Cost Accounting 1,2,3,16,17 & 8 chapter review

32) Cost driver activity and cost for October and November is below. What were mixed costs for November? Cost Driver 5,000 10,000 VC $10,000 FC $30,000 MC $20,000 Total Cost $60,000 $75,000

MC = $25,000 Cost Driver 5,000 10,000 VC $10,000 (2x) $20,000 FC $30,000 $30,000 MC $20,000 $??? Total Cost $60,000 $75,000

31) Ace Airline has the following cost. Classify each cost as variable, fixed, or mixed. The cost driver is passengers/mile. passenger/mile (000s) 10,000 20,000 Plane maintenance $60,000 $85,000 Supplies $30,000 $60,000 Depreciation $150,000 $150,000 Utilities $35,000 $70,000

Plane maintenance = Mixed Supplies = Variable Depreciation = Fixed Utilities = Variable

3) What are the information objectives for the responsibility accounting systems for managers?

Provide information for decision support and controls (performance evaluations)

9) What are the objectives for (GAAP) external reports prepared for investors?

Provide information to estimate the firms value (stock price)

63) Hardley Drive-In sells hamburgers. Fixed cost are $18,000 per month and variable cost are $2.00 per hamburger. Hardley estimates the following demand schedule. Which price should Hardley choose? Price Unit Sale $12.00 4,000 $10.00 5,500 $8.00 7,000

$10.00 Price CM/Unit CM $12.00 $10.00 40,000 $10.00 $8.00 44,000 $8.00 $6.00 42,000 pick larger CM

36) Cost is the Purchasing Debt is $9,000 for 8,000 orders and $11,250for 11,000 orders. Specify the cost function and estimates total cost for 9,200 orders.

Cost Function : Y = .75X + 3,000 Estimate at 9,200 = $9,900 TC = VC + FC VC per hour = (11,250 - 9,000) / (11,000 - 8,000) = 0.75 FC = TC - VC = 9,000 - .75 * 8,000 = 3,000 TC = 9,200 * .75 + 3,000 = 9,900

99) Domose Inc. planned to use $150.00 of material per unit but actually used $147.00 of material per unit, and planned to make 1,100 units but actually made 900 units. The flexible-budget amount for materials is a. $161,700 b. $165,000 c. $132,300 d. $135,000

d. $135,000 Flexible Budget provides expect cost at a given level expected cost = $150 per FB = $150 * 900 = $135,000

14) The Murphy Corp. had the following information available for the year. What is the conversion cost? DM purchased = $40,000 Overhead = $33,000 DL = 2,500 hours @ $8.00 Beg End WIP $10k $15k FGS $21k $17k DMI $5k $8k a. $89,000 b. $85,000 c. $57,000 d. $53,000

d. $53,000 conversion cost = DL + OHD = (2,500 * $8.00) + $33,000 = $53,000

62) VC is $27,000, FC is $18,000, loss is $4,500. What is break-even? a. $37,500 b. $81,000 c. $49,500 d. $54,000 e. $36,000

d. $54,000 Income Statement after bottom work Revenue $??? $40,500 VC $27,000 $27,000 CM (SUM) $??? $13,500 FC $18,000 $18,000 NI (SUM) ($4,500) (4,500) Working from the bottom up NI = CM - FC or CM = NI + FC = ($4,500) + $18,000 = $13,500 CM = Revenue - VC or Revenue = CM + VC = $13,500 + $27,000 = $40,500 CM Ratio = CM / Revenue = 13,500/$40,500 = 33% Break-even = FC/ CM Ratio

Ceta Company had the following inventories at the beginning and end of January. Assuming the Cost of Goods Manufactured was $660,000, what was the cost of goods sold for January? Beg End FGI $125,000 $117,000 WIP $235,000 $251,000 DM $134,000 $124,000 a. $652,000 b. $666,000 c. $676,000 d. $668,000

d. $668,000 COGS Total COG Manufactured $660,000 Beg FGI $125,000 End FGI ($117,000) COGS $668,000

