already has the necessary accounting and technological expertise in place.

B. When the company operates in an environment where the risk of cost distortion is high.

Sitting, Waiting,​ Wishing, Inc. is a manufacturer of chairs. Given direct material is measured in​ feet, which of the following correctly pairs the listed variable with the appropriate label included in either the direct material variances or the direct labor​ variances? A. direct labor standard input​ ratio: feet per chair B. actual​ price: dollar per foot C. quantity​ purchased: chairs D. standard​ rate: dollar per chair E. actual​ output: feet

B. actual​ price: dollar per foot

Upon review of Anti​ Corona's Statement of Cash​ Flows, the following was​ noted: Cash Flows from Operating Activities - ($5,000) Cash Flows from Investing Activities - $15,000 Cash Flows from Financing Activities - ($6,000) From this​ information, the most likely explanation is that Anti Corona is A. issuing stock to fund operations and purchase​ long-term assets. B. selling​ long-term assets to fund operations and pay dividends. C. using cash from operations and selling​ long-term assets to pay back​ long-term debt. D. assuming long​ term-debt to fund operations and purchase​ long-term assets. E. using cash from operations and issuing common stock to purchase​ long-term assets.

B. selling​ long-term assets to fund operations and pay dividends.

Financial and Managerial accounting are similar in that both A. are regulated by outside regulatory agencies and commissions. B. use information provided by the internal accounting system. C. provide information primarily to external users. D. primarily emphasize future operating results and goals. E. are designed to meet the needs of managers.

B. use information provided by the internal accounting system. Financial and Managerial accounting are similar in that both use information provided by the internal accounting system.

​Nature's Twitter is a manufacturer of bird seed. The company uses a process costing system to account for product costs in three sequential production​ departments: Sorting,​ Inspecting, and Packaging. The Sorting department reported a total of​ 10,040 direct material equivalent units and a total of​ 8,960 conversion equivalent units on its January production cost report. In​ addition, the report showed that during​ January, 5,000 physical units were transferred to Inspecting from Sorting. The physical units that remained in the Sorting​ department's ending January inventory were​ 55% complete with respect to conversion costs What was the Sorting​ department's ending​ inventory's stage of completion with respect to direct material​ costs? A. 56% B. 75% C. 70% D. ​80% E. 45%

C. 70%

Which of the following cost behaviors does not change in​ total? A. Variable B. Mixed C. Fixed

C. Fixed

Which of the following is not a typical budgeting approach used by​ companies? A. Prior period review B. Rolling C. Master D. Zero based

C. Master

Which of the following formulas cannot be used to calculate the total direct labor​ variance? A. DL rate​ + DL efficiency B. (actual DL hours​ logged)(actual rate per​ hour) -​ (standard DL hours​ allowed)(standard rate per​ hour) C. standard DL rate per hour​ (actual DL hours logged​ - DL hours allowed for actual activity​ level) D. actual DL cost​ - expected DL cost for actual activity level

C. standard DL rate per hour​ (actual DL hours logged​ - DL hours allowed for actual activity​ level)

Choose the answer that best completes the following​ statement: Equivalent units are used in a process costing system​ ______ A. to accurately calculate gross profit for the period. B. to help track the physical flow of units through the production process. C. to enable the fair assignment of costs to a completed unit and to a partially completed unit. D. to differentiate between units started during the period and units completed during the period.

C. to enable the fair assignment of costs to a completed unit and to a partially completed unit.

Which of the following companies would be the least likely to use a job order costing​ system? A. Rosie the Robot​ Company, a manufacturer of space age cleaning robots built to customer specifications. B. Before the​ Amplifier, Inc., a manufacturer of custom made acoustic guitars. C. The Wright Flight​ Company, a manufacturer of custom built aircrafts. D. Sweetwater, Inc., a manufacturer of​ mass-produced blueberry beverages. E. The Black Bear​ Trail, LLC, a builder specializing in​ one-of-a-kind residential Pacific Northwest cabins.

D. Sweetwater, Inc., a manufacturer of​ mass-produced blueberry beverages.

Holding all other variables​ constant, in which of the following situations will the breakeven point​ increase? A. Sales price increases. B. Fixed expenses decrease. C. Contribution margin increases. D. Variable expenses increase. E. Contribution margin percentage increases.

D. Variable expenses increase.

For which of the following cost categories do manufacturers prepare​ standards? A. direct material B. manufacturing overhead C. direct labor D. all of the above

D. all of the above

Which of the following masters level accounting tracks at UGA consists of viewing the work of others to determine if the output is​ "free of material​ errors"? A. systems B. financial C. managerial D. audit E. tax

D. audit

Which of the following formulas is​ incorrect? A. direct material quantity variance​ = standard direct material price​ (quantity of direct material used​ - quantity of direct material expected for actual ​output) B. direct labor hours expected for actual output​ = actual output x standard direct labor hours per unit C. standard unit direct material cost​ = standard input ratio x standard direct material price D. direct material price variance​ = quantity of direct material used​ (actual direct material price​ - standard direct material ​price) E. total direct labor variance​ = (actual direct labor hours​ logged)(actual direct labor​ rate) -​ (direct labor hours expected for actual​ output)(standard direct labor ​rate)

D. direct material price variance​ = quantity of direct material used​ (actual direct material price​ - standard direct material ​price)

Which of the following best defines the planning phase of the business​ cycle? A. using accounting knowledge to improve the operations of a company B. interacting with​ employees, suppliers, and customers C. comparing budgets to financial accounting records D. identifying alternatives and the resources necessary for each alternative E. reviewing the work of others to determine if any errors exist

D. identifying alternatives and the resources necessary for each alternative

Which of the following is an advantage of decentralized​ operations? A. Top managers are able to focus on strategic decision making. B. Employees experience increased motivation. C. Customer relations are improved. D. The information available to make decisions is more accurate. E. All of the above are advantages of decentralized operations.

E. All of the above are advantages of decentralized operations.

Quidditch, Inc. is a merchandiser of a single line of broomsticks. At the beginning of the​ day, the shop had 15 brooms in its inventory. During the​ day, 5 new brooms were delivered to the shop. By close of​ business, only 9 brooms remained in inventory. The purchase price of each broom from the supplier is​ $250. In​ addition, the company pays​ $5 for shipping on each broomstick and​ 2% of the purchase price for delivery insurance on each broomstick. These costs have remained consistent since the company began business. Quidditch sells each broomstick for​ $475. Which of the following statements is​ correct? A. The​ company's total gross profit for the day is ​$2,365 B. The ending inventory reported on the​ company's balance sheet is​ $2,340. C. The product cost per broomstick is ​$260. D. The gross profit per broomstick is ​$215. E. All of the above statements are correct.

E. All of the above statements are correct.

Which of the following statements concerning performance reports is​ incorrect? A. The activity level used to populate the flexible budget is based on the actual​ "units." B. The master budget and the flexible budget use the same cost behavior equation to calculate budgeted expenses. C. The master budget variance is equal to the sum of the volume variance plus the flexible budget variance. D. A favorable sales revenue flexible budget variance would indicate that the actual sales price was higher than the sales price used in the master budget. E. All unfavorable flexible budget variances should be investigated.

E. All unfavorable flexible budget variances should be investigated.

Which of the following questions does the statement of cash flows​ answer? A. Did the company invest in​ long-term assets during the ​period? B. Did the company pay down​ long-term debt during the ​period? C. Did the company make cash dividend distributions during the ​period? D. Did the company operate within its means during the ​period? E. The statement of cash flows answers all of the above questions.

E. The statement of cash flows answers all of the above questions.

Which of the following questions does the statement of cash flows not​ answer? A. Did the company operate within its means during the ​period? B. Did the company make cash dividend distributions during the ​period? C. Were any​ long-term assets purchased during the ​period? D. Was the company able to pay down​ long-term debt during the ​period? E. Why does net income for the period not equal total​ assets?

E. Why does net income for the period not equal total​ assets?

True or False: The only criteria necessary to make information relevant to the decision making process is that it differs between alternatives.

False

True or False: Conversion costs include direct material and manufacturing overhead.

False;

True or False: Cost behavior relates to the categorization of costs as either product or period costs.

False; cost behavior relates to how costs act and respond to changes in activity levels

True or False: If a​ company's operations are​ decentralized, only the​ top-level management group is allowed to make decisions.

False; if a​ company's operations are​ decentralized, the​ top-level management group are not the only ones allowed to make decisions.

True or False: Used​ properly, budgets can help eliminate goal congruence.

False; used​ properly, budgets can help eliminate goal congruence.

True or False: A company having few competitors would typically use​ cost-plus pricing to determine its regular sales price.

True

True or False: To calculate the direct labor costs​ incurred, the direct labor wage rate is multiplied by the direct labor hours logged for the job.

True; to calculate the direct labor costs​ incurred, the direct labor wage rate is multiplied by the direct labor hours logged for the job.

Good Morning Sunshine is a wholesaler of coffee makers. In 2020, actual September sales revenue totaled $200,000. In October and November, sales are expected to increase 10% above the previous month's sales. Prices are set to achieve a 60% gross profit. The company wants to maintain an ending merchandise inventory equal to 15% of the next month's cost of goods sold. What are the company's budgeted purchases for the month of October? a. $81,200 b. $89,320 c. $82,200 d. $88,000 e. $85,800

b. $89,320 Chapter 9

Which of the following statements concerning performance reports is incorrect? a. The master budget variance is equal to the sum of the volume variance plus the flexible budget variance. b. A favorable sales revenue volume variance would indicate that the actual sales price was higher than the sales price used in the master budget. c. The master budget and the flexible budget use the same cost behavior equation to calculate budgeted expenses. d. The activity level used to populate the flexible budget is based on the actual "units." e. All material flexible budget variances should be investigated.

b. A favorable sales revenue volume variance would indicate that the actual sales price was higher than the sales price used in the master budget.

Which of the following statements is correct with regard to Activity Based Costing (ABC)? a. Only manufacturing companies can use ABC. b. ABC categorizes all manufacturing overhead activities as unit level activities. c. The costs of implementing ABC are generally lower for companies that have established information technology systems. d. ABC uses only volume based cost drivers in the calculation of predetermined manufacturing overhead rates. e. If the consumption ratios using the traditional method are the same as the consumption ratios using ABC, cost distortion will exist.

c. The costs of implementing ABC are generally lower for companies that have established information technology systems. Chapter 4

Which of the following is not an advantage of decentralized operations? a. Employees experience increased motivation. b. The information available to make decisions is more accurate. c. Customer relations are improved. d. Top managers are able to focus on strategic decision making. e. Concerns about a lack of goal congruence are eliminated.

e. Concerns about a lack of goal congruence are eliminated. Chapter 10

9 to​ 5, LLC manufactures typewriters in two sequential production​ departments: assembly and inspection. The company uses the weighted average method to account for product costs and allocates manufacturing overhead to production at a rate of​ $60 per direct labor hour using a​ traditional, normal costing system. In its first production​ department, assembly, two direct materials are added during production. The first direct material accounts for​ 60% of the​ department's total direct material and is added at the beginning of the production process. The second direct material accounts for the remaining​ 40% and is added to the units when they are half way through the conversion process. Conversion costs are incurred uniformly throughout the production process. On July​ 31st, 10,000​ typewriters, 100% complete with respect to direct material costs and​ 80% complete with respect to conversion​ costs, were in the assembly​ department's work in process inventory. These units were assigned total costs of​ $8,700 on the July production cost​ report, $1,500 of which was for direct material costs. ​100,000 typewriters were started in the assembly department during August. At the end of​ August, 15,000 typewriters were still in production in the assembly department. These units were​ 60% complete with respect to direct material costs and​ 20% complete with respect to conversion costs. The following additional data are available for the​ department's August​ activities: Direct Materials Requisitioned - $154,500 Direct Labor Costs​ Incurred* - $22,700 ​*The direct labor wage rate was​ $20 per direct labor hour. Question 2 What was the conversion cost included in work in process​ - assembly on September​ 1st? A. $3,000 B. $1,147 C. $13,500 D. $915 E. $16,500

A. $3,000

Which of the following​ "rules of​ thumb" is incorrect with regard to making​ short-term business​ decisions? A. Variable costs should be analyzed on a per unit. B. Analysis should be performed using a traditional income statement approach. C. Past costs should not be used in the decision making process. D. Qualitative factors should be considered when analyzing a decision. E. Per unit fixed costs should be converted to totals for analysis.

B. Analysis should be performed using a traditional income statement approach.

Which of the following statements concerning the activity based costing​ (ABC) template is​ correct? (answers assume the two column approach taught in class is​ used) A.To determine cost​ distortion, you can compare the total direct product costs attributable to the cost object under traditional costing and ABC.Your answer is not correct. B.If a company has only two cost​ objects, the total cost distortion for the two objects will always be​ "equal and​ offsetting." This is the correct answer. C.Direct material and direct labor for a specific cost object differ between the traditional and the ABC columns. D.The numerator in the traditional POHR calculation is greater the sum of the numerators in the ABC POHR calculations. E.If the cost object is being​ overcosted, the total cost calculated in the ABC column will be higher than the total cost calculated in the traditional column.

B. If a company has only two cost​ objects, the total cost distortion for the two objects will always be​ "equal and​ offsetting." This is the correct answer.

Which of the following describes a profit​ center? A. Management is only held responsible for controlling costs. B. Management is only held responsible for generating revenue and controlling costs. C. Return on Investment would be used to evaluate the​ segment's performance. D. Management is held responsible for efficiently managing the​ segment's assets.

B. Management is only held responsible for generating revenue and controlling costs.

Which of the following product cost categories is impossible to trace to a​ job? A. Operating Expenses B. Manufacturing Overhead C. Direct Labor D. Direct Material

B. Manufacturing Overhead

Which of the following formulas is​ correct? A. direct material price variance​ = quantity of direct material used​ (actual direct material price​ - standard direct material ​price) B. standard unit direct material cost​ = standard input ratio x standard direct material price Your answer is correct. C. direct labor hours expected for actual output​ = actual output x standard direct labor rate D. total direct labor variance​ = (actual direct labor hours​ logged)(standard direct labor​ rate) -​ (direct labor hours expected for actual​ output)(actual direct labor ​rate) E. direct material quantity variance​ = actual direct material price​ (quantity of direct material used​ - quantity of direct material expected for actual ​output)

B. standard unit direct material cost​ = standard input ratio x standard direct material price

The following Income Statement was prepared for Chop and​ Sauté, Inc., an upscale cooking​ store: Chop and​ Sauté, Inc. Income Statement For the year ended December​ 31, 2019 Sales Revenue - ​$347,000 Cost of Goods Sold - (78,000) Gross Profit - $269,000 Selling and Administrative Expenses - (43,900) Operating Income - 225,100 Loss on Sale of Equipment - (5,500) Net Income - $219,600 All of the​ company's sales are made on account. At the beginning of the​ year, the Accounts Receivable balance was​ $53,500. The balance had increased to​ $54,200 by​ year-end. All of the​ company's inventory purchases are made on account. Accounts Payable consists solely of inventory purchases. At the beginning of the​ year, the Inventory balance was​ $60,400. By​ year-end, the balance had increased by​ $4,900. The net increase in the Accounts Payable balance during the year was​ $1,100. ​$12,300 of depreciation expense is included in the Selling and Administrative Expenses. The company uses the direct write off method to account for bad debt but did not write off or reinstate any accounts during 2019. All cash operating expenses are paid when incurred. What was the​ company's 2019 net cash flows from operating​ activities? A. $230,700 B. $235,700 C. $232,900 D. ​$150,000 E. $220,600

C. $232,900

You own a​ 500-unit apartment complex and charge a monthly rental rate of​ $1,200 per unit. When the apartments are​ 96% occupied, monthly operating costs total​ $300,000, $240,000 of which are variable costs. A nearby manufacturing plant has just announced that it is closing in the upcoming year. As a​ result, you anticipate occupancy will decrease to​ 85%. Using your knowledge of cost​ behavior, what is your predicted monthly operating​ income? A. $216,875 B. $225,600 C. $237,500 D. $246,000 E. None of the above.

C. $237,500

Banana​ Pancakes, LLC is a manufacturer of umbrellas. During the previous​ period, $780,000 of direct materials were requisitioned and​ $150,000 of direct labor costs were incurred in the​ company's manufacturing operations. The company uses actual costing to account for manufacturing overhead. The actual manufacturing overhead costs incurred totaled​ $640,000. The following additional information was extracted from the​ company's accounting​ records: Cost of Goods Manufactured . . .​ $1,650,000 Operating Expenses . . .​ $410,000 Given Sales Revenue of​ $2,500,000 and a net decrease in Finished Goods Inventory of​ $50,000, calculate Operating Income for the previous period. A. $470,000 B. $800,000 C. $390,000 D. $440,000 E. ​$490,000

C. $390,000

Which of the following statements concerning the activity based costing​ (ABC) template is​ correct? (answers assume the two column approach taught in class is​ used) A. Direct material and direct labor for a specific cost object differ between the traditional and the ABC columns. B. The numerator in the traditional POHR calculation is greater the sum of the numerators in the ABC POHR calculations. C. If a company has only two cost​ objects, the total cost distortion for the two objects will always be​ "equal and​ offsetting." D. To determine cost​ distortion, you can compare the total direct product costs attributable to the cost object under traditional costing and ABC. E. If the cost object is being​ overcosted, the total cost calculated in the ABC column will be higher than the total cost calculated in the traditional column.

C. If a company has only two cost​ objects, the total cost distortion for the two objects will always be​ "equal and​ offsetting."

Which of the following tells management how much income is earned from every sales dollar​ generated? A. Return on Investment B. Segment Margin C. Sales Margin D. Investment/Capital Turnover E. Residual Income

C. Sales Margin

Sweet Sadie Company is a manufacturer of gourmet dog treats. It currently manufactures 3 different product lines. The manager of each product line is held responsible for generating revenue and controlling costs. The following information was compiled for the Sweet Potato Bliss product line for the prior​ period: Actual Results (​9,000 units) ​Sales Revenue - $20,000 ​Variable Manufacturing Costs - $6,250 Fixed Manufacturing Costs - $4,350 ​Variable Operating Costs - $1,000 ​Fixed Operating Costs - $500 Master Budget (8,000 units) Sales Revenue - ​$12,000 ​Variable Manufacturing Costs - $2,000 ​Fixed Manufacturing Costs - $5,000 ​Variable Operating Costs - $1,600 ​Fixed Operating Costs - $500 Assume variances are separately calculated for each line listed above. Which of the following statements is​ correct? A. If the​ company's materiality threshold is​ $900, three of the flexible budget variances should be investigated. B. The product line is considered both a cost center and a revenue center. C. The total fixed costs on the flexible budget equals​ $5,500. D. The master budget variance for fixed costs is greater than the flexible budget variance for fixed costs. E. The revenue volume variance is unfavorable and the variable cost volume variance is favorable.

C. The total fixed costs on the flexible budget equals​ $5,500.

Which of the following is NOT considered a refined costing system for purposes of allocating​ MOH? A. departmental B. activity based costing C. traditional

C. traditional

Which of the following statements is​ incorrect? A. Product costs for a manufacturer are categorized as either direct​ material, direct​ labor, or manufacturing overhead costs. B. All links in the value chain applicable to a service company are considered period costs. C. Costs incurred in the production link in the value chain for a manufacturer are expensed when the related unit of product is sold. D. Period costs are relevant for purposes of calculating Gross Profit on the Income Statement for a both a merchandiser and a manufacturer. E. Period costs for a merchandiser are expensed as​ selling, general, and administrative expensed.

D. Period costs are relevant for purposes of calculating Gross Profit on the Income Statement for a both a merchandiser and a manufacturer.

Which of the following budgets is the starting point in the budgeting process for all​ companies? A. The purchases budget. B. The capital expenditures budget. C. The operating expenses budget. D. The sales budget.

D. The sales budget.

Which of the following statements is correct concerning the preparation of the operating section of the statement of cash​ flows? A. The choice of​ method, direct or​ indirect, changes the overall cash flow from operating activities reported on the statement. B. Assuming accounts payable includes only inventory​ purchases, the payments to suppliers will always equal the inventory purchases made during the period. C. Cash operating​ expenses, assuming they are paid when​ incurred, are calculated by adding noncash expenses to the total operating expenses reported on the income statement. D. A net loss from the sale of a​ long-term asset is reported in the operating section as a use of cash. E. Assuming all sales are made on account and there was a net decrease in accounts receivable during the​ period, the cash received from customers can be calculated by adding the net decrease to total sales for the period.

E. Assuming all sales are made on account and there was a net decrease in accounts receivable during the​ period, the cash received from customers can be calculated by adding the net decrease to total sales for the period.

Which of the following statements is correct with regard to Activity Based Costing​ (ABC)? A. ABC uses only volume based cost drivers in the calculation of predetermined manufacturing overhead rates. B. The costs of implementing ABC are generally higher for companies that have established information technology systems. C. ABC categorizes all manufacturing overhead activities as unit level activities. D. If the consumption ratios using the traditional method are the same as the consumption ratios using​ ABC, cost distortion will exist. E. None of the above statements are correct.

E. None of the above statements are correct.

True or False: The production manager is held responsible for all direct material and direct labor variances.

False

Which of the following would be considered a direct product cost for Sundy Zip Ups, LLC, a manufacturer of men's dress shoes? a. Salary paid to the factory supervisor. b. Leather used in the production of the shoes. c. Depreciation on the equipment in the sales offices. d. Rent paid for the manufacturing facility. e. Delivery charges paid for finished goods shipped to the customers.

b. Leather used in the production of the shoes. Chapter 2

1. You own a 500-unit apartment complex and charge a monthly rental rate of $1,250 per unit. When the apartments are 80% occupied, monthly operating costs total $200,000. When occupancy dips to 75%, monthly operating costs fall to $197,000. A nearby manufacturing plant has just announced that it is expanding and adding additional jobs in the upcoming year. As a result, you anticipate occupancy will increase to 90%. Given the high low method is used to predict cost behavior, which of the following statements is incorrect? a. Monthly costs are expected to increase by $120 for each additional unit that is occupied. b. At 90% occupancy, the expected monthly operating costs are $206,000. c. Annual fixed costs are expected to be $152,000. d. At 90% occupancy, the expected monthly operating income is $356,500. e. If 505 units were occupied, the expected costs should not be calculated using the cost behavior formula developed.

c. Annual fixed costs are expected to be $152,000. Chapter 6

1. Reach the Summit, Inc. is planning to open a new rock climbing facility in Athens. Summit will generate revenue by selling monthly memberships that give climbers unlimited access to the facility. The facility will have an estimated $240,000 in assets. The owners expect to earn a 15% annual return on the company's assets. The facility's annual fixed costs are estimated to be $42,000. The variable costs per climber are estimated to be $15 per month. After researching the market, the company believes that it can sell 100 memberships in its first month of operations if it does not require an initial signup fee. Summit can only charge $75 per month for a membership because of competition from another facility in the area. Which of the following statements is incorrect regarding the company's first month of operations? a. Holding all other variables constant, if the company reduces variable costs to $10 per member, the company would meet its monthly target profit. b. If fixed costs are reduced to $3,000 per month and all other variables remain constant, the company would meet its monthly target profit. c. The total monthly target costs for Reach the Summit is $4,000. d. Reach the Summit is considered a price taker in its current market. e. If it makes no changes to its projected operations, the company will fall short of its monthly target profit by $500.

c. The total monthly target costs for Reach the Summit is $4,000. Chapter 8

Which of the following transactions would be a source of cash reported in the investing activities section of the Statement of Cash​ Flows? A. Cash received from the sale of equipment B. Cash received from sales to customers C. Cash dividends paid to the shareholders D. Cash paid to repurchase treasury stock E. Cash received from the assumption of​ long-term debt

A. Cash received from the sale of equipment

Which of the following statements is true with regard to cost​ behavior? A. Fixed​ costs, calculated on a per unit​ basis, are inversely related to the change in activity level. B. Variable costs do not change in total as the activity level changes. C. The preparation of a traditional income statement requires knowledge of cost behavior. D. Cost behavior relates to the categorization of costs as either product or period costs. E. Mixed costs are constant in total.

A. Fixed​ costs, calculated on a per unit​ basis, are inversely related to the change in activity level.

Which of the following statement is correct concerning standard costing​ and/or variance​ calculations? A. Standards are used at the beginning of the period to budget and at the end of the period to evaluate performance. B. Variances falling outside of an acceptable range of outcomes do not require investigation. C. A favorable quantity​ (efficiency) variance indicates that a company used more input than expected for the actual level of output. D. A price​ (rate) variance calculates the difference between what a company paid and what it expected to pay for its production output. E. Quantity​ (efficiency) standards represent the expected cost per unit of input.

A. Standards are used at the beginning of the period to budget and at the end of the period to evaluate performance.

Which of the following statements describes a favorable​ variance? ​i. Actual revenue was higher than expected. ​ii. Actual expenses were higher than expected. ​iii. Actual revenue was lower than expected. ​iv. Actual expenses were lower than expected. A. i. and iv. B. iii. and iv. C. i. and ii. D. i. only E. ii. and iii.

A. i. and iv.

How many POHRs are calculated if a company uses a departmental costing system to allocate​ MOH? (assume the company has multiple production​ departments) A. more than one B. none C. only one

A. more than one

The total contribution margin tells managers A. the amount by which sales revenue exceeds variable costs. B. the amount by which sales revenue exceeds cost of goods sold.

A. the amount by which sales revenue exceeds variable costs.

Which of the following​ "rules of​ thumb" is incorrect with regard to making​ short-term business​ decisions? A. Variable costs should be analyzed on a per unit. B. Analysis should be performed using a traditional income statement approach. C. Qualitative factors should be considered when analyzing a decision. D. Per unit fixed costs should be converted to totals for analysis. E. Past costs should not be used in the decision making process.

B. Analysis should be performed using a traditional income statement approach.

Which of the following statements is incorrect concerning Job​ Costing? A. The initial cost object used in Job Costing is a job. B. Only manufacturers can use Job Costing. C. Companies who produce their product in small batches would use Job Costing. D. It is possible for a job to consist of more than one unit of product.

B. Only manufacturers can use Job Costing.

Which of the following statements is incorrect concerning budget​ preparation? A. A​ zero-based budgeting approach requires that all budgeted amounts be​ "justified" during the budgeting process. B. Participative budgeting decreases the risk that employees will create budgetary slack. Your answer is correct. C. If a participative approach is used to prepare​ budgets, multiple levels of management are involved in the budgeting process. D. The preparation of the sales budget is the starting point in the budgeting process for all companies. E. The advantage of the rolling budget approach is that it keeps management focused on their operational and strategic goals.

B. Participative budgeting decreases the risk that employees will create budgetary slack.

Which of the following statements is incorrect concerning the preparation of the operating section of the statement of cash​ flows? A. Assuming accounts payable includes only inventory​ purchases, to calculate the payment to​ suppliers, both inventory and accounts payable are analyzed. B. Assuming all sales are made on account and there was a net decrease in accounts receivable during the​ period, the cash received from customers can be calculated by adding the net decrease to total sales for the period. C. A net loss from the sale of a​ long-term asset is reported in the operating section as a use of cash. Your answer is correct. D. Cash operating​ expenses, assuming they are paid when​ incurred, are calculated by subtracting noncash expenses from the total operating expenses reported on the income statement. E. The choice of preparation​ method, direct or​ indirect, does not change the overall cash flow from operating activities reported on the statement.

C. A net loss from the sale of a​ long-term asset is reported in the operating section as a use of cash.

If the calculated direct labor efficiency variance is​ favorable, which of the following statements would always be​ true? A. The actual price paid for each unit of direct material was more than the standard price. B. The quantity of direct material used in production was more than the quantity of direct material purchased during the period. C. Less direct labor hours were logged in production than expected for the actual output level. D. The total actual direct cost was lower than the total expected direct labor costs for the actual output. E. The actual direct labor wage rate was lower than the standard direct labor wage rate.

C. Less direct labor hours were logged in production than expected for the actual output level.

Which of the following statements is true with regard to​ short-term decision-making? A. Fixed costs should be considered on a per unit basis. B. Variable costs should be considered in total. C. Qualitative and quantitative information should be considered.

C. Qualitative and quantitative information should be considered.

Which of the following statements concerning budget preparation for a merchandiser is​ correct? A. Only an understanding of cost behavior is required to prepare an operating expense budget. B. Operating expenses differ from operating cash outflows solely as a result of timing differences between when an expense is incurred and when an expense is paid. C. If a company requires its ending inventory to equal a certain percentage of the cost of next​ month's sales, the company would be able to prepare purchases budgets for 4 months if it only knew the cost of sales for those 4 months. D. Assuming only a portion of a​ company's sales are made on​ account, bad debt expense under the percentage of sales method is calculated by multiplying sales on account by the estimated uncollectible percentage. E. None of the above statements are correct.

D. Assuming only a portion of a​ company's sales are made on​ account, bad debt expense under the percentage of sales method is calculated by multiplying sales on account by the estimated uncollectible percentage.

Upon review of Anti​ Corona's Statement of Cash​ Flows, the following was​ noted: Cash Flows from Operating Activities - ($5,000) Cash Flows from Investing Activities - $15,000 Cash Flows from Financing Activities - ($6,000) From this​ information, the most likely explanation is that Anti Corona is A. using cash from operations and issuing common stock to purchase​ long-term assets. B. assuming long​ term-debt to fund operations and purchase​ long-term assets. C. issuing stock to fund operations and purchase​ long-term assets. D. selling​ long-term assets to fund operations and pay dividends. E. using cash from operations and selling​ long-term assets to pay back​ long-term debt

D. selling​ long-term assets to fund operations and pay dividends.

The following Income Statement was prepared for Chop and​ Sauté, Inc., an upscale cooking​ store: Chop and​ Sauté, Inc. Income Statement For the year ended December​ 31, 2019 Sales Revenue - $347,000 Cost of Goods Sold - (78,000) Gross Profit - $269,000 Selling and Administrative Expenses - (43,900) Operating Income - 225,100 Loss on Sale of Equipment - ​(5,500) Net Income - $219,600 All of the​ company's sales are made on account. At the beginning of the​ year, the Accounts Receivable balance was​ $53,500. The balance had increased to​ $54,200 by​ year-end. All of the​ company's inventory purchases are made on account. Accounts Payable consists solely of inventory purchases. At the beginning of the​ year, the Inventory balance was​ $60,400. By​ year-end, the balance had increased by​ $4,900. The net increase in the Accounts Payable balance during the year was​ $1,100. ​$12,300 of depreciation expense is included in the Selling and Administrative Expenses. The company uses the direct write off method to account for bad debt but did not write off or reinstate any accounts during 2019. All cash operating expenses are paid when incurred. What was the​ company's 2019 net cash flows from operating​ activities? A. $220,600 B. $235,700 C. $230,700 D. $150,000 E. $232,900

E. $232,900

Which of the following is incorrect regarding cost behavior​ equations? A. The​ y-intercept value in a cost behavior equation represents total expected costs when the activity level is zero. B. The relevant range is defined as the range of activity over which a cost behavior equation is valid. C. If costs are​ nonlinear, managers can develop cost behavior equations by defining multiple relevant ranges. D. The account analysis method is considered the most subjective tool available for developing a cost behavior equation. E. If a data set only contains two data​ points, the high low method and regression analysis will yield different cost behavior equation.

E. If a data set only contains two data​ points, the high low method and regression analysis will yield different cost behavior equation.

Which of the following statements is​ incorrect? A. The preparation of financial accounting information is bound by Generally Accepted Accounting Principles. B. Reports and other output provided by financial accounting systems focus on the past. C. Managerial accounting relies on the knowledge of​ broad, multidisciplinary teams. D. Managerial accounting systems provide information primarily used by managers and other internal users. E. Managerial accounting systems produce the four basic financial statements.

E. Managerial accounting systems produce the four basic financial statements.

Which of the following statements is correct with regard to Activity Based Costing​ (ABC)? A. The costs of implementing ABC are generally higher for companies that have established information technology systems. B. ABC categorizes all manufacturing overhead activities as unit level activities. C. ABC uses only volume based cost drivers in the calculation of predetermined manufacturing overhead rates. D. If the consumption ratios using the traditional method are the same as the consumption ratios using​ ABC, cost distortion will exist. E. None of the above statements are correct.

E. None of the above statements are correct.

If a net decrease is reported in the finished goods inventory account during the​ period, which of the following statements is always​ true? A. The sum of direct​ material, direct​ labor, and manufacturing overhead costs added during the period is greater than the cost of goods manufactured. B. The cost assigned to units sold is greater than the total manufacturing costs added to production during the period. C. Raw material used in production is less than raw material purchased during the period. D. The cost assigned to units completed is greater than the total manufacturing costs added to production during the period. E. The cost of goods sold is greater than the cost of goods manufactured during the period.

E. The cost of goods sold is greater than the cost of goods manufactured during the period.​

True or False: A responsibility center is a segment for which the manager is held responsible for certain activities.

True; a responsibility center is a segment for which the manager is held responsible for certain activities.

True or False: Companies are typically decentralized along product​ lines, by geographic​ regions, or through responsibility centers.

True; companies are typically decentralized along product​ lines, by geographic​ regions, or through responsibility centers.

Which of the following statements is correct regarding contribution margin? a. The contribution margin income statement is organized by cost behavior. b. The total contribution margin tells managers the amount by which sales revenue exceeds cost of goods sold. c. The unit contribution margin is calculated by subtracting the unit fixed cost from the sales price. d. The variable cost percentage represents the amount from each unit sale that covers variable costs. e. Companies that sell more than one product can disregard sales mix when performing CVP analysis.

a. The contribution margin income statement is organized by cost behavior. Chapter 7

Get Reel, Inc. is a manufacturer of fishing rods. The company produces the rods in small batches based on customer specifications. At the beginning of the year, Get Reel estimated total manufacturing overhead of $135,000 and total machine hours of 10,000. The company allocated manufacturing overhead to production based on machine hours using a traditional, normal costing system. During August, Get Reel started and finished Job CC. The job consisted of 10 identical rods sold at a sales price of $130 per rod. A total of $200 in direct materials were requisitioned for the job during the month. Direct laborers worked a total of 12.5 hours on the job and were paid at a rate of $18 per direct labor hour. Given Job CC required 15 hours of machine time, what is the gross profit per rod? a. $87.50 b. $67.25 c. $87.95 d. $68.75 e. $70.63

b. $67.25 Chapter 3

Hawkins Audio Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras. A supplier has been identified who can sell the part to Hawkins at a price of $6.90 per unit. Currently, 60,000 units of the part were made last year. At this production level, the company incurred $354,000 of total variable direct product costs. Manufacturing overhead increased by $0.10 for each unit produced. Fixed manufacturing overhead costs equaled $50,000. If the part were purchased from the outside supplier, 75% of the total fixed manufacturing overhead cost would continue, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be $22,000 per year. 1. Assume the company will need 50,000 units of the parts next year. If production is outsourced, what would be the effect on operating income? a. Increase of $33,000 b. Decrease of $10,500 c. Decrease of $54,500 d. Increase of $14,500

b. Decrease of $10,500 Chapter 8

Champagne of the South, Inc., a manufacturer of bottled sweet tea, had the following beginning and ending inventories for the year ended December 31: January 1 Work in Process Inventory - $18,000 Finished Goods Inventory - $21,000 December 31 Work in Process Inventory - $17,000 Finished Goods Inventory - $16,500 $27,000 in Raw Materials were purchased during the year. The net decrease in Raw Materials Inventory during the year was $2,000. Raw Materials Inventory only contains direct materials. In addition, the following costs were incurred during the year: direct labor costs of $30,000, factory supervisor's salary of $10,000, factory utilities of $12,000, factory depreciation of $9,000, factory rent of $8,000, indirect factory materials of $5,000, and selling, general, and administrative expenses of $22,000. The company uses actual costing to account for manufacturing overhead costs. What was the cost assigned to the units completed during the year? a. $108,500 b. $131,000 c. $104,000 d. $98,000 e. $103,000

c. $104,000 Chapter 2

The Daily Grind, Inc., a manufacturer of coffee makers, uses the weighted average method in its process costing system. The company allocates manufacturing overhead to production at a rate of $6 per direct labor hour using a traditional, normal costing system. In its first production department, assembly, all direct material is added at the beginning of the production process and conversion costs are incurred uniformly throughout the production process. On July 31st, 8,000 coffee makers, 75% complete with respect to conversion costs, were in the assembly department's work in process inventory. These units were assigned total costs of $27,780 on the July production cost report, $3,780 of which was for conversion costs. 120,000 coffee makers were started during August. At the end of August, 10,000 coffee makers were still in production in the assembly department. These units were 80% complete with respect to the conversion process. The following additional data are available for the department's August activities: Direct Materials Requisitioned - $371,520 Direct Labor Costs Incurred* - $43,560 *The direct labor wage rate was $18.15 per direct labor hour. What as the cost to assemble one coffee maker in July? a. $3.47 b. $3.68 c. $3.63 d. $3.58 e. $4.85

c. $3.63 Chapter 5

1. Which of the following statements is true with regard to cost behavior? a. Cost behavior relates to the categorization of costs as either product or period costs. b. Variable costs do not change in total as the activity level changes. c. Fixed costs, calculated on a per unit basis, are inversely related to the change in activity level. d. Mixed costs are constant in total. e. More than one of the above statements is true.

c. Fixed costs, calculated on a per unit basis, are inversely related to the change in activity level. Chapter 6

1. Which of the following is incorrect regarding cost behavior equations? a. If costs are nonlinear, managers can develop cost behavior equations by defining multiple relevant ranges. b. The account analysis method is considered the most subjective tool available for developing a cost behavior equation. c. If a data set only contains two data points, the high low method and regression analysis will yield different cost behavior equations. d. The y-intercept value in a cost behavior equation represents total expected costs when the activity level is zero. e. The relevant range is defined as the range of activity over which a cost behavior equation is valid.

c. If a data set only contains two data points, the high low method and regression analysis will yield different cost behavior equations. Chapter 6

Hypnotize, Inc. is a merchandiser of items influenced by music from the 1990s. The company began 2019 with $6,000 in cash and reported a net loss of $600 on its 2019 income statement. During 2019 a gain of $250 was reported on the sale of a piece of equipment with a book value of $1,000. A new piece of equipment was purchased at a cost of $8,000 to replace the equipment that was sold. The company paid $1,500 from its available cash balance to purchase the equipment and took out a cash long-term note payable from its bank for the remaining balance. The company always pays cash dividends on the date of declaration. The beginning retained earnings was $10,000 and the ending retained earnings was $8,200. Given a reported positive cash flow of $1,500 from its operating activities during the year, which of the following statements is incorrect? a. The company's cash flows from financing activities were $5,300. b. The company operated within its means during the year. c. The ending cash reported on the balance sheet was $4,550. d. The company's overall investing activities used cash of $6,750. e. The net change in cash for the year was $50.

c. The ending cash reported on the balance sheet was $4,550. Chapter 13

The Daily Grind, Inc., a manufacturer of coffee makers, uses the weighted average method in its process costing system. The company allocates manufacturing overhead to production at a rate of $6 per direct labor hour using a traditional, normal costing system. In its first production department, assembly, all direct material is added at the beginning of the production process and conversion costs are incurred uniformly throughout the production process. On July 31st, 8,000 coffee makers, 75% complete with respect to conversion costs, were in the assembly department's work in process inventory. These units were assigned total costs of $27,780 on the July production cost report, $3,780 of which was for conversion costs. 120,000 coffee makers were started during August. At the end of August, 10,000 coffee makers were still in production in the assembly department. These units were 80% complete with respect to the conversion process. The following additional data are available for the department's August activities: Direct Materials Requisitioned - $371,520 Direct Labor Costs Incurred* - $43,560 *The direct labor wage rate was $18.15 per direct labor hour. What was the conversion cost included in work in process - assembly on September 1st? a. $5,040 b. $4,900 c. $3,690 d. $3,920 e. $4,823

d. $3,920 Chapter 5

Blue Sky, Inc. generated $265,000 in sales during September 2020. Of this amount, $65,000 was for cash. The remaining $200,000 of sales were made on account. The company budgeted $350,000 in sales for October 2020 and expect sales in November 2020 to be 10% lower than October's sales. 20% of the total budgeted sales are for cash; the remaining budgeted sales are expected to be made on account. The historical collection pattern for sales made on account is as follows: month of sale - 60% first month following the month of sale - 35% second month following the month of sale - 4% The balance is expected to be uncollectible. Given the above information, calculate the total expected cash receipts in November. a. $322,100 b. $367,800 c. $257,200 d. $320,200 e. $321,390

d. $320,200 Chapter 9

Which of the following questions does the Statement of Cash Flows not answer? a. Did the company invest in long-term assets during the period? b. Did the company operate within its means during the period? c. Did the company pay down long-term debt during the period? d. Did the company make cash dividend distributions during the period? e. All of the above questions are answered by the Statement of Cash Flows.

e. All of the above questions are answered by the Statement of Cash Flows.