19) During January, the cost of goods manufactured was $93,000. The beginning finished goods inventory was $16,000 and the ending finished goods inventory was $20,000. What was the cost of goods sold for the month? a. $93,000 b. $129,000 c. $97,000 d. $89,000

d. $89,000 Total COGS COGS Manu $93,000 Beg FGI $16,000 End FGI ($20,000) Total COGS (SUM) $89,000

68) Lewis Production Company had the following projected information. Calculate revenue need to obtain a pre-tax profit of $75,000. Selling price per unit $150.00 Variable cost per unit $90.00 Total fixed cost $300,00 a. $375,000 b. $750,000 c. $625,000 d. $937,500

d. $937,500 Income Statement (work up from bottom) Revenue $?? VC $?? CM (SUM) $375,000 FC $300,000 OI $75,000 CM = unit*(Selling price per unit - VC per unit) $375,000 = ($150-$90)*unit unit = 6,250 Revenue = 6,250 * $150 = $937,500

67) Edco Company produced and sold 45,000 units of a product last year, with the following results. If Edco's sales revenues increase by 15.0%, what will be the increase in income? Revenue $1,350,000 Manufacturing costs Variable $585,000 Fixed $270,000 Selling costs Variable $40,500 Fixed $54,000 Administrative cost Variable $184,500 Fixed $108,000 a. 60% b. 15% c. 45% d. 75%

d. 75% Income Statement Revenue $1,350,000 $1,552,500 VC ($810,000) ($931,500) CM (Sum) $540,000 $621,000 FC ($432,000) ($432,000) OI $108,000 $189,000 % Change = $189,000/$108,000

76) Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety ratio? a. 9.0% b. 92.0% c. 52.0% d. 8.0%

d. 8.0% Margin of safety ratio = (Sales - Break-even) / Sales MS Ratio = ($326,000 - $300,000) / $326,000 = 7.79%

7) Davos Inc. makes fiberglass ski-boards. Which is correct? a. Fiberglass is factory overhead b. Factory property tax is a period cost c. Marketing Dept. Office supplies OHD d. Payroll taxes for workers in the Packaging Dept. is direct labor

d. Payroll taxes for workers in the Packaging Dept. is direct labor

88) If a firm has made a correct decision to discontinue a division, which of the following should not decline? a. total corporate sales b. total corporate COGS c. total corporate FC d. Total corporate income

d. Total corporate income

37) Which of the following would be a total cost function that starts at the origin, reaches a max value and it parallel to the x-axis? a. total direct material costs of $12.00 per unit, the cost driver is output b. employees are paid $15.00 per hours and guaranteed a minimum weekly wage of $300.00, the cost driver is hours c. rent on exhibit space at a convention of $4,000, the cost driver is number of attendees d. a consultant paid $100.00 per hours with a maximum fee of $2,000, the cost driver is hours

d. a consultant paid $100.00 per hours with a maximum fee of $2,000, the cost driver is hours

91) An opportunity cost is a a. cost paid to take advantage of an opportunity, such as obtaining a franchise b. fixed cost of implementing prevent measures to increase product quality c. relevant, nonqualified cost that is estimated for the accounting records d. benefit foregone by choosing one alternative over another

d. benefit foregone by choosing one alternative over another

95) The flexible budget contains a. budget amount for the plan cost driver b. actual cost for the actual cost driver c. actual cost for planned cost driver d. budgeted amount for the actual cost driver

d. budgeted amount for the actual cost driver

27) The standards of ethical conduct for management accountants include a. Competence and performance b. integrity and respect for others c. confidential, confidence, integrity and observance d. competence, confidentiality, integrity, and credibility

d. competence, confidentiality, integrity, and credibility

13) A company has purchased some steel to use in the production of steel railing. If this steel has not been put into production, it would be classified as a. finished goods inventory b. work in process inventory c. factory supplies d. direct material inventory e. office supplies

d. direct material inventory

61) Which of the following would not be useful in CVP analysis? a. output volume b. fixed costs c. product mix d. gross margin

d. gross margin

A product cost is that is not directly-traced to the product is a. conversion cost b. recorded as a prime cost of production c. allocated to selling and administrative costs d. included as part of overhead e. expensed as incurred

d. included as part of overhead

5) Which are period costs? a. raw material b. direct materials and direct labor c. direct labor and manufacturing overhead d. sales salaries

d. sales salaries

54) The high-low method may give unsatisfactory results if a. volume of activity is heavy b. volume of activity is light c. there are less than 100 observations d. the points are not reprehensive e. the data points all fall on a line

d. the points are not reprehensive

30) If Y= a + bX is the cost relation, the "b" term represents a. the total cost b. the cost driver c. the fixed portion of the cost d. the rate of change in total cost

d. the rate of change in total cost a = Y b = X c = a d = b

78) If a firm has made a correct decision to discontinue a division, which of the following should not decrease? a. total corporate cost of good sold b. to corporate sales c. total corporate fixed cost d. total corporate income

d. total corporate income

55) The relevant range is a. where all costs remain same b. where fixed cost per unit of cost driver is expected to remain the same c. where total VC remains the same d. where total fixed cost are expected to remain the same

d. where total fixed cost are expected to remain the same

46) Baker Airlines developed a cost function for food cost of TC = $8,000 + $1.60*miles flown. The best estimate of food costs at 10,000 miles is a. $16,000 b. none of these c. $26,000 d. $17,600 e. $24,000

e. $24,000 TC = $8,000 + $1.6 * miles TC = $8,000 + $1.6 * 10,000 = $24,000

90) Information below is for Cook Company's East Division. Eliminating East Division would have the following effect on company income. Sales $550,000 VC $275,000 DFC $180,000 Allocate $170,000 a. decrease $550,000 b. increase $75,000 c. decrease $60,000 d. increase $15,000 e. decrease $95,000

e. decrease $95,000 Income Statement Sales $550,000 VC ($275,000) DFC ($180,000) OI $95,000

48) The following data relate to the Hodges Company for May and August. Which of the responses is correct? Maintenance hours 10,000 12,000 Maintenance cost $260,000 $300,000 a. variable maintenance cost is $26.00 per hour b. variable maintenance cost is $25.00 per hour c. more then one response is correct d. variable maintenance cost is $25.50 per hour e. fixed maintenance cost is $60,000 per month

e. fixed maintenance cost is $60,000 per month TC = VC + FC VC per unit = ($300,000-$260,000)/(12,000-10,000) = $20.00 per hour FC = TC - VC = $260,000 - $20.00 * 10,000 = $60,000

51) In a plot of mixed cost, the Y-intercept corresponds to the

fixed cost Y = bX + a a = FC b = VC per unit

50) A regression analysis between sales processing cost (Y) and sales resulted in the following least squares line: Y = 80,000 + 5.00*X. This implies that

increase of $1.00 in sales is expected to result in an increase of $5.00 in total cost

56) Donahue worked 120,000 labor hours at a total cost of $400,000, including $200,000 fixed cost. Next year Donahue expects to work 145,000 hours. What is the expected total cost for next year?

VC = TC - FC = $400,000 - $200,000 = $200,000 VC per unit = $200,000/120,000 = $1.67 TC = $1.67*145,000 + $200,000 = $441,667

64) Exec Funeral can provide up to 8 funerals a week with present resources. Normal weekly sales are between 4 and 8 funerals at $13,200 each. Cost information is below. What is weekly break even? Funerals TC 4 $72,400 5 $75,600 6 $78,800 7 $82,000 8 $85,200

VC per unit = $75,600 - $72,400 = $3,200 TC = VC + FC or FC = TC - VC FC = $72,400 - ($3,200*4) = $59,600 Profit = CM - FC or 0 = ($13,200 - $3,200)*units - $59,600 break-even = 5.96 or 6 funeral