Which of the following statements is correct concerning budget preparation? a. If a participative approach is used to prepare budgets, multiple levels of management are involved in the budgeting process. b. A zero-based budgeting approach requires that all budgeted amounts be "justified" during the budgeting process. c. The preparation of the sales budget is the starting point in the budgeting process for all companies. d. Participative budgeting increases the risk that employees will create budgetary slack. e. All of the above statements are correct concerning budget preparation.

e. All of the above statements are correct concerning budget preparation. Chapter 9

Which of the following statements is incorrect with regard to the production cost report prepared in a given department? a. The production cost report ultimately assigns costs to units in ending inventory and units completed and transferred out. b. The cost per equivalent unit represents how much it costs to produce one completed unit during the period. c. Total costs to account for include product costs in beginning inventory and product costs added during the period. d. Total equivalent units for a product cost category could never exceed total physical units. e. Equivalent units represent the number of units that were completed in each product cost category given the costs incurred.

e. Equivalent units represent the number of units that were completed in each product cost category given the costs incurred. Chapter 5

Which of the following statements is correct? a. Period costs are relevant for purposes of calculating Gross Profit on the Income Statement for a both a merchandiser and a manufacturer. b. Product costs for a merchandiser are expensed as selling, general, and administrative expensed when the related unit is sold. c. All links in the value chain applicable to a service company are considered product costs. d. Costs incurred in the purchases link in the value chain for a merchandiser are expensed when incurred. e. Product costs for a manufacturer are categorized as either direct material, direct labor, or manufacturing overhead costs.

e. Product costs for a manufacturer are categorized as either direct material, direct labor, or manufacturing overhead costs.

Which of the following​ "rules of​ thumb" is incorrect with regard to making​ short-term business​ decisions? A. Variable costs should be analyzed on a per unit. B. Analysis should be performed using a traditional income statement approach. Your answer is correct. C. Past costs should not be used in the decision making process. D. Qualitative factors should be considered when analyzing a decision. E. Per unit fixed costs should be converted to totals for analysis.

B. Analysis should be performed using a traditional income statement approach.

San Luis​ Obispo, California based​ SLOboards, Inc. manufactures a single line of paddleboards. For the year ended December​ 31, 2019, SLOboards manufactured and sold a total of​ 1,000 boards. The following information was compiled for 2019 based on the 2019 production and sales​ volume: Sales Revenue . . .​ $500,000 Total Variable Costs . . .​ $200,000 Total Fixed​ Costs . . .​ $160,000 SLOboards is considering relocating its operations to Morro​ Bay, California in 2021. If the company relocates to Morro​ Bay, the sales price will not change. The variable cost per board in Morro Bay will decrease to​ $150, but the total annual fixed manufacturing costs will increase by​ $55,000. Which of the following statements is​ correct? A. If annual unit sales in 2021 are expected to be less than​ 1,100, the company should move its operations to Morro Bay. B. If the company relocates to Morro Bay and desires a​ $205,000 annual target​ profit, it must generate sales revenue of​ $600,000 in 2021. C. SLOboards' 2019 operating income was ​$85,000. D. The Morro Bay cost structure is considered the low operating leverage option for​ SLOboards' operations. E. If operations are moved to Morro​ Bay, the annual breakeven point would be 615 units higher than the annual breakeven point in San Luis Obispo.

B. If the company relocates to Morro Bay and desires a​ $205,000 annual target​ profit, it must generate sales revenue of​ $600,000 in 2021.

Which of the following companies would be the least likely to use a job order costing​ system? A. Before the​ Amplifier, Inc., a manufacturer of custom made acoustic guitars. B. The Black Bear​ Trail, LLC, a builder specializing in​ one-of-a-kind residential Pacific Northwest cabins. C. Sweetwater, Inc., a manufacturer of​ mass-produced blueberry beverages. D. Rosie the Robot​ Company, a manufacturer of space age cleaning robots built to customer specifications. E. The Wright Flight​ Company, a manufacturer of custom built aircrafts.

C. Sweetwater, Inc., a manufacturer of​ mass-produced blueberry beverages.

Just for the​ Halibut, Inc. designs and manufactures custom made fishing rods. On June​ 1, it had one job started for Misterjaw with a beginning Work in Process balance of​ $525. During June the job was finished and sold. Direct labor for the job in June was​ $72 and direct materials used were​ $60. Direct laborers are paid a wage rate of​ $9 per hour and manufacturing overhead is applied to production at a rate of​ $15 per direct labor hour. The company marks up costs​ 35% to determine the selling price. What was the selling price of the​ job? A. $919.35 B. $1,059.75 C. $951.75 D. $945.27 E. $1,048.95

E. $1,048.95

​Elevate, Inc. is a manufacturer of bed frames. The company allocates manufacturing overhead to production using a​ single, plantwide overhead rate based on the most appropriate cost driver for its labor intensive manufacturing environment. The following information is available for the year just​ ended: Estimated Manufacturing Overhead - $350,000 Estimated Direct Labor Hours - 50,000 Estimated Machine Hours - 10,000 Actual Direct Labor Hours - 55,000 Actual Machine Hours - 12,000 Actual Manufacturing Overhead - $362,000 What is the amount by which manufacturing overhead was either underallocated or overallocated for the​ year? A. Overallocated by ​$35,000 B. Underallocated by ​$12,000 C. Overallocated by ​$58,000 D. Underallocated by ​$278,000 E. Overallocated by ​$23,000

E. Overallocated by ​$23,000

True or False: A standard cost is a budget for a single unit of product.

True

True or False: Participative budgeting relies on the knowledge of multiple levels of management within a company.

True; participative budgeting relies on the knowledge of multiple levels of management within a company.

True or False: Sensitivity analysis helps management answer​ "What If?" questions.

True; sensitivity analysis helps management answer​ "What If?" questions.

True or False: The contribution margin income statement is organized by cost behavior.

True; the contribution margin income statement is organized by cost behavior.

True or False: The relevant range is defined as the range of activity over which a cost behavior formula is considered valid.

True; the relevant range is defined as the range of activity over which a cost behavior formula is considered valid.

For CVP analysis​ calculations, which of the following statements is​ correct? A. In target profit​ calculations, sales revenue exceeds total costs. B. If sales volume is expected to be higher than the indifference​ point, management should choose the cost structure with higher variable costs. C. The​ break-even point is the point at which operating income is greater than ​$0. D. A​ company's sales mix is ultimately determined by management. E. CVP analysis relies on our knowledge of cost function to express relationships among​ costs, sales​ volume, and profit.

A. In target profit​ calculations, sales revenue exceeds total costs.

Which of the following is incorrect with regard to​ short-term decision​ making? A. When a manufacturer outsources production of a part used in its production​ process, the manufacturer will typically eliminate all fixed manufacturing costs. This is the correct answer. B. In a​ keep/drop decision, if all of a​ company's fixed costs are​ common, a​ segment's segment margin will equal its contribution margin. C. The effect on current and future customer relationships should be considered when deciding whether to accept or reject a special order. D. If a company has insufficient excess capacity to fully fill a special​ order, the company will need to give up regular sales if they accept the special order. Your answer is not correct. E. A company having few competitors would typically use cost plus pricing as its pricing approach

A. When a manufacturer outsources production of a part used in its production​ process, the manufacturer will typically eliminate all fixed manufacturing costs.

Choose the option that best finishes the following​ statement: If the MOH actually used by a cost object in production is different than the MOH allocated to the cost​ object, _________ A. the total cost of the cost object will be distorted. B. the POHR used by the costing system is incorrect. C. the​ company's customer base will decline. D. the company will report a loss on the sale of the cost object.

A. the total cost of the cost object will be distorted.

Assuming all merchandise purchases are made on​ account, which of the following pieces of information would you NOT need to know in order to calculate the cash payments to suppliers during the​ period? A. Cost of Goods Sold B. Sales Revenue C. Beginning and Ending Merchandise Inventory D. Beginning and Ending Accounts Payable

B. Sales Revenue

Good Morning Sunshine is a wholesaler of coffee makers. In the current​ year, actual March sales revenue totaled​ $200,000. April sales are expected to decrease​ 10% below March sales. May sales are expected to increase​ 10% above April sales. June sales are expected to increase​ 5% above May sales. Prices are set to achieve a​ 60% gross profit. The company wants to maintain an ending merchandise inventory equal to​ 10% of the next​ month's cost of sales. The ending inventory requirement was met at the end of March. Accounts Payable consist solely of inventory purchases. All invoices from the suppliers are dated as of the end of the month of purchase and carry payment terms​ 1/10, net 30. Assuming Good Morning Sunshine takes full advantage of purchase discounts​ offered, what are the​ company's expected cash disbursements in May to its​ supplier? A. $72,720.00 B. $107,989.20 C. $71,992.80 D. ​$78,015.96 E. $73,062.00

C. $71,992.80

Which of the following statements accurately describes a flexible budget​ variance? A. The difference between a​ company's actual operating results and its master budget. B. The difference between the​ company's flexible budget and its master budget. C. The difference between the​ company's actual operating results and the budgeted created for its actual level of activity.

C. The difference between the​ company's actual operating results and the budgeted created for its actual level of activity.

If an activity is performed on a group of​ units, it is said to be which type of ABC activity​ level? A. facility B. product C. batch D. unit

C. batch

Zero​ Waste, Inc. manufactures eco friendly snack containers. The company uses standard costs to judge performance. Recently an employee mistakenly threw away some of the production records for the previous operating period and only partial data exists. The company documented an unfavorable total direct labor variance of​ $300 for the​ period, actual direct labor hours logged of​ 6,000, and actual direct labor costs of​ $62,400. The actual direct labor rate was​ $0.40 more per hour than expected. How many containers were produced during the period assuming a standard direct labor unit cost of​ $2.00? A. 12,420 B. 28,500 C. 31,350 D. 28,750 E. 31,050

E. 31,050

True or False: If all sales are made on​ account, the only piece of information you would need to calculate the cash received from customers during the period is the net change in Accounts Receivable.

False

True or False: If a balance exists in the temporary MOH account at the end of the​ period, it can be ignored for purposes of preparing the​ company's financial statements.

False; If a balance exists in the temporary MOH account at the end of the​ period, it can be ignored for purposes of preparing the​ company's financial statements.

True or False: The total direct material variance can always be calculated by adding the DM price variance and the DM quantity variance.

False; The total direct material variance can not only be calculated by adding the DM price variance and the DM quantity variance.

True or False: When raw materials are used for a​ job, Work in Process Inventory decreases.

False; When raw materials are used for a​ job, Work in Process Inventory increase because the raw materials are going to be in WIP therefore increasing it..

True or False: Only manufacturers have both product and period costs.

False; both merchandiser and manufacturers have both product and period costs.

True or false: It is likely that a company implementing ABC would use only use volume based cost drivers.

False; it is not likely that a company implementing ABC would use only use volume based cost drivers as they also use transaction based cost drivers.

True or False: Management by exception dictates that only unfavorable variances be investigated.

False; management by exception dictates that not only unfavorable variances be investigated, favorable variances are also.

True or False: The​ Selling, General, and Administrative expenses reported on the Income Statement could include some noncash expenses.

True

1. Which of the following "rules of thumb" is incorrect with regard to making short-term business decisions? a. Analysis should be performed using a traditional income statement approach. b. Variable costs should be analyzed on a per unit. c. Qualitative factors should be considered when analyzing a decision. d. Past costs should not be used in the decision-making process. e. Per unit fixed costs should be converted to totals for analysis.

a. Analysis should be performed using a traditional income statement approach. Chapter 8

That's How We Roll is a bowling center. The following total costs were incurred during two different sessions for a single bowler: Games Bowled (3) Shoe Rental - $6.00 Game Fees - $12.75 Total Costs to Bowl - $18.75 Games Bowled (6) Shoe Rental - $6.00 Game Fees - $25.50 Total Costs to Bowl - $31.50 1. Which of the following statements is correct concerning the above data? (use either account analysis or the high low method to develop an equation) a. If the bowling alley only accepts cash, you would need $41 to bowl 4 games. b. The total costs to bowl would be considered a mixed cost. c. For each additional game bowled, the total costs to bowl would increase by $5.58. d. The total cost to bowl per game increases as the number of games bowled increases. e. To determine the total variable costs to bowl at any activity level, the number of games bowled should be multiplied by $6.00.

b. The total costs to bowl would be considered a mixed cost. Chapter 6

Which of the following statements best describes why a company would choose the higher operating leverage cost structure if its sales volume is expected to be above the calculated indifference point in​ units? A. The unit variable cost is greater than the sales price above the indifference point. B. The contribution margin is less than the fixed costs below the indifference point. C. The increase in fixed costs has been paid for by the increase in the unit contribution margin. D. There is a tradeoff between variable costs and fixed costs in the cost structure. E. The increase in fixed costs has not been paid for by the increase in the unit contribution margin.

C. The increase in fixed costs has been paid for by the increase in the unit contribution margin.

Which of the following is considered when deciding whether to accept a special​ order? A. Is there sufficient excess​ capacity? B. Will regular sales be affected in the long ​run? C. Are fixed costs ​affected? D. Is the special unit contribution margin ​positive? E. All of the above are considered.

E. All of the above are considered.

1. Which of the following is correct with regard to short-term decision making? a. If a company has insufficient excess capacity to fully fill a special order, the company will need to give up regular sales if they accept the special order. b. When a manufacturer outsources production of a part used in its production process, the manufacturer will typically eliminate all fixed manufacturing costs. c. In a keep/drop decision, if all of a company's fixed costs are common, a segment's segment margin will be less than its contribution margin. d. The effect on current and future customer relationships should not be considered when deciding whether to accept or reject a special order. e. A company having few competitors would typically use target costing in its pricing approach.

a. If a company has insufficient excess capacity to fully fill a special order, the company will need to give up regular sales if they accept the special order. Chapter 8

When It Rains, It Pours, LLC, a manufacturer of umbrellas, is considering switching its operations to an Activity Based Costing system. The following manufacturing overhead activities and cost drivers have been identified: Machine Setup Cost Driver - Number of Machine Setups Description - 1,000 umbrellas are manufactured per setup. Machine Assembly Cost Driver - Machine Hours Logged Description - Each umbrella requires 0.2 hours of machine time. Product Inspection Cost Driver - Inspection Hours Logged Description - Each umbrella requires 0.1 hours of inspection time. Product Movement Cost Driver - Number of Moves Description - 500 umbrellas are moved at a time. General Factory Cost Driver - Machine Hours Logged Description - Additional MOH costs not associated with the above activities. Based on the above descriptions, which of the following correctly pairs the activity with its appropriate cost level? a. General Factory . . . batch level cost b. Machine Setup . . . unit level cost c. Machine Assembly . . . unit level cost d. Product Inspection . . . batch level cost e. Product Movement . . . facility level cost

c. Machine Assembly . . . unit level cost Chapter 4

Which of the following companies would be the least likely to use a job order costing system? a. Rosie the Robot Company, a manufacturer of space age cleaning robots built to customer specifications. b. Before the Amplifier, Inc., a manufacturer of custom made acoustic guitars. c. The Black Bear Trail, LLC, a builder specializing in one-of-a-kind residential Pacific Northwest cabins. d. The Wright Flight Company, a manufacturer of custom built aircrafts. e. Sweetwater, Inc., a manufacturer of mass-produced blueberry beverages.

e. Sweetwater, Inc., a manufacturer of mass-produced blueberry beverages. Chapter 3

Scrapping the​ Bottom, Inc. is a manufacturer of peanut butter. The jars of peanut butter pass through two sequential production departments before landing in finished goods inventory. The​ company's first processing​ department, machining, reported the following information for its most recent month of​ operations: costs in beginning work in process ​direct materials - $4,320 ​direct labor - $1,040 ​allocated MOH - $1,790 costs added during the month ​​direct materials - $52,800 ​direct labor - $21,500 ​allocated MOH - $32,250 The machining​ department's beginning inventory consisted of​ 5,000 physical units that were​ 80% complete with respect to direct material and​ 60% complete with respect to conversion. During the​ month, 45,000 physical units were started in the department. At month​ end, 8,000 physical units were in the​ department's ending inventory. The units in ending inventory were​ 75% complete with respect to direct material and​ 50% complete with respect to conversion. You asked one of the staff members on your team to calculate the cost to machine a unit for the most recent month of operations. The staff member emailed you the following​ calculations: DM total costs to account for - $57,120 ​divided by units - 48,400 ​cost per unit - $1.18 C ​total costs to account for - $56,580 ​divided by units - 46,800 ​​cost per unit - $1.21 ​ Total (cost per unit): $2.39 Where did they go​ wrong? A. They did not include the beginning inventory costs on the total costs to account for line. B. They used the percentage of completion for units in beginning inventory instead of the percentage of completion for units in ending inventory. C. They failed to account for units in ending inventory. D. They divided the total costs to account for by total physical units instead of total equivalent units. E. They forgot to include allocated manufacturing overhead in the conversion costs.

B. They used the percentage of completion for units in beginning inventory instead of the percentage of completion for units in ending inventory.

Which of the following statements is incorrect with regard to the production cost report prepared in a​ company's first processing​ department? A. The cost per equivalent unit represents how much it costs to complete one unit in the department during the period. B. The production cost report assigns costs to units in the​ department's ending work in process inventory and units completed and transferred out during the period. C. Equivalent units represent the number of units that were completed in each product cost category given the costs incurred. D. Total costs to account for include product costs in the​ department's beginning work in process inventory and product costs added to its work in process during the period. E. Total equivalent units for a product cost category could never exceed total physical units.

C. Equivalent units represent the number of units that were completed in each product cost category given the costs incurred.

Which of the following statements is incorrect with regard to process​ costing? A. Manufacturers who operate in a mass production environment choose between actual costing and normal costing to account for manufacturing overhead. B. When you reach the end of step 3 on the production cost report for the final department in the production​ process, given the sales​ price, the unit gross profit can be calculated. C. In sequential​ processing, manufacturing occurs​ "in order" of production departments. D. The percentage of completion for all units in a subsequent department with respect to transferred in costs from a previous department can be less than​ 100%. Your answer is correct. E. Nonuniform input occurs when production costs are added at different points in time in a production department.

D. The percentage of completion for all units in a subsequent department with respect to transferred in costs from a previous department can be less than​ 100%.

Brutus is a division of Madam​ Medusa's Pawn​ Shop/Boutique, Inc. Last​ year, the division generated operating income of​ $609,840 and sales revenue of​ $10,890,000. Given invested capital of​ $3,000,000 and a hurdle rate of​ 15%, which of the following statements is​ correct? A. If the​ division's manager is evaluated based on maintaining the​ division's current Return on​ Investment, he would accept an investment opportunity that would yield a return of​ 18%. B. For every dollar of capital​ invested, approximately​ $2.00 of income is earned. C. For every dollar of sales revenue​ generated, $0.56 of income is earned. D. The residual income for Brutus is​ $69,840. E. For every dollar of capital​ invested, $3.63 of sales revenue is generated.

E. For every dollar of capital​ invested, $3.63 of sales revenue is generated.

​Elevate, Inc. is a manufacturer of bed frames. The company allocates manufacturing overhead to production using a​ single, plantwide overhead rate based on the most appropriate cost driver for its highly automated manufacturing environment. The following information is available for the year just​ ended: Estimated Manufacturing Overhead - ​$350,000 Estimated Direct Labor Hour - 50,000 Estimated Machine Hours - 10,000 Actual Direct Labor Hours - 55,000 Actual Machine Hours - 12,000 Actual Manufacturing Overhead - $362,000 What is the amount by which manufacturing overhead was either underallocated or overallocated for the​ year? A. Overallocated by ​$23,000 B. Overallocated by ​$35,000 C. Underallocated by ​$278,000 D. Underallocated by ​$12,000 E. Overallocated by ​$58,000

E. Overallocated by ​$58,000

True or False: To calculate the cash dividends paid to shareholders during the​ period, only information from the comparative Balance Sheet is needed.

False

True or False: Units transferred in to department 2 from department 1 during the period and units in beginning inventory for department 2 for the same period are always equal.

False

Which of the following statements is​ correct? a. The preparation of managerial accounting information is not bound by Generally Accepted Accounting Principles. b. Financial accounting relies on the knowledge of​ broad, multidisciplinary teams to properly record and report transactions. c. Managerial accounting systems produce the four basic financial statements. d. Reports and other output provided by financial accounting systems focus on the future. e. Managerial accounting systems provide information primarily used by shareholders and other external users.

a. The preparation of managerial accounting information is not bound by Generally Accepted Accounting Principles. Chapter 1

1. Clarke Central's class of 2001 is currently planning its 20-year class reunion. In estimating costs for the 20-year reunion, the planning committee compiled the number of people in attendance and related total costs for each previous class reunion held. The data was then entered in a spreadsheet program and regression analysis was performed. The analysis resulted in the following cost behavior equation: y=56x+800 and indicated that 95% of the variability in total costs could be explained by the number of people in attendance. Which of the following statements is incorrect if the planning committee's best estimate is that 200 people will attend the 20-year reunion, and the committee expects all costs to be covered by the people in attendance? a. The best estimate of total costs for the 20-year reunion is $12,000. b. If the estimate is correct, the total fixed costs will be $800 c. Assuming the estimate is realistic, the minimum price that should be charged per person is $56. d. It is unlikely that an outlier exists in the data used to perform the regression analysis. e. The x variable coefficient is 56, and the intercept coefficient is 800.

c. Assuming the estimate is realistic, the minimum price that should be charged per person is $56.

When It Rains, It Pours, LLC is a manufacturer of umbrellas. During the previous period, $780,000 of direct materials were requisitioned and $150,000 of direct labor costs were incurred in the company's manufacturing operations. The company uses actual costing to account for manufacturing overhead. The actual manufacturing overhead costs incurred totaled $640,000. The following additional information was extracted from the company's accounting records: Cost of Goods Manufactured - $1,650,000 Sales Revenue - $2,500,000 Operating Expenses - $410,000 Given a net decrease in Finished Goods Inventory of $50,000, calculate Operating Income for the previous period. a. $440,000 b. $800,000 c. $490,000 d. $470,000 e. $390,000

e. $390,000 Chapter 2

Celestial​ Beings, Inc. is a manufacturer of incense. The company produces two main​ products: Sun and Moon. Currently the company uses a traditional costing system and allocates manufacturing overhead to production based on machine hours. Each unit of Sun requires 0.75 machine hours to​ product, and each unit of Moon requires 1.0 machine hours to produce. The company expects to make​ 2,000 units of Sun and​ 1,000 units of Moon in the upcoming period. Due to pricing​ concerns, management is considering moving to an activity based costing system. Two activities and cost pools have been identified that account for​ 80% of the total budgeted​ manufacturing: machine setup​ $48,000 and product movement​ $32,000. The machine setup overhead costs are driven by number of setups. The production equipment is setup for every 10 units of Sun produced and for every 25 units of Moon produced. The product movement overhead costs are driven by number of moves. Sun is moved in groups of 25​ units, and Moon is moved in groups of 50 units. The remaining​ 20% of the total budgeted manufacturing overhead costs is considered general factory overhead costs and will continue to be allocated to the​ company's products using machine hours even if the switch to ABC is made. The following direct product cost information has been compiled for each product​ line: Direct Material ​Sun - $5.25 per unit Moon - ​$7.65 per unit Direct​ Labor* ​Sun - $7.50 per unit ​Moon - $10.00 per unit ​*Direct labor wages average​ $20 per hour. Question 2: Assuming the company marks up costs​ 120% to determine sales​ price, by how much is the Moon product line currently being​ over/underpriced per​ unit? A. $38.72 overpriced per unit B. ​$21.12 overpriced per unit C. ​$17.60 underpriced per unit D. $22.93 underpriced per unit E. $19.36 overpriced per unit

A. $38.72 overpriced per unit

Pink​ Blankie, a manufacturer of​ children's sleep​ apparel, incurs three different​ costs, Cloth, Factory​ Rent, and Factory​ Utilities, in its manufacturing operations. Total costs for each cost type at two different activity levels are as​ follows: Rent - Factory Utilities ​10,000 units ​Cloth - $75,000 ​Factory - $50,000 ​Rent - $4,000 ​20,000 units ​Cloth - $150,000 ​Factory - $50,000 ​Rent - $6,000 The cost behavior for each cost listed above​ is: A. Cloth​ - Variable; Factory Rent​ - Fixed; Factory Utilities​ - Mixed B. Cloth​ - Mixed; Factory Rent​ - Variable; Factory Utilities​ - Fixed C. Cloth​ - Mixed; Factory Rent​ - Mixed; Factory Utilities​ - Variable D. Cloth​ - Variable; Factory Rent​ - Fixed; Factory Utilities​ - Fixed E. Cloth​ - Fixed; Factory Rent​ - Mixed; Factory Utilities​ - Mixed

A. Cloth​ - Variable; Factory Rent​ - Fixed; Factory Utilities​ - Mixed

What is the formula to calculate the predetermined manufacturing overhead​ rate? A. total estimated MOH​ ÷ total estimated activity level for the allocation base B. total actual MOH​ ÷ total actual activity level for the allocation base C. total estimated direct labor costs​ ÷ total estimated direct labor hours

A. total estimated MOH​ ÷ total estimated activity level for the allocation base

Which of the following statements is​ correct? A. If the​ over/underallocated MOH is fairly large and the majority of the units have not been​ sold, the balance in MOH should be prorated between​ WIP, FG, and COGS. B. If MOH is overallocated to a job that has been​ sold, and the company calculates sales price by marking up job​ costs, the job will likely be underpriced. C. The formula to arrive at the POHR is total actual manufacturing overhead divided by total estimated allocation base. D. "Number of​ units" is typically an appropriate allocation base for MOH because the​ company's products consume equal overhead resources. E. To calculate the decrease to WIP for allocated MOH​ costs, the POHR is multiplied by the actual amount of the allocation based used by the cost object.

A. If the​ over/underallocated MOH is fairly large and the majority of the units have not been​ sold, the balance in MOH should be prorated between​ WIP, FG, and COGS.

Which of the following statements is incorrect regarding contribution​ margin? A. The variable cost percentage represents the amount from each sales dollar that covers variable costs. B. Companies that sell more than one product can disregard sales mix when performing CVP analysis. C. The unit contribution margin is calculated by subtracting the unit variable cost from the sales price. D. The contribution margin income statement is organized by cost behavior. E. The total contribution margin tells managers the amount by which sales revenue exceeds variable costs.

B. Companies that sell more than one product can disregard sales mix when performing CVP analysis.

Elevate, Inc. is a manufacturer of bed frames. The company allocates manufacturing overhead to production using a single, plantwide overhead rate based on the most appropriate cost driver for its highly automated manufacturing environment. The following information is available for the year just ended: Estimated Manufacturing Overhead - $350,000 Estimated Direct Labor Hours - 50,000 Estimated Machine Hours - 10,000 Actual Direct Labor Hours - 55,000 Actual Machine Hours - 12,000 Actual Manufacturing Overhead - $362,000 Calculate the amount by which manufacturing overhead was either underallocated or overallocated for the year. a. Overallocated by $35,000 b. Overallocated by $23,000 c. Underallocated by $12,000 d. Overallocated by $58,000 e. Underallocated by $278,000

d. Overallocated by $58,000 Chapter 3

#meta manufactures yoga props such as straps and blocks. Straps are sold to customers at a price of​ $18 per strap. The company currently produces​ 36,000 straps a​ year, which is​ 80% of full capacity. The company does not maintain any safety stock and only produces the exact number of straps it sells. At the current operating​ level, the following total costs are​ incurred: Product Costs - $136,800 Period Costs - $41,400 Of the total product​ costs, $93,600 are variable costs. Of the total period​ costs, $25,200 are variable costs. An order has been received from a chain of yoga studios for​ 10,000 straps at a special price of​ $15 per strap. If the special order is​ accepted, the unit variable manufacturing costs will decrease by​ $0.20 per strap due to the type of buckle used. A different supplier will be used for the buckles and therefore a new supplier contract has to be drafted by the​ company's outside attorney. The​ attorney's fee is estimated to be​ $1,000. Variable period costs consist solely of sales​ commissions, which will not be paid on the special order. No other costs will be affected by acceptance of the special order. By how much will operating income increase if the special order is​ accepted? A. $110,300 B. $105,800 C. $95,000 D. $98,800 E. None of the above.

A. $110,300

Tom Industries has a plant capacity of​ 70,000 units per month. The company is currently operating at​ 80% of​ capacity, resulting in a variable cost per unit of​ $30 and a fixed cost per unit of​ $4.10. The regular sales price of​ Tom's product is​ $45 per unit. Tom Industries has been asked by​ Izzy, Inc. to fill a special order for​ 10,000 units of the product at a special sales price of​ $40 each. Izzy will market the units in a foreign country under its own brand name. As a​ result, Tom Industries will have to pay an export attorney a fee of​ $15,000 to make sure it is complying with export laws and regulations relating to the special order.​ Additionally, the variable cost per unit will decrease by​ $5 since sales commissions will not be paid on the special order. You have asked a staff member to calculate the effect on operating income if the special order is accepted. They calculated that the increase in operating income as a result of accepting the special order if​ $85,000 and sent you the following​ calculations: GET special sales price - $40 special unit variable cost - $30 special unit contribution margin - $10 units in special order - 10,000 contribution margin from special order - $100,000 additional fixed costs - $15,000 operating income from special order - $85,000 Where did the staff member go​ wrong? A. The staff member did not adjust the unit variable cost for changes related to the special order. B. The staff member included unit fixed costs in their calculations. C. The staff member did not account for the additional fixed costs from the special order. D. The staff member failed to calculate the amount​ "given up" from regular sales. E. The staff​ member's calculation is correct.

A. The staff member did not adjust the unit variable cost for changes related to the special order.

Keep it​ Minimal, Inc. is a manufacturer of furniture. At the beginning of​ February, it was estimated that each unit of Let the Light In would require 4 hours of direct​ labor, and the related direct labor cost was expected to equal​ $36 per unit of product. During​ February, the company logged​ 3,750 hours of direct labor hours to produce​ 1,000 units of Let the Light In. Direct laborers were paid at a rate of​ $9.15 per hour. Which of the following statements is correct with regard to Let the Light​ In's February​ production? A. The total actual direct labor cost was lower than the total expected direct labor cost. B. It is likely that the direct labor variances are not related since both the rate variance and the efficiency variance are unfavorable. C. The direct labor standard rate was greater than the direct labor actual rate during the month. D. The direct labor hours expected for the actual output during the month were less than the actual direct labor hours logged during the month. E. If the company used higher paid and more efficient workers than expected for production during the​ period, it was not​ "worth ​it."

A. The total actual direct labor cost was lower than the total expected direct labor cost.

Neither Paper nor Plastic Company manufactures​ high-end, reusable shopping bags in a labor intensive production environment. The company uses a traditional normal costing system to allocate manufacturing overhead to production on the basis of direct labor hours logged. For the upcoming​ year, the company estimates it will incur​ $45,000 of total manufacturing overhead costs. Management is concerned that the current sales prices for its two product​ lines, Nylon and​ Canvas, are no longer competitive. In an effort to improve costing​ accuracy, and as a result​ pricing, management has decided to analyze manufacturing overhead using activity based costing. Management has identified two activities​ that, when​ combined, generate​ 65% of the total budgeted manufacturing overhead costs. The two activities are product movement and inspection. The product movement overhead is driven by the number of times the products are moved in batches on the factory floor and accounts for​ 45% of the total budgeted manufacturing overhead. The inspection overhead is driven by inspection hours logged and accounts for​ 20% of the total budgeted manufacturing overhead. The remaining budgeted manufacturing overhead is considered general factory overhead costs and will continue to be allocated to the product lines based on direct labor hours logged. The projected production levels for the upcoming year are​ 3,000 Nylon bags and​ 1,500 Canvas bags. In​ addition, the following input ratios are expected for the product​ lines: Canvas Product Movement Nylon - 100 units per move 1Canvas - 50 units per move Inspection Hours Nylon - 0.1 hours per unit Canvas - 0.1 hours per unit Direct Labor Hours Nylon - 0.5 hours per unit Canvas - 2.0 hours per unit Which of the following statements is incorrect with regard to the above​ information? A. The traditional costing system is overcosting the Nylon product line by​ $11,437.50 in total. B. The per unit cost distortion for the Nylon product line is not equal to the per unit cost distortion for the Canvas product line. C. Under activity based​ costing, the Nylon product line consumes two times the inspection manufacturing overhead costs as the Canvas product line. D. Under activity based​ costing, 25% of the product movement manufacturing overhead costs will be allocated to the Canvas product line. E. No cost distortion exists for the​ "slice" of total manufacturing overhead that is considered general factory overhead costs.

A. The traditional costing system is overcosting the Nylon product line by​ $11,437.50 in total.

What percentage of completion is used for the equivalent unit calculation as it relates to​ transferred-in units? A. ​100% B. The same percentage as used for conversion costs in ending inventory. C. The same percentage as used for direct material costs in ending inventory. D. 0%

A. ​100%

Half​ Moon, Inc. is a yoga mat manufacturer located in​ Portland, Oregon. The company has two product​ lines: Restorative and Power. The following information relates to its first year of​ operations: Restorative ​Unit Sales Price - $80 Variable Cost Percentage - 30% ​Traceable Fixed Costs - $160,000 Power ​Unit Sales Price - $105 ​Variable Cost Percentage - 35% ​Traceable Fixed Costs - $188,000 During the​ year, 15,000 units of Restorative and​ 10,000 units of Power were sold. Total common fixed costs of​ $210,000 were allocated to the product lines based on their respective percentage of total unit sales. Based on the above​ data, on which amounts should the performance of the two product lines be​ judged? A. Restorative​ $200,000; Power​ $179,500 B. Restorative​ $680,000; Power​ $494,500 C. Restorative​ $494,000; Power​ $463,000 D. Restorative​ $260,000; Power​ $127,000 E. Restorative​ $620,000; Power​ $547,000

B. Restorative​ $680,000; Power​ $494,500

Where the Boat Leaves​ From, Inc., is a manufacturer of custom built boat docks. At the beginning of​ July, two jobs were in​ progress: Lanier and Sinclair. Lanier and​ Sinclair's June 30th job cost records showed balances of​ $2,500 and​ $5,000, respectively. During​ July, one additional job was​ started: Hartwell. Direct laborers are paid at a rate of​ $20 per hour. The company uses a​ traditional, normal costing system to account for manufacturing overhead. Manufacturing overhead is allocated to production at a rate of​ $5 per direct labor hour. The following actual factory overhead costs were incurred during the​ month: indirect materials​ $50, supervisor's salary​ $300, and equipment depreciation​ $100. In​ addition, the sales staff is paid a​ 2% commission on gross revenue generated from jobs sold during the month. The following additional information was extracted from the accounting records of Where the Boat Leaves​ From: direct materials added during July ​Lanier - $500 ​Sinclair - $1,000 ​Hartwell - $1,400 direct labor costs incurred during July ​Lanier - $150 ​Sinclair - $750 ​Hartwell - $800 Sinclair and Hartwell were sold at cost plus​ 80% during the month. Lanier remained in process at month end. Calculate the Gross Profit reported on the Income Statement for July assuming the Manufacturing Overhead account is closed out to cost of goods sold at the end of each month. A. $7,520 B. $7,445 C. $8,075 D. ​$6,710 E. $7,495

B. $7,445

Fueled by Caffeine Company is a manufacturer of travel mugs. Fueled has recently experienced turnover in its accounting department and is unable to find documentation of the prior period standard rate per direct labor hour. The company needs this information to begin the budgeting process for the next period. Fueled has determined that the total direct labor variance in the prior period was a favorable​ $390 and that direct laborers were paid​ $0.50 less per hour than expected. Management expected​ 5,200 direct labor hours to be logged during production based on the actual number of travel mugs​ produced; however, 260 more actual direct labor hours were logged during production. What was the prior​ period's actual direct labor rate per​ hour? A. $12.00 per direct labor hour B. $8.50 per direct labor hour C. $8.00 per direct labor hour D. $9.00 per direct labor hour E. $10.50 per direct labor hour

B. $8.50 per direct labor hour

The computer system for Number​ 14, LLC, a manufacturer of basketball​ jerseys, fell victim to an internet virus. The manager was able to determine from various sources that​ 2,000 fewer pounds were used in the production of​ 20,000 jerseys last period than purchased. Records show that the total direct material variances was​ $40,000 favorable. The direct material price variance was documented to be​ $120,000 unfavorable, which resulted from the actual cost per yard of direct material being​ $2 higher than the expected cost of​ $16 per yard. Additional documentation could not be found for the direct materials quantity variance. The amount of yards the company expected to use per jersey is A. 3.4000 yards B. 3.3875 yards C. 2.4556 yards D. 3.5000 yards E. None of the above.

B. 3.3875 yards

Which of the following statements concerning performance evaluation tools used in decentralized operations is​ correct? A. A positive residual income indicates that a​ segment's return on investment is less than the​ company's target rate of return. B. A​ segment's return on investment can be calculated by multiplying the​ segment's sales margin percentage by its capital turnover ratio. Your answer is correct. C. Performance reports can only be used to evaluate the performance of cost centers. D. Segmented income statements are also referred to as budget versus actual reports. E. Segment margin is calculating by subtracting the common fixed costs allocated to a segment from the​ segment's contribution margin.

B. A​ segment's return on investment can be calculated by multiplying the​ segment's sales margin percentage by its capital turnover ratio.

I Put That Ish on​ Everything, Inc. manufactures a line of premium hot sauces. The​ company's managers would like to increase the annual operating income generated from its best selling sauce Hot Mama by​ $4,800. Given competition in the​ market, the​ product's sales staff is doubtful that the current customer base could be expanded or that the current customer base would accept a price increase. Management has concluded after consulting with key members of the​ product's manufacturing and sales teams that all fixed costs for the product line are currently at the lowest level possible.​ However, the unit variable cost could be reduced if some production changes are made. The following data has been prepared for the Hot Mama product line at its current annual production and sales volume of​ 7,200 units: Sales Price . . .​ $8.50 Unit Variable Cost . . .​ $3.25 Unit Fixed Cost . . .​ $1.50 Given all of the above​ information, which of the following scenarios would you recommend to management to achieve their goal of increasing operating income for the Hot Mama​ line? Assume an annual relevant range of​ 10,000 units of Hot Mama. A. Increase annual sales volume by 915 units. No change in sales price or costs. B. Decrease unit variable cost by​ $0.67. No change in sales​ price, sales​ volume, or total fixed costs. C. Increase sales price to​ $9.17. No change in sales​ volume, unit variable​ costs, or total fixed costs. D. Decrease total fixed costs by​ $4,800. No change in sales​ price, sales​ volume, or unit variable costs. E. I would recommend more than one of the above scenarios.

B. Decrease unit variable cost by​ $0.67. No change in sales​ price, sales​ volume, or total fixed costs.

Hawkins Audio​ Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras.​ 50,000 units of the part were made by Hawkins last year. At this production​ level, the company incurred the following direct product​ costs: Direct Materials - $250,000 Direct Labor - $104,000 Manufacturing Overhead incurred during the same period for production of the part is represented by the following cost behavior​ equation: y​ = $0.10x​ + $50,000. If the part were purchased from an outside​ supplier, 25% of the total fixed manufacturing overhead cost would be​ eliminated, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be​ $12,500 per year. A supplier has been identified who can sell the part to Hawkins at a price of​ $7.80 per unit. Which of the following statements is incorrect assuming​ 60,000 units of the part will be needed next​ year? A. At a purchase price of​ $7.60 (rounded), Hawkins would be indifferent between making and buying the part. B. If production is​ outsourced, operating income will decrease by​ $6,000. C. Qualitative​ considerations, such as whether the purchased part is of equal quality to its manufactured​ part, should be considered by Hawkins. D. At a purchase price of​ $7.80, the cost to make is less than the cost to buy. E. The total cost to make the part next year is​ $480,800.

B. If production is​ outsourced, operating income will decrease by​ $6,000.

Which of the following is not an advantage of​ decentralization? A. Customer relations are improved because management is able to quickly respond to customer inquiries and demands. B. The potential for the duplication of costs and efforts is eliminated. C. Segment managers receive training for​ top-level management positions. D. Segment managers experience increased motivation and the company experiences increased retention as a result. E. Top management is able to focus on strategic planning and ​decision-making.