89) Bonga Corp is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below. Further investigation has revealed that $111,000 of the fixed manufacturing costs and $103,000 of the fixed selling and administrative costs are direct. What would be the income affect from dropping product D74F? Sales $830,000 VC $390,000 FMC $266,00 FS&A $232,000 a. $-226,000 b. $-58,000 c. $58,000 D$226,000

a. $-226,000 Sales $830,000 VC ($390,000) FMC ($111,000) FS&A ($103,000) OI $226,000

84) Wagner Company sells product A for $21.00 per unit. Wagner's unit product cost based on capacity of 200,000 units is below. A customer has offered to buy 20,000 units. The only selling costs that would be incurred on this order would be $3.00 per unit for shipping. Wagner has sufficient idle capacity to manufacture the additional units. Two-thirds of manufacturing overhead is fixed. The minimum acceptable selling price per unit would be DM $4.00 DL $5.00 OHD $6.00 a. $14.00 b. $15.00 c. $16.00 d. $18.00

a. $14.00 DM $4.00 DL $5.00 OHD $2.00 2/3 are so leave the 1.3 of variable cost S&A $3.00 total $14.00

83) CoolAir Corp manufactures portable window air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units. The City of Clearwater would like to purchase 3,000 air conditioners from CoolAir but only if they can get them for $75.00 each. Variable selling and administrative costs on this order will drop down to $2.00 per unit. The annual income affect for the company as a result of accepting this order from the City of Clearwater should be Selling price $125.00 Manufacturing cost Variable $25.000 Fixed $40.00 S&A Costs Variable $10.00 Fixed $15.00 a. $144,000 b. $-21,000 c. $-129,000 d. $24,000

a. $144,000 Income Statement (3,000 units) Deal Sales $225,000 Costs $81,000 OI $144,000

87) Jordan Company has the capacity to make 30,000 units a year of its only product. Cost and revenue data for last year is shown below. A foreign distributor has offered to buy 5,000 units at $90.00 per unit next year. Jordan plans sales next year of 18,000 units. If Jordan accepts this offer, what would be the earnings effect? 18,000 units Sales $1,800,000 VC $990,000 FC $495,000 a. $175,000 b. $840,000 c. $390,000 d. $855,000

a. $175,000 Income Statement No Deal Deal Sales $500,000 $450,000 VC $275,000 $275,000 OI $225,000 $175,000

18) Asteroid Industries accumulated the following cost information for the year. Total factory overhead cost is DM $16,000 Indirect M $4,000 Indirect L $8,500 Factory Dep $12,800 DL $37,000 a. $25,300 b. $78,300 c. $16,800 d. $12,800 e. $53,000

a. $25,300 OHD included all production costs other than DM and DL Indirect M $4,000 Indirect L $8,500 Factory Dep $12,800 OHD (SUM) $25,300

82) Vytek Corp makes and sells a product for the following unit cost and plans output of 50,000 units. Selling price is $50.00 per unit. Capacity is 60,000 units. A wholesaler has contacted Vytek about purchasing 8,000 units. What selling price per unit must be charged so Vytek earns a profit on the sale of $60,000? DM $9.00 DL $8.00 VOHD $6.00 FOHD $5.00 VS&A $4.00 FS&A $3.00 a. $34.50 per unit b. $42.50 per unit c. $35.50 per unit d. $39.50 per unit

a. $34.50 per unit Variable Cost Only DM $9.00 DL $8.00 VOHD $6.00 VS&A $4.00 Total $27.00 Profit per unit needed = $60,000/ 8,000 = $7.50 $27.00 + $7.50 = $34.50

86) A customer has requested that Lewelling Corp fill an order for 9,000 units of product S47 for $20.50 a unit. While the product would be modified slightly for the order, product S47's normal unit product cost is $14.40, as below. The customer would like modifications made that would increase the variable costs by $5.00 per unit and that would require an investment of $36,000 in special molds that would have no other use or any salvage value. The company has capacity for producing the order. The annual income affect for the company as a result of accepting this order should be DM $3.10 DL $1.50 VOHD $6.40 FOHD $3.40 Unit Cost $14.40 a. $4,500 b. $-9,900 c. $54,900 d. $-26,00

a. $4,500 Income Statement Sales $184,500 DM $27,900 DL $13,500 VOHD $57,600 Variable $27,000 Salvage $36,000 OI = 4,500

47) Wallt Company has the following data for maintenance hours and total cost, respectively. Using high-low, estimate the amount of maintenance cost per hour. Miles Cost January 480 $4,200 February 320 $3,000 March 400 $3,600 April 300 $2,820 May 500 $4,350 June 310 $2,960 July 320 $3,030 August 520 $4,470 September 490 $4,260 October 470 $4,050 November 350 $3,300 December 340 $3,160 a. $7.50 b. $570.00 c. $0.13 d. $2,781

a. $7.50 Low = April 300 $2,820 High = August 520 $4,470 Cost per hour = ($4,470-$2,820)/(520-300) = $7.50

20) Begin and end inventory balances for the Rude, Inc. is shown below. Purchased of direct materials were $18,000. Direct labor and factory overhead costs were $20,000 and $28,000, respectively. The cost of goods manufactured was Beg End Raw material $9,000 $7,000 WIP $16,000 $12,400 FGI $36,000 $30,000 a. $71,600 b. $68,000 c. $74,000 d. $77,600 e. $64,600

a. $71,600 COGS Manufactured DM Beg DM $9,000 Purchased $18,000 End DM ($7,000) Total DM (SUM) $20,000 DL $20,000 OHD $28,000 Total Manufactured Cost add (SUM) $68,000 Beg WIP $16,000 End WIP ($12,400) COGS Manufactured (SUM) $71,600

35) Estimate variable cost for month 1 Month 1 2 Hours 2,000 2,500 Cost $900 $1,100 a. $800 b. $850 c. $825 d. $0

a. $800 VC per unit = (1,100-900) / (2,500 - 2,000) = 0.4 VC = .4 * 2,000 = $800

71) A company has fixed costs of $320,000 and a contribution margin per unit of $15.00. If the company wants to earn $40,000 pretax income, how many units must be sold? a. 24,000 b. 21,333 c. 20,000 d. 18,666 e. 2,667

a. 24,000 (Work up from the bottom) Unit sold $?? CM per unit $15.00 CM $360,000 FC $320,000 OI $40,000 CM = CM per unit * unit $360,000 / $15 = 24,000

69) Oslo Corporation reported the following data. If the company's target profit was $480,000, it would have to sell Units sold 8,000 Sales Revenue $7,200,000 Variable cost $4,000,000 Unit fixed cost $200.00 a. 5,200 b. 4,000 c. 2,800 d. 1,200

a. 5,200 FC = unit * FC per unit = 8,000 * $200 = $1,600,000 VC per unit = VC / Unit = $4,000,000 / 8,000 = $500 Revenue per unit = $7,200,00 / 8,000 = $900 Income Statement Revenue $??? VC $??? CM $2,080,000 FC $1,6000,000 OI $480,000 CM = (VC - Revenue per unit)*unit $2,080,000 = ($900 - $500)*unit unit = 5,200