B. The potential for the duplication of costs and efforts is eliminated.

Tom Industries has a plant capacity of​ 70,000 units per month. The company is currently operating at​ 80% of​ capacity, resulting in a variable cost per unit of​ $30 and a fixed cost per unit of​ $4.10. The regular sales price of​ Tom's product is​ $45 per unit. Tom Industries has been asked by​ Izzy, Inc. to fill a special order for​ 10,000 units of the product at a special sales price of​ $40 each. Izzy will market the units in a foreign country under its own brand name. As a​ result, Tom Industries will have to pay an export attorney a fee of​ $15,000 to make sure it is complying with export laws and regulations relating to the special order.​ Additionally, the variable cost per unit will decrease by​ $5 since sales commissions will not be paid on the special order. You have asked a staff member to calculate the effect on operating income if the special order is accepted. They calculated that the increase in operating income as a result of accepting the special order if​ $85,000 and sent you the following​ calculations: GET special sales price - $40 special unit variable cost - $30 special unit contribution margin - $10 units in special order - 10,000 contribution margin from special order - $100,000 additional fixed costs - $15,000 operating income from special order - $85,000 Where did the staff member go​ wrong? A. The staff member did not account for the additional fixed costs from the special order. B. The staff member did not adjust the unit variable cost for changes related to the special order. C. The staff member included unit fixed costs in their calculations. D. The staff member failed to calculate the amount​ "given up" from regular sales. E. The staff​ member's calculation is correct.

B. The staff member did not adjust the unit variable cost for changes related to the special order.

Keep it​ Minimal, Inc. is a manufacturer of furniture. At the beginning of​ February, it was estimated that each unit of Let the Light In would require 4 hours of direct​ labor, and the related direct labor cost was expected to equal​ $36 per unit of product. During​ February, the company logged​ 3,750 hours of direct labor hours to produce​ 1,000 units of Let the Light In. Direct laborers were paid at a rate of​ $9.15 per hour. Which of the following statements is correct with regard to Let the Light​ In's February​ production? A. The direct labor standard rate was greater than the direct labor actual rate during the month. B. The total actual direct labor cost was lower than the total expected direct labor cost. C. The direct labor hours expected for the actual output during the month were less than the actual direct labor hours logged during the month. D. It is likely that the direct labor variances are not related since both the rate variance and the efficiency variance are unfavorable. E. If the company used higher paid and more efficient workers than expected for production during the​ period, it was not​ "worth ​it."

B. The total actual direct labor cost was lower than the total expected direct labor cost.

You own Lettuce Turnip the​ Beet, Inc., a vegetarian catering company. You have been hired by a local nonprofit to provide food for an upcoming fundraising event to promote community recycling. The nonprofit expects 100 people to attend the fundraising event. You have asked one of your staff members to estimate the cost of the event using the following information from three previous catering​ engagements: Engagement 1 ​Total cost of event - $1,890 Cost per person - $21 Engagement 2 Total cost of event - ​$1,785 ​Cost per person - $17 Engagement 3 ​Total cost of event - $2,100 ​Cost per person - $15 The staff member decides to use the high low method to predict costs and estimates that with 100 people in​ attendance, the total estimated costs will be​ $1,848. You are unsure of how the staff member came up with the​ estimate, so you ask the staff member to explain how they calculated the total estimated costs. This is what they emailed to​ you: "I defined​ "x" as the number of people in attendance and calculated the number of people who attended each engagement by dividing the total cost of the engagement by the cost per person. Engagement 1 had the lowest number of people in​ attendance, 90​ people, and Engagement 3 had the highest number of people in​ attendance, 140 people. I then paired the high and low​ "x" with the high and low total cost of the event. Engagment 2 had the lowest total cost of​ $1,785, and Engagement 3 has the highest total cost of​ $2,100. Using​ (90, $1,785) and​ (140,$2,100) as my two data​ points, I calculated a variable cost per person of​ $6.30. Using the variable cost per person and the first data​ point, (90,​ $1,785), I calculated total fixed costs of​ $1,218. I then multiplied 100 people by​ $6.30 per person and added​ $1,218 to arrive at the total expected costs for the event of​ $1,848." Where did the staff member go​ wrong? A. They did not state the variable rate in its constant form. B. They failed to pair the lowest x with the correct y. C. They incorrectly defined the independent variable. D. They incorrectly assumed the fixed costs remained constant in total. E. They failed to convert the monthly fixed costs to annual fixed costs.

B. They failed to pair the lowest x with the correct y.

Neither Paper nor Plastic Company manufactures​ high-end, reusable shopping bags in a labor intensive production environment. The company uses a traditional normal costing system to allocate manufacturing overhead to production on the basis of direct labor hours logged. For the upcoming​ year, the company estimates it will incur​ $45,000 of total manufacturing overhead costs. Management is concerned that the current sales prices for its two product​ lines, Nylon and​ Canvas, are no longer competitive. In an effort to improve costing​ accuracy, and as a result​ pricing, management has decided to analyze manufacturing overhead using activity based costing. Management has identified two activities​ that, when​ combined, generate​ 65% of the total budgeted manufacturing overhead costs. The two activities are product movement and inspection. The product movement overhead is driven by the number of times the products are moved in batches on the factory floor and accounts for​ 45% of the total budgeted manufacturing overhead. The inspection overhead is driven by inspection hours logged and accounts for​ 20% of the total budgeted manufacturing overhead. The remaining budgeted manufacturing overhead is considered general factory overhead costs and will continue to be allocated to the product lines based on direct labor hours logged. The projected production levels for the upcoming year are​ 3,000 Nylon bags and​ 1,500 Canvas bags. In​ addition, the following input ratios are expected for the product​ lines: Canvas Product Movement Nylon - 100 units per move Canvas - 150 units per move Inspection Hours Nylon - 0.1 hours per unit Canvas - 0.1 hours per unit Direct Labor Hours Nylon - 0.5 hours per unit Canvas - 2.0 hours per unit Which of the following statements is incorrect with regard to the above​ information? A. Under activity based​ costing, 25% of the product movement manufacturing overhead costs will be allocated to the Canvas product line B. Under activity based​ costing, 50% of the inspection manufacturing overhead costs will be allocated to each product line. This is the correct answer. C. No cost distortion exists for the​ "slice" of total manufacturing overhead that is considered general factory overhead costs. D. The traditional costing system is undercosting the Nylon product line by​ $11,437.50 in total. E. The per unit cost distortion for the Nylon product line is not equal to the per unit cost distortion for the Canvas product line.

B. Under activity based​ costing, 50% of the inspection manufacturing overhead costs will be allocated to each product line.

Which of the following statements is correct regarding the inventory cost flow assumptions used in process​ costing? A. The​ first-in, first-out method is easier to use than the weighted average method. B. The weighted average method is more accurate than the​ first-in, first-out method when product costs vary drastically from period to period. C. Companies who adopt the weighted average method typically use a production cost report to track units and costs. D. The​ first-in, first-out method combines the physical flow and costs of units in beginning inventory and units started during the period.

C. Companies who adopt the weighted average method typically use a production cost report to track units and costs.

Meditate to Elevate is a wholesaler of gear to yoga studios. The company sells three product​ lines: Ujjayi,​ Drishti, and Tapas. A traditional departmental income statement for the year ended 12.31.20 is shown​ below: Ujjayi ​Sales Revenue $80,000 ​​(Cost of Goods​ Sold) - (65,000) ​Gross Profit - 15,000 ​​(Operating Expenses) - (20,000) ​Operating Income - $(5,000) Drishti ​Sales Revenue $30,000 ​​(Cost of Goods​ Sold) - (9,000) ​Gross Profit - 21,000 ​​(Operating Expenses) - (15,000) ​Operating Income - $6,000 Tapas ​Sales Revenue $37,500 ​​(Cost of Goods​ Sold) - (20,250) Gross Profit - 17,250 ​​(Operating Expenses) - (7,375) ​Operating Income - $9,875 ​40% of the cost of goods sold for each product line is variable. The remaining cost of goods sold for each product line consists of traceable fixed costs. The operating expenses for each product line include​ $6,000 of common fixed costs. The remaining operating expenses consist of traceable fixed costs. Due to profitability​ concerns, management is considering dropping the Ujjayi product line. If Ujjayi is​ dropped, the freed up capacity would be used to expand​ Tapas's operations. As a​ result, Tapas's sales volume would increase by​ 10%, and its traceable fixed costs would increase by​ $2,000 due to the cost of expansion. The loss of Ujjayi and the expansion of Tapas would result in a​ 5% decrease in​ Drishti's sales volume. What would be the annual change in operating income if Ujjayi is​ dropped? A. decrease of​ $5,442.50 B. decrease of​ $1,380.00 C. increase of​ $3,987.50 D. increase of​ $4,620.00 E. increase of​ $15,987.50

B. decrease of​ $1,380.00

If the standard direct material cost per unit is​ $10 and the standard direct material cost is​ $5 per​ pound, which of the following formulas correctly calculates the direct material input​ ratio? A. $10 per unit x​ $5 per pound B. $10 per unit​ ÷ $5 per pound C. $10 per unit​ - $5 per pound D. $10 per unit​ + $5 per pound

B. ​$10 per unit​ ÷ $5 per pound

Chai​ Me, Inc., a merchandiser of herbal tea​ products, began operations on January 1. The company expects sales in its first month of operations to total​ $14,000. 80% of the sales are expected to be cash sales. The remaining sales are expected to be on account. Full payment of all sales on account are expected in the month following the month of sale. Inventory purchases during January are expected to equal​ $4,000. Purchases are paid for in the month of purchase. No purchase discounts are available. Chai pays its sales staff a​ 10% commission on all sales made. The commission expense is recognized in the month of sale and is paid on the 10th of the following month.​ Chai's expected fixed monthly operating expenses are​ $4,570. Included in this amount is​ $500 of depreciation expense. All cash operating expenses are paid in the month incurred. Chai plans to take out a business loan with a local bank at the beginning of January. The entire amount borrowed will be immediately reinvested in the business to purchase assets and inventory. Interest will not begin to accrue until​ February; however, Chai is required to make a principal payment of​ $2,000 at the end of January.​ Additionally, Chai plans to pay a cash dividend of​ $1,000 to its owners in January. Chai is required to maintain a minimum cash balance of​ $3,000 at the end of each month by the bank. How much would Chai need to borrow from an established line of credit in January if it makes no adjustments to the above​ plan? A. $630 B. $2,870 C. $70 D. $3,370 E. Chai would not need to borrow from an established line of credit.

B. ​$2,870

9 to​ 5, LLC manufactures typewriters in two sequential production​ departments: assembly and inspection. The company uses the weighted average method to account for product costs and allocates manufacturing overhead to production at a rate of​ $60 per direct labor hour using a​ traditional, normal costing system. In its first production​ department, assembly, two direct materials are added during production. The first direct material accounts for​ 60% of the​ department's total direct material and is added at the beginning of the production process. The second direct material accounts for the remaining​ 40% and is added to the units when they are half way through the conversion process. Conversion costs are incurred uniformly throughout the production process. On July​ 31st, 10,000​ typewriters, 100% complete with respect to direct material costs and​ 80% complete with respect to conversion​ costs, were in the assembly​ department's work in process inventory. These units were assigned total costs of​ $8,700 on the July production cost​ report, $1,500 of which was for direct material costs. ​100,000 typewriters were started in the assembly department during August. At the end of​ August, 15,000 typewriters were still in production in the assembly department. These units were​ 60% complete with respect to direct material costs and​ 20% complete with respect to conversion costs. The following additional data are available for the​ department's August​ activities: Direct Materials Requisitioned - $154,500 Direct Labor Costs​ Incurred* - $22,700 ​*The direct labor wage rate was​ $20 per direct labor hour. Question 1 What was the cost to assemble one typewriter in​ July? A. $0.87 B. $2.40 C. $1.05 D. $2.50 E. $1.00

C. $1.05

#meta manufactures yoga props such as straps and blocks. Straps are sold to customers at a price of​ $18 per strap. The company currently produces​ 36,000 straps a​ year, which is​ 90% of full capacity. The company does not maintain any safety stock and only produces the exact number of straps it sells. At the current operating​ level, the following total costs are​ incurred: Product Costs - ​$136,800 Period Costs - $41,400 Of the total product​ costs, $43,200 are fixed costs. Of the total period​ costs, $16,200 are fixed costs. An order has been received from a chain of yoga studios for​ 5,000 straps at a special price of​ $15 per strap. If the special order is​ accepted, the unit variable manufacturing costs will increase by​ $0.20 per strap due to the type of buckle used. A different supplier will be used for the buckles and therefore a new supplier contract has to be drafted by the​ company's outside attorney. The​ attorney's fee is estimated to be​ $1,000. Variable period costs consist solely of sales​ commissions, which will not be paid on the special order. No other costs will be affected by acceptance of the special order. By how much will operating income increase if the special order is​ accepted? A. $39,800 B. $34,120 C. $45,300 D. $43,300 E. None of the above.

C. $45,300

#meta manufactures yoga props such as straps and blocks. Straps are sold to customers at a price of​ $18 per strap. The company currently produces​ 36,000 straps a​ year, which is​ 90% of full capacity. The company does not maintain any safety stock and only produces the exact number of straps it sells. At the current operating​ level, the following total costs are​ incurred: Product Costs ​$136,800 Period Costs ​$41,400 Of the total product​ costs, $43,200 are fixed costs. Of the total period​ costs, $16,200 are fixed costs. An order has been received from a chain of yoga studios for​ 5,000 straps at a special price of​ $15 per strap. If the special order is​ accepted, the unit variable manufacturing costs will increase by​ $0.20 per strap due to the type of buckle used. A different supplier will be used for the buckles and therefore a new supplier contract has to be drafted by the​ company's outside attorney. The​ attorney's fee is estimated to be​ $1,000. Variable period costs consist solely of sales​ commissions, which will not be paid on the special order. No other costs will be affected by acceptance of the special order. By how much will operating income increase if the special order is​ accepted? A. ​$39,800 B. ​$34,120 C. ​$45,300 Your answer is correct. D. ​$43,300 E. None of the above.

C. $45,300

Get​ Reel, Inc. is a manufacturer of fishing rods. The company produces the rods in small batches based on customer specifications. At the beginning of the​ year, Get Reel estimated total manufacturing overhead of​ $48,500, total direct labor hours of​ 10,000 and total machine hours of​ 2,000. The company uses a​ traditional, normal costing system and allocates manufacturing overhead to production using the most appropriate allocation base for its labor intensive manufacturing environment. During​ January, Get Reel started and finished Job Santiago. The job consisted of 10 identical fishing rods sold at a sales price of​ $1,100 per rod. A total of​ $2,000 in direct materials were requisitioned for the job during the month. Direct laborers worked a total of 16.0 hours on the job and were paid at a rate of​ $18 per direct labor hour. The job required 2.0 hours of machine time. Assuming 6 of the rods were sold during​ January, what is the total gross profit reported on the job during the​ month? A. $5,174.82 B. $5,342.64 C. $5,180.64 D. $5,183.55 E.​ $5,198.10

C. $5,180.64

Create Space produces yoga mats and props. The company currently allocates manufacturing overhead to production at a rate of​ $5.00 per direct labor hour. In order to gain a better understand of how its products consume overhead​ resources, the company is considering using activity based costing for internal planning and decision making purposes. Two activities have been identified as generating​ 80% of the total budgeted manufacturing overhead. Information related to the two activities is as​ follows: Activity Machine Setup Inspection Cost Pool Cost Driver Activity Level ​Machine Setup - $106,000 ​Inspection - $59,000 Cost Driver Activity Level Machine Setup - 200 setups Inspection - 500 inspection hours The remaining overhead is attributable to general factory costs and will continue to be allocated based on direct labor hours. One of the​ company's products, Restorative​ Cushion, requires 50​ setups, 675 inspection​ hours, and​ 12,250 direct labor hours. What is the​ product's total cost​ distoration? A. $12,241 B. $44,900 C. $57,150 D. $41,250 E. $69,400

C. $57,150

Where the Boat Leaves​ From, Inc., is a manufacturer of custom built boat docks. At the beginning of​ July, two jobs were in​ progress: Lanier and Sinclair. Lanier and​ Sinclair's June 30th job cost records showed balances of​ $2,500 and​ $5,000, respectively. During​ July, one additional job was​ started: Hartwell. Direct laborers are paid at a rate of​ $20 per hour. The company uses a​ traditional, normal costing system to account for manufacturing overhead. Manufacturing overhead is allocated to production at a rate of​ $5 per direct labor hour. The following actual factory overhead costs were incurred during the​ month: indirect materials​ $50, supervisor's salary​ $300, and equipment depreciation​ $100. In​ addition, the sales staff is paid a​ 2% commission on gross revenue generated from jobs sold during the month. The following additional information was extracted from the accounting records of Where the Boat Leaves​ From: direct materials added during July ​Lanier - $500 ​Sinclair - $1,000 ​Hartwell - $1,400 direct labor costs incurred during July ​Lanier - $150 ​Sinclair - $750 ​Hartwell - $800 Sinclair and Hartwell were sold at cost plus​ 80% during the month. Lanier remained in process at month end. Calculate the Gross Profit reported on the Income Statement for July assuming the Manufacturing Overhead account is closed out to cost of goods sold at the end of each month. A. $7,495 B. $7,520 C. $7,445 D. $6,710 E. $8,075

C. $7,445

Champagne of the​ South, Inc. is a manufacturer of bottled sweet tea. The​ company's Raw Materials Inventory only contains direct materials.​ $27,000 in Raw Materials were purchased during the year. The ending Raw Materials Inventory was​ $2,000 higher than the beginning Raw Materials Inventory. The company began the year with​ $17,000 in its Work in Process Inventory. By year​ end, the Work in Process Inventory had increased to​ $18,000. At year​ end, the company reported​ $15,600 in its Finished Goods​ Inventory, which was a net decrease of​ $4,500 from the beginning of the year. The following costs were incurred during the​ year: direct labor costs of​ $30,000, factory​ supervisor's salary of​ $10,000, factory utilities of​ $12,000, factory depreciation of​ $9,000, factory rent of​ $8,000, indirect factory materials of​ $500, and​ selling, general, and administrative expenses of​ $22,000. What was the cost assigned to the units completed during the​ year? A. $97,500 B. $89,000 C. $93,500 D. ​$98,000 E. $94,500

C. $93,500

Why is using a job costing system inefficient for a manufacturer who produces large batches of identical units of​ product? A. All units are completed in the period in which they are started. B. Direct material and direct labor costs cannot be easily identified. C. All of the units produced require the same inputs and conversion processes for completion. D. The ultimate goal of the costing system is not to determine the cost of a unit of product

C. All of the units produced require the same inputs and conversion processes for completion.

Why is using a job costing system inefficient for a manufacturer who produces large batches of identical units of​ product? A. All units are completed in the period in which they are started. B. Direct material and direct labor costs cannot be easily identified. C. All of the units produced require the same inputs and conversion processes for completion. D. The ultimate goal of the costing system is not to determine the cost of a unit of product

C. All of the units produced require the same inputs and conversion processes for completion.

The following information was extracted from the accounting records of Jump​ Around, Inc., a manufacturer of pogo​ sticks, for the fourth quarter of​ 2019: Raw materials used . . .​ $12,000 Indirect materials used . . .​ $3,000 Direct​ labor . . .​ $6,000 Indirect factory labor . . .​ $1,000 Administrative and sales salaries . . .​ $3,000 Building​ depreciation* . . .​ $3,125 Building​ rent* . . .​ $3,000 ​*The building is​ 5,000 square feet.​ 4,000 square feet are devoted to manufacturing operations. The remaining square footage is devoted to administrative and selling activities. Shared costs are allocated based on square footage. The company started the quarter with​ $15,000 in its Work in Process inventory. The balance in Work in Process inventory had increased to​ $20,000 by the end of the quarter. The net decrease in Finished Goods inventory during the quarter was​ $3,000. The company uses an actual costing system to account for MOH and includes both direct and indirect materials in its Raw Materials Inventory account. Which of the following statements is​ correct? A. The total period costs included in the above data chart equal​ $3,000. B. The total indirect product costs for the period were​ $5,900. C. Gross Profit for the period was equal to Sales Revenue minus​ $21,900. D. Costs assigned to units completed during the period was​ $23,900. E. More than one of the above statements is correct.

C. Gross Profit for the period was equal to Sales Revenue minus​ $21,900.

So​ You're Telling Me​ There's Still a​ Chance, Inc. is a manufacturer of leather briefcases. The company uses the high low method to develop cost behavior equations. The following per unit manufacturing costs were incurred in its operations for the last four months of the previous​ year: September Activity Level - 105 briefcases ​Cost Per Briefcase - $67.00 October Activity Level - 63 briefcases ​Cost Per Briefcase - $100.00 November Activity Level - 72 briefcases ​​Cost Per Briefcase - $94.00 December Activity Level - 117 briefcases ​​​Cost Per Briefcase - $64.00 Assuming the relevant range extends to 130 briefcases per month and the above data set does not contain an​ outlier, which of the following statements is​ incorrect? A. If​ 1,500 briefcases are expected to be produced in a given​ year, the estimated total annual manufacturing costs would be​ $91,968. B. For each additional briefcase​ manufactured, costs are expected to increase by​ $22.00. C. If 125 briefcases are expected to be produced in a given​ month, the estimated total monthly manufacturing costs would be​ $10,250. D. The monthly fixed costs are expected to be​ $4,914. E. The manufacturing costs are considered a mixed cost because they have both a variable component and a fixed component.

C. If 125 briefcases are expected to be produced in a given​ month, the estimated total monthly manufacturing costs would be​ $10,250.

Say No to the​ Brush, LLC. is a manufacturer of premium hairstyling products.​ It's most popular​ product, It's​ Real, is sold in 10 ounce bottles. One bottle of​ It's Real is expected to use 8 ounces of direct material at a standard direct material cost of​ $1.75 per ounce. During the​ month, the company purchased​ 320,000 ounces of direct material at a total cost of​ $608,000. However, only​ 285,000 ounces of direct material were used in the monthly production of​ 38,000 bottles. The expected direct labor cost per bottle of​ It's Real is​ $2. The company anticipates that 0.25 direct labor hours will be logged for each bottle produced. During the​ month, direct laborers worked​ 10,000 direct labor hours and were paid​ $7.56 per hour. Given the above​ data, which of the following statements is​ correct? A. The direct labor hours allowed for the actual output level were greater than the direct labor hours logged. B. The Direct Material Price Variance is favorable. C. The actual direct labor rate was less than the standard direct labor rate. D. The total Direct Material Variance can be calculate by adding the Direct Material Price Variance and the Direct Material Quantity Variance. E. The actual direct material unit input ratio was greater than the standard direct material unit input ratio.

C. The actual direct labor rate was less than the standard direct labor rate.

Syrup​ Traps, Inc. manufactures professional grade waffle irons. The standard direct material unit cost for its most popular waffle iron is​ $48 per waffle iron. The standard input ratio for direct material is 2.4 ounces per waffle iron. In a recent​ month, 5,100 ounces of direct material were used in the production of​ 2,040 waffle irons. The actual cost of direct material purchased during the month was​ $90,000. A favorable total direct material variance of​ $6,120 was reported for the month. Which of the following statements is correct with regard to the direct material variances calculated for the above​ data? A. The actual price paid per ounce of direct material was​ $0.40 more than the standard price per ounce of direct material. B. The production manager is responsible for both the direct material price variance and the direct material quantity variance. C. The net decrease in the​ company's raw material inventory during the period was 100 ounces. D. The direct material quantity variance is​ $9,792 unfavorable. E. The direct material price variance is​ $10,200 favorable.

C. The net decrease in the​ company's raw material inventory during the period was 100 ounces.

​It's Five​ O'clock Somewhere, LLC manufactures beverage containers. The company is anxious to produce and sell a new beverage container designed to keep beverages cool for up to 2 hours. The container will sell for​ $3 each. Enough capacity exists in the​ company's plant to produce​ 14,000 of the new containers each month.​ $0.40 from every sales dollar is contribution margin. Fixed costs associated with the container would total​ $12,000 per month in the existing facility. The​ company's Marketing Department predicts that if demand for the new container exceeds the​ 14,000 containers that the company is able to produce in its current facility that additional manufacturing space can be rented from another company at a fixed cost of​ $2,000 per month. The rented facility has a production capacity of​ 8,000 units per month. The variable cost percentage in the rented facility would equal​ 70% due to somewhat less efficient operations than in the​ company's current facility. Which of the following statements is​ correct? A. The maximum monthly operating income that the company could make with the two facilities is ​$19,600. B. The monthly breakeven point in the rented facility is greater than the monthly breakeven point in the existing facility. C. To make a monthly target profit of​ $5,000, a total of​ 16,445 containers must be produced and sold. D. As long as the​ company's monthly target profit is less than or equal to​ $5,200, it will not need to rent the additional facility. E. If the company produces less than​ 14,000 containers in its current​ facility, the total fixed costs will be less than ​$12,000.

C. To make a monthly target profit of​ $5,000, a total of​ 16,445 containers must be produced and sold.

Meditate to Elevate is a wholesaler of gear to yoga studios. The company sells three product​ lines: Ujjayi,​ Drishti, and Tapas. A traditional departmental income statement for the year ended 12.31.20 is shown​ below: Ujjayi Sales Revenue - ​$100,000 ​(Cost of Goods​ Sold) - ​(60,000) Gross Profit - ​40,000 ​(Operating Expenses) - ​(30,000) Operating Income - ​$10,000 Drishti Sales Revenue - ​​$30,000 ​(Cost of Goods​ Sold) - ​(18,000) Gross Profit - ​​12,000 ​(Operating Expenses) - ​(14,000) Operating Income - ​​$(2,000) Tapas Sales Revenue - ​​$37,500 ​(Cost of Goods​ Sold) - ​​(30,250) Gross Profit - ​7,250 ​(Operating Expenses) - ​​(3,375) Operating Income - ​​$3,875 ​30% of the cost of goods sold for each product line is variable. The remaining cost of goods sold for each product line consists of traceable fixed costs. Operating expenses for each product line include​ $2,000 of common fixed costs. The remaining operating expenses consist of variable costs. Due to profitability​ concerns, management is considering dropping the Drishti product line. If Drishti is​ dropped, the freed up capacity would be used to expand​ Ujjayi's operations. As a​ result, Ujjayi's sales volume would increase by​ 20%, and its traceable fixed costs would increase by​ $5,000 due to costs related to expansion. The loss of Drishti and the expansion of Ujjayi would result in a​ 2% decrease in​ Tapas's sales volume. What would be the annual change in operating income if Drishti is​ dropped? A. decrease of​ $7,717.50 B. increase of​ $1,979,00 C. increase of​ $5,259.00 D. decrease of​ $2,145.00 E. increase of​ $10,831.50

C. increase of​ $5,259.00

Luke's Diner, Inc. is a manufacturer of restaurant grade coffee makers. For the year just​ ended, the​ company's building expenses totaled​ $41,000. The building is used for both selling and administrative activities and manufacturing operations. Of the​ 8,000 total building square​ footage, 5,000 square feet are used for manufacturing operations. The remaining building square footage is used for​ selling, general, and administrative activities. Building costs are split into period and product costs based on building square footage. The company includes both direct and indirect materials in its raw material inventory. At the beginning of the​ year, the company reported​ $15,000 in its raw material inventory. The ending raw material inventory reported on its balance sheet was​ $18,000. The company reported raw material purchases of​ $33,900 during the year and direct materials used of​ $25,300. ​ $8,600 of direct labor costs and​ $4,200 of indirect factory labor costs were reported on the​ company's cost of goods sold schedule for the year. The company reported an​ $8,000 net increase in its work in process inventory during the year. If the cost of units completed during the year was​ $6,400 lower than the cost of units sold during the​ year, what was the​ company's sales revenue given a gross profit of​ $11,700? A. $86,300 B. ​$89,825 C. ​$79,425 D. $82,435 E. ​$95,425

C. ​$79,425

Celestial​ Beings, Inc. is a manufacturer of incense. The company produces two main​ products: Sun and Moon. Currently the company uses a traditional costing system and allocates manufacturing overhead to production based on machine hours. Each unit of Sun requires 0.75 machine hours to​ product, and each unit of Moon requires 1.0 machine hours to produce. The company expects to make​ 2,000 units of Sun and​ 1,000 units of Moon in the upcoming period. Due to pricing​ concerns, management is considering moving to an activity based costing system. Two activities and cost pools have been identified that account for​ 80% of the total budgeted​ manufacturing: machine setup​ $48,000 and product movement​ $32,000. The machine setup overhead costs are driven by number of setups. The production equipment is setup for every 10 units of Sun produced and for every 25 units of Moon produced. The product movement overhead costs are driven by number of moves. Sun is moved in groups of 25​ units, and Moon is moved in groups of 50 units. The remaining​ 20% of the total budgeted manufacturing overhead costs is considered general factory overhead costs and will continue to be allocated to the​ company's products using machine hours even if the switch to ABC is made. The following direct product cost information has been compiled for each product​ line: Direct Material ​Sun - $5.25 per unit Moon - ​$7.65 per unit Direct​ Labor* ​Sun - $7.50 per unit ​Moon - $10.00 per unit ​*Direct labor wages average​ $20 per hour. Question 1 What is the total cost distortion of the Sun product​ line? A. $20,848 B. $20,968 C. $57,650 D. $17,600 E. $10,818

D. $17,600

Celestial​ Beings, Inc. is a manufacturer of incense. The company produces two main​ products: Sun and Moon. Currently the company uses a traditional costing system and allocates manufacturing overhead to production based on machine hours. Each unit of Sun requires 0.75 machine hours to​ product, and each unit of Moon requires 1.0 machine hours to produce. The company expects to make​ 2,000 units of Sun and​ 1,000 units of Moon in the upcoming period. Due to pricing​ concerns, management is considering moving to an activity based costing system. Two activities and cost pools have been identified that account for​ 80% of the total budgeted​ manufacturing: machine setup​ $48,000 and product movement​ $32,000. The machine setup overhead costs are driven by number of setups. The production equipment is setup for every 10 units of Sun produced and for every 25 units of Moon produced. The product movement overhead costs are driven by number of moves. Sun is moved in groups of 25​ units, and Moon is moved in groups of 50 units. The remaining​ 20% of the total budgeted manufacturing overhead costs is considered general factory overhead costs and will continue to be allocated to the​ company's products using machine hours even if the switch to ABC is made. The following direct product cost information has been compiled for each product​ line: Direct Material ​Sun - $5.25 per unit ​Moon - $7.65 per unit Direct​ Labor* ​Sun - $7.50 per unit ​Moon - $10.00 per unit ​*Direct labor wages average​ $20 per hour. Question 1 What is the total cost distortion of the Sun product​ line? A. $20,968 B. $20,848 C. $10,818 D. $17,600 E. $57,650

D. $17,600

1. The High School Musical Company has two divisions - Troy and Gabriella. In the previous year, Troy generated sales revenue of $300,000 and had total traceable costs of $80,000, $20,000 of which was fixed. Gabriella generated a segment margin of $30,000. Common fixed costs totaled $170,000; $50,000 of this amount was allocated to the Gabriella division. Management is considering the elimination of the Gabriella division since it has shown an operating loss for the past several years. If Gabriella is dropped, the company would open a new division in its place. The new division would generate $200,000 in sales revenue and have a contribution margin percentage equal to 40%. The new division's traceable fixed costs would total $15,000. In addition, it is projected that opening the new division would decrease Troy's sales volume by 6%. What would be the net increase in the company's operating income if Gabriella is dropped and replaced with the new division? a. $20,600 b. $100,600 c. $99,400 d. $90,600 e. $21,800

a. $20,600 Chapter 8

Celestial​ Beings, Inc. is a manufacturer of incense. The company produces two main​ products: Sun and Moon. Currently the company uses a traditional costing system and allocates manufacturing overhead to production based on machine hours. Each unit of Sun requires 0.75 machine hours to​ product, and each unit of Moon requires 1.0 machine hours to produce. The company expects to make​ 2,000 units of Sun and​ 1,000 units of Moon in the upcoming period. Due to pricing​ concerns, management is considering moving to an activity based costing system. Two activities and cost pools have been identified that account for​ 80% of the total budgeted​ manufacturing: machine setup​ $48,000 and product movement​ $32,000. The machine setup overhead costs are driven by number of setups. The production equipment is setup for every 10 units of Sun produced and for every 25 units of Moon produced. The product movement overhead costs are driven by number of moves. Sun is moved in groups of 25​ units, and Moon is moved in groups of 50 units. The remaining​ 20% of the total budgeted manufacturing overhead costs is considered general factory overhead costs and will continue to be allocated to the​ company's products using machine hours even if the switch to ABC is made. The following direct product cost information has been compiled for each product​ line: Direct Material ​Sun - $5.25 per unit ​Moon - $7.65 per unit Direct​ Labor* ​Sun - $7.50 per unit ​Moon - $10.00 per unit ​*Direct labor wages average​ $20 per hour. A. $22.93 underpriced per unit B. $21.12 overpriced per unit C. $17.60 underpriced per unit D. $38.72 overpriced per unit E. $19.36 overpriced per unit

D. $38.72 overpriced per unit

​DolCor, Inc. manufactures and sells two​ products: Debit and Credit. The following data were extracted from last​ month's accounting​ records: Debit Sales Revenue - $180,000 ​Product Costs - $144,000 ​Period Costs - $26,400 Credit ​Sales Revenue - $190,000 ​Product Costs - $132,000 ​Period Costs - $28,000 ​Debit's variable product costs consist of​ $45,000 of direct​ material, $24,000 of direct​ labor, and​ $36,000 of manufacturing overhead. The remainder of its product costs are traceable fixed manufacturing overhead.​ Debit's period costs consist of​ $20,000 of sales commission paid as a percentage of sales revenue. The remainder of its period costs are allocated common fixed costs. ​Credit's variable cost percentage is​ 75%. Of its fixed​ costs, $11,000 are traceable. The remainder of its fixed costs are allocated common fixed costs. Which of the following statements is​ incorrect? A. Credit's performance should be judged on a segment margin of​ $36,500. B. If Debit was expected to generate a segment margin of​ $18,000, it fell short of​ management's expectations by​ $2,000. C. Credit's contribution margin percentage for the period is​ 25%. D. Debit's total traceable costs equal​ $39,000. Your answer is correct. E. The​ company's operating income for the period equals​ $39,600

D. Debit's total traceable costs equal​ $39,000.

Which of the following statements is incorrect regarding job​ costing? A. If all units in a job are​ identical, the unit cost is equal to the total job cost divided by the number of units in the job. B. A manufacturer who produces in small batches should use job costing because each batch may require different product costs for completion. C. The​ "ending balance" calculated in the job cost record could be reported in either work in process​ inventory, finished goods​ inventory, or cost of goods sold depending on the ending status of the job. D. Manufacturing overhead is disregarded when calculating the cost of a job. E. The initial cost object under job costing is either a​ customer's order or a group of units.

D. Manufacturing overhead is disregarded when calculating the cost of a job.

Front Porch​ Shenanigans, Inc. manufactures bed swings in three sequential production​ departments: machining,​ assembly, and inspection. Two direct​ materials, wood and​ chains, are used in the machining department. The wood is added at the beginning of the production process and accounts for​ 80% of the direct material input. The chains are added when the conversion process is​ 85% complete. Conversion costs are incurred uniformly throughout production in the machining department. The machining department began January with 675 swings in process and started another​ 1,620 swings during the month. At month​ end, 660 swings remained in process in the department and were assigned a cost of​ $48,906 on the​ department's January production cost​ report, $19,800 of which was for direct material costs. Management estimates that​ 25% more in conversion costs need to be added to the swings in ending inventory before they can be transferred to the assembly department. Given the above​ information, which of the following statements is correct with regard to the machining​ department's January​ operations? A.Physical units in ending inventory each receive​ $37.50 of direct material cost at month end. B.The total costs to account for in the machining department during January equals​ $158,823.00. C.The cost to complete a swing in the machining department during January equals​ $89.91. D.The costs transferred to the assembly department during January equals​ $157,450.50. E.Machining completed​ 2,130 units with respect to conversion costs.

D. The costs transferred to the assembly department during January equals​ $157,450.50.

Making​ Waves, Inc. manufactures two lines of​ bodyboards: Basic and Deluxe. Under the current costing​ system, manufacturing overhead is allocated to each product line based on direct labor hours. Each Basic bodyboard requires 4.0 direct labor hours to​ shape, and each Deluxe bodyboard requires 12.0 direct hours to shape. For the upcoming​ period, the company expects to manufacture​ 1,000 Basic bodyboards and 500 Deluxe bodyboards. In​ addition, the company estimates that its total manufacturing overhead for the upcoming period will be​ $130,000. The controller for the company has suggested to management that an activity based costing system be analyzed to better understand what is driving manufacturing overhead costs. Before fully analyzing the impact of switching to​ ABC, management has asked the controller to focus on the quality inspection​ activity, which accounts for​ 75% of the total budgeted manufacturing overhead. After speaking with the production​ supervisor, the controller has determined that the most appropriate cost driver for quality inspection overhead costs is the total number of quality inspection hours logged. Inspections are performed for every 40 Basic bodyboards manufactured and every 10 Deluxe bodyboards manufactured. Quality inspectors spend 2 hours inspecting each batch. Which of the following statements is​ incorrect? A. The cost distortion per unit is higher for the Deluxe than it is for the Basic bodyboard line. B. A total of 150 inspection hours are expected for the projected production level. Your answer is not correct. C. Under activity based​ costing, approximately​ 67% of the overhead related to quality inspection is allocated to the Deluxe D. The current costing system is undercosting Basic and overcosting Deluxe with respect to the quality inspection overhead. E. Under the current costing​ system, 40% of the overhead related to quality inspection is allocated to Basic.

D. The current costing system is undercosting Basic and overcosting Deluxe with respect to the quality inspection overhead.

Syrup​ Traps, Inc. manufactures professional grade waffle irons. The standard direct material unit cost for its most popular waffle iron is​ $48 per waffle iron. The standard input ratio for direct material is 2.4 ounces per waffle iron. In a recent​ month, 5,100 ounces of direct material were used in the production of​ 2,040 waffle irons. The actual cost of direct material purchased during the month was​ $90,000. A favorable total direct material variance of​ $6,120 was reported for the month. Which of the following statements is incorrect with regard to the direct material variances calculated for the above​ data? A. The net decrease in the​ company's raw material inventory during the period was 100 ounces. B. Based on the DM quantity​ variance, it is likely that the DM price variance resulted from the purchase of substandard direct material. C. The direct material quantity variance is​ $4,080 unfavorable. D. The direct material price variance is​ $10,200 favorable. E. The actual price paid per ounce of direct material was​ $2 less than the standard price per ounce of direct material.

D. The direct material price variance is​ $10,200 favorable.

Over and​ Under, Inc. manufactures weaving looms. Before the period​ began, the company prepared the following manufacturing overhead budget for an expected activity level of​ 15,000 direct labor hours​ (DL hrs): Variable Manufacturing Overhead Costs - $322,500 Fixed Manufacturing Overhead Costs - $205,000 By the end of the​ period, the company noted that​ 3,000 fewer direct labor hours were logged than expected. The total actual manufacturing overhead costs incurred during the period was​ $545,000, of​ which, $325,000 was fixed. Which of the following statements is incorrect for the above​ data? A. The total volume variance can be calculated by multiplying the unit variable cost by the difference between the expected DL hrs and the actual DL hrs. B. The master budget variance related to fixed manufacturing overhead costs for the period equals​ $120,000. C. The flexible budget variance for fixed manufacturing overhead costs equals the master budget variance for fixed overhead costs. D. The​ company's flexible budget variance for total manufacturing overhead costs during the period equals​ $64,500. E. The volume variance for variable manufacturing overhead costs is favorable because fewer DL hrs were logged during production than expected.

D. The​ company's flexible budget variance for total manufacturing overhead costs during the period equals​ $64,500.

Luz​ Azul, LLC is a merchandiser of blue light blocking glasses. The company began 2019 with​ $10,000 in cash and reported net income of​ $6,700 on its 2019 income statement. During the year a loss of​ $250 was reported on the cash sale of a piece of equipment with a book value of​ $1,000. A new piece of equipment was purchased at a cost of​ $8,500 to replace the equipment that was sold. The company paid​ $1,500 from its available cash balance to purchase the equipment and took out a cash​ long-term note payable from its bank for the remaining balance. All dividends declared during 2019 were paid in 2019. There was not a balance in the dividends payable account at the beginning of the year. There was a​ $250 net decrease in retained earnings during the year. Given a reported positive cash flow of​ $500 from its operating activities during the​ year, which of the following statements is​ incorrect? A. The​ company's cash decreased by​ $7,200 during the year. B. The company operated within its means during the year. C. The ending cash reported on the balance sheet was ​$2,800. D. The​ company's investing activities used​ $750 more in cash than they provided. E. The​ company's net cash flows from financing activities were ​$50.