Which of the following statements is/are true? I. A cost that is relevant in one decision may not be relevant in another decision. II. A cost that can be avoided by choosing one alternative over another is relevant for decision purposes. a. Both 1 and 2 b. Only 1 c. Only 2 d. None

a. Both 1 and 2

22) Publicly-traded companies preparing financial accounting reports must follow the accounting procedures established by the a. SEC and FASB b. IRS and FASB c. SEC and IRS d. None of these

a. SEC and FASB

49) Cost and cost driver, respectively, is shown below. Estimate the cost function using high/low. January $8,100 750 April $9,000 850 July $10,200 1,000 October $8,700 800 a. TC = $1,800 + $8.40* labor hours b. TC = $2,400 + $8.40* labor hours c. TC = $1,800 + $12.00* labor hours

a. TC = $1,800 + $8.40* labor hours TC = VC + FC High = 1,000 $10,200 Low = 750 $8,100 VC per unit = ($10,200-$8,100)/(1,000-750) = $8.40 FC = TC - VC = $10,200 * $8.40 * 1,000 = $1,800

92) Two months ago, Victory purchased 4,500 pounds of Hydrol, paying $15,300. The market for this product has been very strong since the acquisition, with the market price jumping to $4.05 per pound. The company recently received an order that would require the use of 4,200 pounds of Hydrol. Which of the following is relevant in deciding whether to accept the order? a. The $4.05 market price b. The 300-pounds remaining inventory of Hydrol c. 4,500 pounds of Hydrol d. The $3.40

a. The $4.05 market price

2) Which of the following is primary objective for management accountants when providing decisions support information? a. Timeliness and relevance is more important than precision b. I would rather be precisely right than potential wrong c. I must have accurate information so that the accounting records will be correct d. I don't need the information, just tell me what to think

a. Timeliness and relevance is more important than precision

93) Occidental Comp is contemplating dropping a product because of ongoing losses. Costs that would be relevant in this situation would include variable manufacturing costs and a. avoidable fixed cost b. factory depreciation c. unavoidable fixed cost d. allocated corporates administrative cost e. general corporate advertising

a. avoidable fixed cost

85) Which of the following minimizes the risks of outsourcing? a. building a close partnership with supplier b. the use of short-term contracts that specify price c. shifting the firm's responsibility for on-time delivery to the supplier d. increasing the contract price

a. building a close partnership with supplier

12) The merchandise inventory in a merchandising business corresponds most closely to which of the following items in a manufacturing firm? a. finish goods b. cost of goods manufactured c. raw material d. cost of goods available for sale e. work in process

a. finish goods

52) The cost function TC = 150 + 10.00*cost drive a. has an intercept of 150 b. has a slope coefficient of 150 c. represent a fixed cost d. is a nonlinear

a. has an intercept of 150

77) In evaluating whether to keep or dispose a product or division, a company should consider the division's a. income before common cost b. gross margin c. contribution margin d. none of the responses are correct

a. income before common cost

41) If the cost driver increases 10.0%, total variable cost will a. increase 10% b. increase by more than 10% c. decrease by less than 10% d. remain the same

a. increase 10%

43) The relevant range of activity refers to the a. levels of activity over which cost relations are expect to be valid b. geographical areas where the company plans to operate c. activity level where all cost are curvilinear d. level of activity where all cost are constant

a. levels of activity over which cost relations are expect to be valid

17) The ending work in process inventory is deducted on the a. statement of cost of goods manufactured b. income statement c. statement of financial position d. balance sheet e. statement of cash flow

a. statement of cost of goods manufactured

4) Which is not conversion cost for an automobile? a. steel in auto body panels b. Assembly workers wages c. depreciation on factory machinery d. supervisor of a production dept.

a. steel in auto body panels

72) Amfort company sells a product for $9.00 which has variable cost of $3.00 per unit. Last year, the company needed to sell 20,000 shirts to break even. The company is subject to a 40.0% tax rate. For income of $22,500 after tax for the coming year, what sales will be required? a. $257,625 b. $236,250 c. $180,000 d. $213,750

b. $236,250 OI after tax = Pre-tax * (1- % tax) Pre-tax = $22,500/(1- 40%) = 37,500 CM ratio = CM / Revenue = ($9.00 - $3.00) / $9.00 = 2/3 Break-even revenue = $9.00 * 20,000 = $180,000 Break-even = FC / CM ratio FC = $180,000 * 2/3 = $120,000 Income Statement CM $6.00 per unit FC ($120,000) OI $37,500 units = 26,250 Revenue = units * Revenue per unit = 26,250 * $9.00 = $236,250