D. The​ company's investing activities used​ $750 more in cash than they provided.

Luz​ Azul, LLC is a merchandiser of blue light blocking glasses. The company began 2019 with​ $10,000 in cash and reported net income of​ $6,700 on its 2019 income statement. During the year a gain of​ $250 was reported on the cash sale of a piece of equipment with a book value of​ $1,000. A new piece of equipment was purchased at a cost of​ $8,500 to replace the equipment that was sold. The company paid​ $1,500 from its available cash balance to purchase the equipment and took out a cash​ long-term note payable from its bank for the remaining balance. All dividends declared during 2019 were paid in 2019. There was not a balance in the dividends payable account at the beginning of the year. There was a​ $250 net decrease in retained earnings during the year. Given a reported negative cash flow of​ $500 from its operating activities during the​ year, which of the following statements is​ correct? A. The company paid​ $6,450 in dividends during the year. B. The ending cash reported on the balance sheet was ​$2,800. C. The company operated within its means during the year. D. The​ company's net cash flows from financing activities were ​$50. Your answer is correct. E. The​ company's investing activities used​ $250 more in cash than they provided.

D. The​ company's net cash flows from financing activities were ​$50

Which of the following lists all phases of the business​ cycle? A. beginning, middle, end B. service, merchandiser, manufacturer C. exposition, rising​ action, climax D. planning, directing, controlling E. decision-making, recording, comparing

D. planning, directing, controlling

Create Space produces yoga mats and props. The company currently allocates manufacturing overhead to production at a rate of​ $5.00 per direct labor hour. In order to gain a better understand of how its products consume overhead​ resources, the company is considering using activity based costing for internal planning and decision making purposes. Two activities have been identified as generating​ 80% of the total budgeted manufacturing overhead. Information related to the two activities is as​ follows: Activity Machine Set up Inspection Cost Pool ​Machine Setup - $106,000 ​Inspection - $59,320 Cost Driver Activity Level Machine Setup - 250 setups ​Inspection - 1,000 inspection hours The remaining overhead is attributable to general factory costs and will continue to be allocated based on direct labor hours. If one of the​ company's products requires 50​ setups, 675 inspection​ hours, and​ 12,250 direct labor​ hours, is the product being overcosted or undercosted by the traditional system and by how much in​ total? A. overcosted by​ $24,834 B. undercosted by​ $1,720 C. undercosted by​ $8,616 D. undercosted by​ $12,241 E. None of the above.

D. undercosted by​ $12,241

Hawkins Audio​ Video, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras.​ 60,000 units of the part were made by Hawkins last year. At this production​ level, the company incurred the following direct product​ costs: Direct Materials - $250,000 Direct Labor - ​$104,000 Manufacturing Overhead incurred during the same period for production of the part is represented by the following cost behavior​ equation: y​ = $0.10x​ + $50,000. If the part were purchased from an outside​ supplier, 80% of the total fixed manufacturing overhead cost would​ continue, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be​ $12,600 per year. A supplier has been identified who can sell the part to Hawkins at a price of​ $7.80 per unit. Which of the following statements is correct assuming​ 50,000 units of the part will be needed next​ year? A. Qualitative​ considerations, such as whether the purchased part is of equal quality to its manufactured​ part, should be considered by Hawkins. B. At a purchase price of​ $7.80, the cost to make is less than the cost to buy. C. The total cost to make the part next year is​ $350,000. D. If production is​ outsourced, operating income will decrease by​ $67,400. E. All of the above statements are correct.

E. All of the above statements are correct.

Which of the following statements is correct concerning standard costing​ and/or variance​ calculations? A. A price​ (rate) variance calculates the difference between what a company paid and what it expected to pay for its production input. B. Standards are used at the beginning of the period to budget and at the end of the period to evaluate performance. C. A favorable quantity​ (efficiency) variance indicates that a company used less input than expected for the actual level of output. D. Variances falling outside of an acceptable range of outcomes require investigation. E. All of the above statements are correct.

E. All of the above statements are correct.

Which of the following statements is correct regarding job​ costing? A. The​ "ending balance" calculated in the job cost record could be reported in either work in process​ inventory, finished goods​ inventory, or cost of goods sold depending on the ending status of the job. B. The initial cost object under job costing is either a​ customer's order or a group of units. C. If all units in a job are​ identical, the unit cost is equal to the total job cost divided by the number of units in the job. D. A manufacturer who produces in small batches should use job costing because each batch may require different product costs for completion. E. All of the above statements are correct.

E. All of the above statements are correct.

Which of the following statements is correct with regard to direct material variances​ and/or direct labor​ variances? A. The quantity purchased is used to determine the direct materials price variance. B. The direct labor efficiency variance can first be calculated at the point of production. C. The production manager is held responsible for all direct labor variances. D. The standard input ratio for direct materials represents the expected amount of direct material used to produce one unit of output. E. All of the above statements are correct.

E. All of the above statements are correct.

Which of the following statements is correct with regard to direct material variances​ and/or direct labor​ variances? A. The quantity purchased is used to determine the direct materials price variance. B. The standard input ratio for direct materials represents the expected amount of direct material used to produce one unit of output. C. The production manager is held responsible for all direct labor variances. D. The direct labor efficiency variance can first be calculated at the point of production. E. All of the above statements are correct.

E. All of the above statements are correct.

Which of the following is correct with regard to​ short-term decision​ making? A. The effect on current and future customer relationships should not be considered when deciding whether to accept or reject a special order. B. When a manufacturer outsources production of a part used in its production​ process, the manufacturer will typically eliminate all fixed manufacturing costs. C. A company having few competitors would typically use target costing in its pricing approach. D. In a​ keep/drop decision, if all of a​ company's fixed costs are​ common, a​ segment's segment margin will be less than its contribution margin. E. If a company has insufficient excess capacity to fully fill a special​ order, the company will need to give up regular sales if they accept the special order.

E. If a company has insufficient excess capacity to fully fill a special​ order, the company will need to give up regular sales if they accept the special order.

Selected data for three investment centers of Going​ Coastal, Inc., a manufacturer of beach​ chairs, are given below for the previous operating​ period: Water ​Sales Revenue - $60,000 ​Capital - $10,000 ​Operating Income - $1,600 Sun ​Sales Revenue - $100,000 Capital - ​$50,000 ​Operating Income - $9,000 Sand ​Sales Revenue - $80,000 Capital - ​$20,000 ​Operating Income - $1,800 An investment opportunity has been identified that will yield a​ 17% return on investment for each center. The​ company's minimum acceptable rate of return is​ 15%. Which of the following statements is​ incorrect? A. Water's manager is the most effective in terms of generating sales revenue from invested capital. B.Sand's ROI is less than the​ company's hurdle rate. C. If residual income is used to award​ bonuses, the managers of all three centers will accept the investment opportunity. D. If each manager is paid a bonus based solely on his ability to exceed the​ division's prior period​ ROI, then two of the managers will accept the opportunity. E. If each manager is paid a bonus based solely on his ability to exceed the​ division's prior period​ ROI, Sun's manager would make a decision that is in the​ company's "best​ interest."

E. If each manager is paid a bonus based solely on his ability to exceed the​ division's prior period​ ROI, Sun's manager would make a decision that is in the​ company's "best​ interest."

Which of the following statements concerning performance evaluation tools used in decentralized operations is correct? a. A positive residual income indicates that a segment's return on investment is greater than the company's target rate of return. b. Segment margin is calculating by subtracting the common fixed costs allocated to a segment from the segment's contribution margin. c. Segmented income statements are also referred to as budget versus actual reports. d. A segment's return on investment can be calculated by dividing the segment's sales margin percentage by its capital turnover ratio. e. Performance reports can only be used to evaluate the performance of cost centers.

a. A positive residual income indicates that a segment's return on investment is greater than the company's target rate of return. Chapter 10

Reach the​ Summit, Inc. is planning to open a new rock climbing facility in Athens. Summit will generate revenue by selling monthly memberships that give climbers unlimited access to the facility. The facility will have an estimated​ $240,000 in assets. The owners expect to earn a​ 10% annual return on the​ company's assets. The target profit is expected to be earned evenly throughout the year. The​ facility's annual fixed costs are estimated to be​ $48,000. The variable costs per climber are estimated to be​ $12 per month. After researching the​ market, the company believes that it can sell 80 memberships in its first month of operations if it does not require an initial signup fee. Summit can only charge​ $80 per month for a membership because of competition from another facility in the area. Which of the following statements is incorrect regarding the​ company's first month of​ operations? A. Holding all other variables​ constant, if the company reduces variable costs to​ $5.00 per​ member, the company would meet its monthly target profit. B. The total monthly target costs for the company is ​$4,400. C. If it makes no changes to its projected​ operations, the company will fall short of its monthly target profit by ​$560. D. Reach the Summit is considered a price taker in its current market. E. If fixed costs are increased by​ $560 per month and all other variables remain​ constant, the company would meet its monthly target profit.

E. If fixed costs are increased by​ $560 per month and all other variables remain​ constant, the company would meet its monthly target profit.

Reach the​ Summit, Inc. is planning to open a new rock climbing facility in Athens. Summit will generate revenue by selling monthly memberships that give climbers unlimited access to the facility. The facility will have an estimated​ $240,000 in assets. The owners expect to earn a​ 10% annual return on the​ company's assets. The target profit is expected to be earned evenly throughout the year. The​ facility's annual fixed costs are estimated to be​ $48,000. The variable costs per climber are estimated to be​ $12 per month. After researching the​ market, the company believes that it can sell 80 memberships in its first month of operations if it does not require an initial signup fee. Summit can only charge​ $80 per month for a membership because of competition from another facility in the area. Which of the following statements is incorrect regarding the​ company's first month of​ operations? A. If it makes no changes to its projected​ operations, the company will fall short of its monthly target profit by ​$560. B. Holding all other variables​ constant, if the company reduces variable costs to​ $5.00 per​ member, the company would meet its monthly target profit. C. Reach the Summit is considered a price taker in its current market. D. The total monthly target costs for the company is ​$4,400. E. If fixed costs are increased by​ $560 per month and all other variables remain​ constant, the company would meet its monthly target profit.

E. If fixed costs are increased by​ $560 per month and all other variables remain​ constant, the company would meet its monthly target profit.

Clarke​ Central's class of 2001 is currently planning its​ 20-year class reunion. In estimating costs for the​ 20-year reunion, the planning committee compiled the number of people in attendance and related total costs for each previous class reunion held. The data was then entered in a spreadsheet program and regression analysis was performed. The analysis resulted in the following cost behavior​ equation: y=56x+800 and indicated that​ 95% of the variability in total costs could be explained by the number of people in attendance. Which of the following statements is incorrect if the planning​ committee's best estimate is that 200 people will attend the​ 20-year reunion, and the committee expects all costs to be covered by the people in​ attendance? A. If the estimate is​ correct, the total fixed costs will be ​$800. B. Assuming the estimate is​ realistic, the minimum price that should be charged per person is ​$60. C. The x variable coefficient is​ 56, and the intercept coefficient is 800. D. The best estimate of total costs for the​ 20-year reunion is ​$12,000 E. It is likely that an outlier exists in the data used to perform the regression analysis.

E. It is likely that an outlier exists in the data used to perform the regression analysis.

The High School Musical Company has two divisions​ - Troy and Gabriella. In the previous​ year, Troy generated sales revenue of​ $300,000 and reported a variable cost percentage of​ 20%. Troy's total traceable costs equaled​ $70,000. Gabriella generated a segment margin of​ $40,000. Common fixed costs totaled​ $100,000 and were evenly allocated to the two divisions. Management is considering the elimination of the Gabriella division since it has shown an operating loss for the past several years. If Gabriella is​ dropped, the company would open a new division in its place. The new division would generate​ $180,000 in sales revenue and have a contribution margin percentage of​ 60%. The new​ division's segment margin would equal​ $60,000. In​ addition, it is projected that opening the new division would decrease​ Troy's sales volume by​ 2%. Which of the following statements is correct with regard to the above​ information? (each statement is​ independent) A. Troy's contribution margin percentage will decrease by​ 2% if Gabriella is dropped and replaced with the new division. B. If Gabriella is dropped and replaced with the new​ division, the​ company's new operating income will be​ $185,400. C. Total traceable costs for the new division is​ $72,000. D. The​ company's common fixed costs would decrease by​ $50,000 if Gabriella is dropped. E. None of the above statements are correct.

E. None of the above statements are correct.

Say No to the​ Brush, LLC. is a manufacturer of premium hairstyling products.​ It's most popular​ product, It's​ Real, is sold in 10 ounce bottles. One bottle of​ It's Real is expected to use 8 ounces of direct material at a standard direct material cost of​ $1.75 per ounce. During the​ month, the company purchased​ 320,000 ounces of direct material at a total cost of​ $608,000. However, only​ 285,000 ounces of direct material were used in the monthly production of​ 38,000 bottles. The expected direct labor cost per bottle of​ It's Real is​ $2. The company anticipates that 0.25 direct labor hours will be logged for each bottle produced. During the​ month, direct laborers worked​ 10,000 direct labor hours and were paid​ $7.56 per hour. Given the above​ data, which of the following statements is​ correct? A. The actual direct labor rate was greater than the standard direct labor rate. B. The direct labor hours allowed for the actual output level were greater than the direct labor hours logged. C. The Direct Material Price Variance is favorable. D. The total Direct Material Variance can be calculate by adding the Direct Material Price Variance and the Direct Material Quantity Variance. E. The actual direct material unit input ratio was less than the standard direct material unit input ratio.

E. The actual direct material unit input ratio was less than the standard direct material unit input ratio.

Making​ Waves, Inc. manufactures two lines of​ bodyboards: Basic and Deluxe. Under the current costing​ system, manufacturing overhead is allocated to each product line based on direct labor hours. Each Basic bodyboard requires 4.0 direct labor hours to​ shape, and each Deluxe bodyboard requires 12.0 direct hours to shape. For the upcoming​ period, the company expects to manufacture​ 1,000 Basic bodyboards and 500 Deluxe bodyboards. In​ addition, the company estimates that its total manufacturing overhead for the upcoming period will be​ $130,000. The controller for the company has suggested to management that an activity based costing system be analyzed to better understand what is driving manufacturing overhead costs. Before fully analyzing the impact of switching to​ ABC, management has asked the controller to focus on the quality inspection​ activity, which accounts for​ 75% of the total budgeted manufacturing overhead. After speaking with the production​ supervisor, the controller has determined that the most appropriate cost driver for quality inspection overhead costs is the total number of quality inspection hours logged. Inspections are performed for every 40 Basic bodyboards manufactured and every 10 Deluxe bodyboards manufactured. Quality inspectors spend 2 hours inspecting each batch. Which of the following statements is​ incorrect? A. The cost distortion per unit is higher for the Deluxe than it is for the Basic bodyboard line. B. Under activity based​ costing, approximately​ 67% of the overhead related to quality inspection is allocated to the Deluxe C. Under the current costing​ system, 40% of the overhead related to quality inspection is allocated to Basic. D. A total of 150 inspection hours are expected for the projected production level. E. The current costing system is undercosting Basic and overcosting Deluxe with respect to the quality inspection overhead.

E. The current costing system is undercosting Basic and overcosting Deluxe with respect to the quality inspection overhead.

The High School Musical Company has two divisions​ - Troy and Gabriella. In the previous​ year, Troy generated sales revenue of​ $320,000 and had total traceable costs of​ $80,000, $20,000 of which was variable. Gabriella generated a segment margin of​ $30,000. Common fixed costs totaled​ $170,000; $50,000 of this amount was allocated to the Gabriella division. Management is considering the elimination of the Gabriella division since it has shown an operating loss for the past several years. If Gabriella is​ dropped, the company would open a new division in its place. The new division would generate​ $180,000 in sales revenue and have a contribution margin percentage equal to​ 70%. The new​ division's segment margin would equal​ $80,000. In​ addition, it is projected that opening the new division would increase​ Troy's sales volume by​ 2%. Which of the following statements is correct with regard to the above​ information? (each statement is​ independent) A. The​ company's operating income will differ depending on if the income statement is prepared using the traditional approach or the contribution margin approach. B. Troy's contribution margin percentage increases by​ 2% if Gabriella is dropped and replaced with the new division. C. The​ company's common fixed costs would decrease by​ $50,000 if Gabriella is dropped. D. If Gabriella is dropped and replaced with the new​ division, the​ company's operating income would increase by​ $50,000. E. Total traceable costs for the new division is​ $100,000.

E. Total traceable costs for the new division is​ $100,000.

Maria, a recent Masters of Accountancy graduate from​ UGA, accepted a staff position with a public accounting firm in​ Charleston, South Carolina. In her new​ position, Maria is tasked with reviewing transactions related to a merchanising​ client's inventory purchases. Her manager explains that the purpose behind the reivew is to determine if the​ client's merchandise inventory account is free of material errors. Based on this​ information, which accounting track did Maria most likely pursue in her graduate​ studies? A. tax B. financial C. advisory D. managerial E. audit

E. audit

True or False: The unit contribution margin is calculated by subtracting the unit fixed cost from the sales price.

False: the unit contribution margin is calculated by subtracting the unit fixed cost from the sales price.

True or False: CVP analysis relies on our knowledge of cost function to express relationships among​ costs, sales​ volume, and profit.

False; CVP analysis relies on our knowledge of cost function to express relationships among​ costs, sales​ volume, and profit.

True or False: Management should only discuss a course of action if the combined cash budget reveals an expected cash deficit at the end of the period.

False; management shouldn't only discuss a course of action if the combined cash budget reveals an expected cash deficit at the end of the period.

True or False: The operating section of the Statement of Cash Flows can be prepared using either the direct or the indirect method.

True

True or False: When making an outsourcing​ decision, management must consider how the in house unit variable costs compare to the price that will be paid to the outside​ provider/supplier.

True

True or False: Both Merchandisers and Manufacturers hold inventory.

True, both Merchandisers and Manufacturers hold inventory.

True or False: Before categorizing costs as either direct or​ indirect, a company must identify a cost object.

True; Before categorizing costs as either direct or​ indirect, a company must identify a cost object.

True or False: In a given​ period, budgeted purchases are not necessarily the same as budgeted cash payments to suppliers.

True; In a given​ period, budgeted purchases are not necessarily the same as budgeted cash payments to suppliers.

True or False: The ultimate goal of any product costing system for a manufacturer is to determine the cost of producing one unit of product.

True; The ultimate goal of any product costing system for a manufacturer is to determine the cost of producing one unit of product.

True or False: A departmental costing system will typically use the same types of cost drivers as used with a traditional costing system.

True; a departmental costing system will typically use the same types of cost drivers as used with a traditional costing system.

True or False: a positive Residual Income indicates that the​ segment's Return on Investment is greater than the​ company's target rate of return.

True; a positive Residual Income indicates that the​ segment's Return on Investment is greater than the​ company's target rate of return.