57) Smart Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus $0.25 per mile, what is the expected cost to move 800 miles? a. $1,200 b. $3,600 c. $2,400 d. $1,000

b. $3,600 One truck = $1,000 + $0.25*800 = $1,200 3 trucks = $1,200 * 3 = $3,600

Based on the following, what is pre-tax income for the month? Sales $820,000 S&A $140,000 DM Purchase $176,000 DL $200,00 OHD $270,000 Beg End DM $24,000 $28,000 WIP $50,000 $56,000 FGI $46,000 $38,000 a. $180,000 b. $36,000 c. $820,000 d. $90,000 e. $640,000

b. $36,000 COGS Manufactured DM Beg DM $24,000 Purchased $176,000 End DM ($28,000) Total DM (SUM) $172,000 DL $200,000 OHD $270,000 Total Manufactured Cost add (SUM) $642,000 Beg WIP $50,000 End WIP ($56,000) COGS Manufactured (SUM) $636,000 Total COGS COGS Manufactured $636,000 Beg FGI $46,000 End FGI ($38,000) Total COGS (SUM) $644,000 Income Statement Sales $820,000 Total COGS ($644,000) Gross Margin (SUM) $176,000 S&A expense ($140,000) Pre-tax $36,000

15) Assume the following data for Gross, Inc. What is the cost of goods manufactured? Beg FGS $60,000 Beg WIP $40,000 End FGI $50,000 End WIP $80,000 Act OHD $ 200,000 Used DM $160,000 DL $100,000 a. $430,000 b. $420,000 c. $460,000 d. $470,000 e. $500,000

b. $420,000 Cost of Goods Manufactured DM used $160,000 DL $100,000 OHD $200,000 Total Manufactured added (SUM) $460,000 Beg WIP $40,000 End WIP ($80,000) Cost of Goods Manufactured (SUM) $420,000

28) Variable cost a. Vary in total with changes in the cost driver b. Do not change per unit of cost driver c. None of the above d. Both a & b

b. Do not change per unit of cost driver

29) Fixed costs a. do not exist within a range of cost driver activity b. FC per unit of cost driver varies inversely with the cost driver c. usually includes direct material and direct labors costs d. fixed per-unit of cost driver

b. FC per unit of cost driver varies inversely with the cost driver

21) Scott is an accountant in a large company. Scott observed unethical behavior by a coworker who is also an accountant. The coworker is a relative of the company's president and he always received preferential treatment. Scott observed the coworker putting office supplies and small pieces of electronic equipment in his briefcase. What course of action should Scoot take first? a. He should do nothing b. He should report observations to his immediate supervisor c. He should report observation to the police. The coworker is stealing from the company. d. He should report the observation to the SEC

b. He should report observations to his immediate supervisor

79) Which of the following statement is the most useful rule for management accountants when providing decision support information? a. I would rather be precisely right than potentially wrong b. I would rather have a reasonable estimate than ignore a relevant cost c. I must have accurate information so that the accounting will be correct

b. I would rather have a reasonable estimate than ignore a relevant cost

75) When the Total Cost line is higher than the Total Revenue line, the difference represents a. not enough b. a loss c. income d. a positive return on the investment

b. a loss

96) The spending variance for fixed cost equals zero when a. the actual level of cost driver is less than the plan cost driver b. all of these c. the actual level of cost driver equal the plan cost driver c. the actual level of cost driver is greater than the plan cost driver

b. all of these

11) Which of the following statements represents a similarity between financial and managerial accounting? a. both are solely concerned with historical transactions b. both draw upon data from an organization's accounting systems c. both are useful in providing information for external users d. both rely heavily on published financial statements e. both are governed by GAAP

b. both draw upon data from an organization's accounting systems

34) At 10,000 maintenance hour, variable cost totaled $35,000 and fixed cost totaled $20,800. If maintenance hours are 16,000, then a. total cost is $89,280 b. cost per hour is $4.80 c. fixed cost per hour is $5.58 d. total cost is $55,800

b. cost per hour is $4.80 TC = VC1 + FC = 35,000 + 20,800 = 55,800 VC1 = X*B -> B = VC1/X = 35,000/10,000 = 3.5 TC = X2*B + FC = 3.5*16,000 + 20,800 = 76,800 Cost per hour = TC / hour = 76,800 / 16,000 = 4.80