Sadie May is a manufacturer of leather high heel shoes. Sadie has recently experienced turnover in her accounting department and is unable to find documentation of the prior period standard rate per direct labor hour. She needs this information to begin the budgeting process for the next period. She has determined that the total direct labor variance in the prior period was a favorable $390 and that direct laborers were paid $0.50 less per hour than expected. Management expected 5,200 direct labor hours to be logged during production based on the actual pairs of heels produced; however, 260 more actual direct labor hours were logged during production. What was the prior period's expected direct labor rate per hour? a. $9.00 per direct labor hour b. $8.50 per direct labor hour c. $12.00 per direct labor hour d. $8.00 per direct labor hour e. $10.50 per direct labor hour

a. $9.00 per direct labor hour Chapter 11

Neither Paper nor Plastic Company is a manufacturer of high-end, reusable shopping bags. The company produces and sells two products: Nylon and Canvas. Currently, the company uses a traditional costing system to allocate manufacturing overhead to production based on machine hours. Management is considering switching to ABC to improve costing accuracy. In their analysis of manufacturing overhead, management has identified two activities and cost pools: Product Inspection and Machining. $96,000 of the budgeted manufacturing overhead relates to the Product Inspective activity. Product Inspection overhead costs are driven by inspection hours logged. The projected production levels for the upcoming period are 1,000 Nylon bags and 5,000 Canvas bags. In addition, the following input ratios were noted for the product lines: Nylon Inspections Hours - 0.9 hours per unit Machine Hours - 0.2 hours per unit Canvas Inspections Hours - 0.3 hours per unit Machine Hours - 0.2 hours per unit Which of the following statements is correct with regard to the above information? a. Under activity based costing, 62.5% of the inspection manufacturing overhead costs will be allocated to the Canvas product line. b. The current costing system is undercosting both the Nylon and Canvas product lines with respect to inspection manufacturing overhead costs. c. Under the current costing​ system, 50% of the inspection manufacturing overhead costs will be allocated to the Nylon product line. d. The cost distortion per unit for both the Nylon and Canvas product lines with respect to inspection manufacturing overhead costs is equal. e. More than one of the above statements is correct.

a. Under activity based costing, 62.5% of the inspection manufacturing overhead costs will be allocated to the Canvas product line. Chapter 4

Where the Boat Leaves From, Inc., is a manufacturer of custom built boat docks. At the beginning of July, two jobs were in progress: Lanier and Sinclair. Lanier and Sinclair's June 30th job cost records showed balances of $5,000 and $2,500, respectively. During July, one additional job was started: Hartwell. Direct laborers are paid at a rate of $20 per hour. The company uses a traditional, normal costing system to account for manufacturing overhead. Manufacturing overhead is allocated to production at a rate of $10 per direct labor hour. The following actual factory overhead costs were incurred during the month: indirect materials $100, supervisor's salary $500, and equipment depreciation $200. In addition, the sales staff is paid a 2% commission on gross revenue generated from jobs sold during the month. The following additional information was extracted from the accounting records of Where the Boat Leaves From: Lanier Direct Materials added during July - $500 Direct Labor costs incurred during July - $150 Sinclair Direct Materials added during July - $1,000 Direct Labor costs incurred during July - $750 Hartwell Direct Materials added during July - $1,400 Direct Labor costs incurred during July - $800 Lanier and Hartwell were sold at cost plus 80% during the month. Sinclair remained in process at month end. Calculate the Gross Profit reported on the Income Statement for July assuming the Manufacturing Overhead account is closed out to cost of goods sold at the end of each month. a. $6,620 b. $6,710 c. $10,410 d. $8,330 e. $6,410

b. $6,710 Chapter 3

Back to the Basics, Inc. manufactures and sells two products: Debit and Credit. The following data were extracted from last month's accounting records: Debit Sales Revenue - $180,000 Direct Material and Direct Labor - 72,000 Manufacturing Overhead - 72,000 Selling Expenses - 14,400 Administrative Expenses - 12,000 Credit Sales Revenue - $180,000 Direct Material and Direct Labor - 48,000 Manufacturing Overhead - 84,000 Selling Expenses - 10,080 Administrative Expenses - 18,000 Manufacturing overhead is traceable to the products. $36,000 of the overhead assigned to Debit is fixed and $72,000 of the overhead assigned to Credit is fixed. The balance of the overhead is variable. Selling expenses consist entirely of commissions paid as a percentage of sales. Administrative expenses in the data above are common fixed costs and have been arbitrarily allocated to the products. Which of the following statements is incorrect? a. The company's operating income for the period equals $29,520. b. Credit's performance should be judged on a segment margin of $19,920. c. If Debit was expected to generate a segment margin of $30,000, it fell short of management's expectations by $8,400. d. Credit's contribution margin percentage for the period is approximately 61%. e. Debit's total traceable costs equal $158,400.

b. Credit's performance should be judged on a segment margin of $19,920. Chapter 10

Which of the following is NOT a reason why companies should budget? a. To provide expectations against which managers compare actual operating results. b. To guarantee that the company will be profitable. c. To generate space for managers to focus on the company's long term goals. d. To determine if "we have enough." e. To communicate to stakeholders what is important to the company.

b. To guarantee that the company will be profitable.

1. It's Five O'clock Somewhere, LLC manufactures beverage containers. The company is anxious to produce and sell a new beverage container designed to keep beverages cool for up to 2 hours. The container will sell for $3 each. Enough capacity exists in the company's plant to produce 16,000 of the new containers each month. $0.60 from every sales dollar covers variable costs. Fixed costs associated with the container would total $14,400 per month in the existing facility. The company's Marketing Department predicts that if demand for the new container exceeds the 16,000 containers that the company is able to produce in its current facility that additional manufacturing space can be rented from another company at a fixed cost of $1,000 per month. The rented facility has a production capacity of 20,000 units per month. The contribution margin percentage in the rented facility would equal 30% due to somewhat less efficient operations than in the company's current facility. Which of the following statements is correct? a. As long as the company's monthly target profit is less than or equal to $19,200, it will not need to rent the additional facility. b. To make a monthly target profit of $20,000, a total of 34,000 blenders must be produced and sold. c. The maximum monthly operating income that the company could make with the two facilities is $27,800. d. The monthly breakeven point in the rented facility is greater than the monthly breakeven point in the existing facility. e. If the company operates below full capacity in its current facility, the total fixed costs will be less than $14,400.

b. To make a monthly target profit of $20,000, a total of 34,000 blenders must be produced and sold. Chapter 7

The Dharma Initiative manufactures 1970's style clothing and accessories. The company produces two main products: Bellbottoms and Platform Boots. Currently Dharma uses a traditional overhead rate in which Manufacturing Overhead is allocated to products based on direct labor hours logged. The projected production levels for the period are 1,000 units of Bellbottoms and 500 units of Platform Boots. Due to profitability concerns, management is considering switching to Activity Based Costing (ABC). Management has divided Manufacturing Overhead Costs into three activities and cost pools: Assembly $32,000; Machine Setup $12,000; and Product Movement $102,600. Management has identified the following cost drivers for each overhead activity: direct labor hours for assembly, number of setups for machine setup, and number of moves for product movement. The following additional information has been compiled for each product line: Bellbottoms Direct Material Cost - $10.50 per unit Direct Labor Requirements* - 0.75 direct labor hours per unit Machine Setup Requirements - 1 setup per 10 units produced Direct Labor Requirements* - 1.0 direct labor hours per unit Product Movement Requirements - 1 move per 25 units produced Platform Boots Direct Material Cost - $15.25 per unit Direct Labor Requirements* - 1.0 direct labor hours per unit Machine Setup Requirements - 1 setup per 25 units produced Product Movement Requirements - 1 move per 25 units produced *Direct laborers are paid at a rate of $20 per hour. The per unit amount by which the Bellbottoms line is overcosted/undercosted by the current costing system is a. $20.71 undercosted b. $19.28 overcosted c. $9.64 undercosted d. $1.18 overcosted e. $25.01 undercosted

c. $9.64 undercosted Chapter 4

The following information was extracted from the accounting records of Jump Around, Inc., a manufacturer of pogo sticks, for the second quarter of 2019: Raw materials used - $12,000 Direct materials used - $9,000 Direct labor - $6,000 Indirect factory labor - $1,000 Administrative and sales salaries - $3,000 Building depreciation* - $3,125 Building rent* - $3,000 *The building is 5,000 square feet. 4,000 square feet are devoted to manufacturing operations. The remaining square footage is devoted to administrative and selling activities. Shared costs are allocated based on square footage. The company started the quarter with $15,000 in its Work in Process inventory. The balance in Work in Process inventory had increased to $20,000 by the end of the quarter. The net decrease in Finished Goods inventory during the quarter was $3,000. The company uses an actual costing system to account for MOH and includes both direct and indirect materials in its Raw Materials Inventory account. Which of the following statements is correct? a. The total indirect product costs for the period were $5,900. b. The total period costs included in the above data chart equal $1,225. c. Gross Profit for the period was equal to Sales Revenue minus $21,900. d. There was a net decrease of $5,000 in Work in Process inventory during the period. e. More than one of the above statements is correct.

c. Gross Profit for the period was equal to Sales Revenue minus $21,900. Chapter 2

Which of the following statements is incorrect with regard to process costing? a. Nonuniform input occurs when production costs are added at different points in time in a production department. b. The percentage of completion for all units in a subsequent department with respect to transferred in costs from a previous department is 100%. c. Manufacturers who operate in a mass production environment choose between job costing and process costing to account for manufacturing overhead. d. In sequential processing, manufacturing occurs "in order" of production departments. e. When you reach the end of step 3 on the production cost report for the final department in the production process, given the sales price, the unit gross profit can be calculated.

c. Manufacturers who operate in a mass production environment choose between job costing and process costing to account for manufacturing overhead. Chapter 5

C. McGill, Inc. manufactures electricity blocking blankets in two sequential production departments: machining and packaging. Two direct materials, fabric and insulation, are used in the machining department. The fabric is added at the beginning of the production process and accounts for 40% of the direct material input. The insulation is added when the conversion process is 85% complete. Conversion costs are incurred uniformly throughout production in the machining department. The machining department began July with 225 blankets in process and started another 540 blankets during the month. At month​ end, 220 blankets remained in process in the department and were assigned a cost of​ $10,450 on the​ department's July production cost report, $3,850 of which was for conversion costs. Management estimates that​ 30% more in conversion costs need to be added to these blankets in the machining department before they can be transferred to the packaging department. Given the above information, which of the following statements is incorrect with regard to the machining department's July operations? a. The costs transferred to the packaging department during July equal $54,500. b. The total costs to account for in machining during July equals $64,950. c. Physical units in ending inventory each receive $25 of conversion costs. d. Machining worked on 765 physical units during July. e. The cost to fully machine a blanket during July equals $100.

c. Physical units in ending inventory each receive $25 of conversion costs. Chapter 5

Business in the Front, Party in the Back, a manufacturer of hairstyling products, provided the following information for its most popular product, Billy Ray: Direct Material: Standard Unit Cost - $14 per unit of product Standard Input Ratio - 8 ounces Direct Labor: Standard Unit Cost - $2 per unit of product Standard Input Ratio - 0.25 hours During February the company purchased 320,000 ounces of direct material at a total cost of $608,000. The direct labor wages for February were $75,600. 38,000 units of product were manufactured during February, using 285,000 ounces of direct material and logging 10,000 direct labor hours. Given the above data, which of the following statements is correct? a. The direct labor hours allowed for the actual output level were greater than the direct labor hours logged. b. The Direct Material Price Variance is favorable. c. The actual direct material unit input ratio was less than the standard direct material unit input ratio. d. The actual direct labor rate was greater than the standard direct labor rate. e. None of the above statements are correct.

c. The actual direct material unit input ratio was less than the standard direct material unit input ratio. Chapter 11

Quidditch, Inc. is a merchandiser of a single line of broomsticks. At the beginning of the day, the shop had 15 brooms in its inventory. During the day, 5 new brooms were delivered to the shop. By close of business, only 9 brooms remained in inventory. The purchase price of each broom from the supplier is $250. In addition, the company pays $5 for shipping on each broomstick and 2% of the purchase price for delivery insurance on each broomstick. These costs have remained consistent since the company began business. Quidditch sells each broomstick for $475. Which of the following statements is correct? a. The shipping cost of $5 per broom would be reported as an operating expense on the Income Statement. b. The company's total gross profit for the day is $1,935. c. The gross profit per broomstick is $215. d. The product cost per broomstick is $250. e. The ending inventory reported on the company's balance sheet is $2,860.

c. The gross profit per broomstick is $215. Chapter 2

Unwind, Inc. is a merchandiser of herbal tea products. The company will begin operations on January 1 with a $500 initial investment from its sole owner. The company expects sales in its first month of operations to total $5,000. All sales will be cash sales. Inventory purchases during January are expected to equal $1,500. Purchases are paid for in the month following the month of purchase. No purchase discounts are available. Unwind's employees are paid on the last day of each month. Expected salaries and wages for January are $835. The company leases its retail space for $500 per month. Rent is due on the 15th of each month. Utilities are paid on the first day of the following month. Unwind anticipates its January utility bill will be $250. Depreciation of $165 is recorded under the straight line method of depreciation at the end of the month. The company has no other expenses. Unwind is required to maintain a minimum cash balance of $2,500 at the end of each month by the bank. Which of the following statements is correct? a. Unwind's expected ending cash balance on January 31st is $3,750. b. Cash collections expected from Unwind's customers in January cannot be calculated without information related to cash collection patterns. c. Unwind could pay up to $1,665 in cash dividends to its owner during January without dipping below the required minimum cash balance. d. In order to calculate the cash payments expected to be paid to Unwind's supplier in January, the company's December purchases would need to be given. e. Unwind should anticipate having to pull $750 from an established line of credit if it makes no changes to the above plan.

c. Unwind could pay up to $1,665 in cash dividends to its owner during January without dipping below the required minimum cash balance. Chapter 9

Red Stapler, Inc. is a wholesaler of office supplies. In the current year, actual March sales revenue totaled $100,000. April sales revenue is expected to increase 20% above March sales revenue. May sales revenue are expected to decrease 10% below April sales revenue. June sales revenue is expected to be $90,000. Prices are set to achieve a 60% gross profit. The company wants to maintain an ending merchandise inventory equal to 15% of the next month's cost of sales. The ending inventory requirement was met at the end of March. Accounts Payable consist solely of inventory purchases. Purchases from suppliers carry payment terms of 2/10, net 30. All invoices from the supplier are dated as of the end of the month regardless of when purchases are made during the month. What is Red Stapler's expected cash disbursement in May to its supplier assuming it pays within the discount period? a. $47,280.00 b. $41,277.60 c. $42,336.00 d. $46,334.40 e. $45,276.00

d. $46,334.40 Chapter 9

The Dharma Initiative manufactures 1970's style clothing and accessories. The company produces two main products: Bellbottoms and Platform Boots. Currently Dharma uses a traditional overhead rate in which Manufacturing Overhead is allocated to products based on direct labor hours logged. The projected production levels for the period are 1,000 units of Bellbottoms and 500 units of Platform Boots. Due to profitability concerns, management is considering switching to Activity Based Costing (ABC). Management has divided Manufacturing Overhead Costs into three activities and cost pools: Assembly $32,000; Machine Setup $12,000; and Product Movement $102,600. Management has identified the following cost drivers for each overhead activity: direct labor hours for assembly, number of setups for machine setup, and number of moves for product movement. The following additional information has been compiled for each product line: Bellbottoms Direct Material Cost - $10.50 per unit Direct Labor Requirements* - 0.75 direct labor hours per unit Machine Setup Requirements - 1 setup per 10 units produced Direct Labor Requirements* - 1.0 direct labor hours per unit Product Movement Requirements - 1 move per 25 units produced Platform Boots Direct Material Cost - $15.25 per unit Direct Labor Requirements* - 1.0 direct labor hours per unit Machine Setup Requirements - 1 setup per 25 units produced Product Movement Requirements - 1 move per 25 units produced *Direct laborers are paid at a rate of $20 per hour. Which of the following statements is correct with regard to the above information? a. Based on the information given in the chart, all three activities identified by ABC appear to be batch level activities. b. Based on appropriate consumption ratios, ABC equally allocates the overhead costs related to the product movement activity to the two product lines. c. The direct product cost for the Bellbottoms line differs between the traditional costing system and activity based costing system by $9.75 per unit. d. Assuming the company marks up costs 40% to determine sales price, the Platform Boots line is being overpriced by approximately $27 per unit. e. More than one of the above statements is correct.

d. Assuming the company marks up costs 40% to determine sales price, the Platform Boots line is being overpriced by approximately $27 per unit. Chapter 4

1. For CVP analysis calculations, which of the following statement is incorrect? a. The break-even point is the point at which operating income is equal to $0. b. In target profit calculations, sales revenue exceeds total costs. c. If sales volume is expected to be higher than the indifferent point, management should choose the cost structure with higher fixed costs. d. CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit. e. A company's sales mix is ultimately determined by the market.

d. CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit.

Use the following data to answer the next two questions: That's How We Roll is a bowling center. The following total costs were incurred during two different sessions for a single bowler: Games Bowled (3) Shoe Rental - $6.00 Game Fees - $12.75 Total Costs to Bowl - $18.75 Games Bowled (6) Shoe Rental - $6.00 Game Fees - $25.50 Total Costs to Bowl - $31.50 1. The cost behavior for each cost listed above is: a. Shoe Rental - variable; Game Fees - variable b. Shoe Rental - fixed; Game Fees - mixed c. Shoe Rental - mixed; Game Fees - variable d. Shoe Rental - fixed; Game Fees - variable e. Shoe Rental - fixed; Game Fees - fixed

d. Shoe Rental - fixed; Game Fees - variable Chapter 6

Which of the following statements is incorrect with regard to direct material variances and/or direct labor variances? a. The direct labor efficiency variance can first be calculated at the point of production. b. The quantity purchased is used to determine the direct materials price variance. c. The sum of the direct labor rate variance and the direct labor efficiency variance will always equal the total direct labor variance. d. The standard input ratio for direct material represents the actual amount of direct material used to produce one unit of product. e. The production manager is held responsible for all direct labor variances.

d. The standard input ratio for direct material represents the actual amount of direct material used to produce one unit of product. Chapter 11

If a net increase is reported in the Work in Process Inventory account during the period, which of the following statements is always true? a. The cost assigned to units sold is greater than the total manufacturing costs added to production during the period. b. The cost assigned to units completed is greater than the total manufacturing costs added to production during the period. c. Raw Material used in production is less than Raw Material purchased during the period. d. The sum of Direct Material, Direct Labor, and Manufacturing Overhead costs added during the period is greater than the Cost of Goods Manufactured. e. The Cost of Goods Sold is less than the Cost of Goods Manufactured during the period.

d. The sum of Direct Material, Direct Labor, and Manufacturing Overhead costs added during the period is greater than the Cost of Goods Manufactured. Chapter 2

Peppermint Kiss is a manufacturer of candy. It currently manufactures 3 different product lines. The manager of each product line is held responsible for generating revenue and controlling costs. The following information was provided by the Chocolate Candy product line for the prior period: Actual Results (10,000 units) Sales Revenue - $20,000 Variable Manufacturing Costs - $6,250 Fixed Manufacturing Costs - $4,350 Variable SG&A - $1,000 Fixed SG&A - $500 Master Budget (8,000 units) Sales Revenue - $12,000 Variable Manufacturing Costs - $2,000 Fixed Manufacturing Costs - $5,000 Variable SG&A - $1,600 Fixed SG&A - $500 Which of the following statements is incorrect? a. The Chocolate Candy product line is a profit center. b. The revenue volume variance is favorable and the variable cost volume variance is unfavorable. c. If the company's materiality threshold is $900, three of the flexible budget variances should be investigated. d. The total fixed costs on the flexible budget would equal $6,875. e. The budgeted unit sales price is $0.50 lower than the actual unit sales price.

d. The total fixed costs on the flexible budget would equal $6,875. Chapter 10

1. #namaste manufactures yoga props such as straps and blocks. Straps are sold to customers at a price of $15 per strap. The company is currently operating at 75% capacity with regard to strap production and produces 30,000 straps per year. At the current operating level, the cost of producing and selling a single strap is as follows: Variable Product Costs - $3.20 Fixed Product Costs - 1.30 Variable Period Costs - 0.50 Fixed Period Costs - 0.45 Total Cost per Mat - $5.45 An order has been received from a chain of yoga studios for 12,000 straps at a special price of $10 per strap. If the special order is accepted, the unit variable manufacturing costs will increase by $0.20 per strap due to the addition of a special label the studio has requested be included on the straps. Additionally, the total fixed product costs will increase by 5%. Variable period costs consist solely of sales commissions, which will not be paid on the special order. Fixed period costs will not be affected by acceptance of the special order. By how much will operating income increase if the special order is accepted? a. $26,400 b. $50,600 c. $24,750 d. $77,250 e. $54,650

e. $54,650 Chapter 8

Which of the following statements is correct concerning standard costing and/or variance calculations? a. Price (rate) standards represent the expected cost per unit of output. b. A favorable quantity (efficiency) variance indicates that a company used more input than allowed for the actual level of output. c. Variances falling outside of an acceptable range of outcomes are considered immaterial variances. d. Standards are only used by companies at the end of the period to evaluate performance and control operations. e. A price (rate) variance calculates the difference between what a company paid and what it expected to pay for its production input

e. A price (rate) variance calculates the difference between what a company paid and what it expected to pay for its production input Chapter 2

Sales and operating data for the investment centers of three different companies are given below: Investment Center for Company A Sales Revenue - $60,000 Capital - $15,000 Operating Income - $3,000 Company's Hurdle Rate - 15% Investment Center for Company B Sales Revenue - $100,000 Capital - $50,000 Operating Income - $9,000 Company's Hurdle Rate - 18% Investment Center for Company C Sales Revenue - $80,000 Capital - $20,000 Operating Income - $1,800 Company's Hurdle Rate - 8% Each investment center is presented with an investment opportunity that requires a $10,000 investment and is expected to yield a rate of return of 19%. If performance is being measured using Residual Income, which investment center(s) will accept the opportunity? a. Only the investment center for Company B b. Only the investment center for Company A c. The investment centers for Companies B and C d. The investment centers for Companies A and C e. The investment centers for Companies A, B, and C

e. The investment centers for Companies A, B, and C Chapter 10