Which is true about using a scatterplot? a. it is influenced by extreme observations b. it useful to evaluate the validity of regression estimates c. it is useful to distinguish between discretionary and committed fixed cost d. it uses the least-squares method

b. it useful to evaluate the validity of regression estimates

1) Responsibility accounting information a. pertains to the company as a whole and is highly aggregated b. pertains to subunits of the company and may be very detailed c. is prepared only once a year d. is constrained by requirements of GAAP

b. pertains to subunits of the company and may be very detailed

6) Cost is classified on external (GAAP) financial statements as a. historical, replacement, and budgeted b. product and period c. variable, fixed, and mixed d. prime cost and period cost

b. product and period

74) A 20.0% reduction in unit variable costs will a. reduce the break-even sales by 20% b. reduce the slope of the total cost line by 20% c. Reduce total cost by 20% d. No affect

b. reduce the slope of the total cost line by 20% TC line is VC

10) Management accounting and financial accounting differ in the management accounting information is prepared a. following prescribed rules b. using methods the company finds beneficial c. for stockholders d. for the Internal Revenue Service

b. using methods the company finds beneficial

70) Tropp Corp sells a product for $10.00 per unit. The fixed cost is $420,000 per month and the unit variable cost is 60.0% of the selling price. What are sales for income of 10.0% of sales? a. $1,050,000 b. $840,000 c. $1,400,00 d. $945,000

c. $1,400,00 OI = 10 % of sales VC = 60% of sales FC = 30 % of sales $420,000 = 30% * Revenue Revenue = $1,400,000

16) Romeo Corporation reports the following for the year. The cost of goods manufactured of the year is Beg FGI $3,200 End FGI $4,000 Total COGS $14,200 a. $11,000 b. $17,400 c. $15,000 d. $10,200 e. $21,400

c. $15,000 Total COGS COGS Manu $??? Beg FGI $3,200 End FGI ($4,000) Total COGS $14,200

Fixed cost per mile is $9.00 when 20,000 miles are driven and $6.00 when 30,000 miles are driven. What is the total cost when zero miles are driven? a. $120,000 b. $270,000 c. $180,000 d. $0

c. $180,000 TC = VC + FC TC = 0 + $9.00 * 20,000

98) Mongelli Family Inn is a bed and breakfast in a converted 100-year-old mansion. The Inn's overhead plan for the most recent month appears below. The Inn's variable overhead cost driver is number of guests and 90 guests were planned. What would be the total flex budget if there are 99 guests? Plan VC Supplies $234 Laundry $315 Plan FC Utilities $220 Salaries $4,290 Dep $2,680 OHD $7,739 a. $7,739.00 b. $61,541.00 c. $8,512.90 c. $7,793.90

c. $7,793.90 Variance per person VC = $234 + $315 = $549 VC per = $549/90 = $6.10 N VC = $6.10 * 99 = $603.90 TC = VC + FC = $603.90 + $7,190 = $7,793.90

73) The Todd Dolhun Company has the following information available. How many units must be sold for after-tax income of $120,000? Total FC $300,000 CM per unit $2.00 Tax Rate 40% a. 180,000 b. 300,000 c. 250,000 d. 210,000

c. 250,000 After-tax = OI * (1- Tax Rate) OI = $120,000 / 60% = $200,000 CM $2.00 per unit FC ($300,000) OI $200,000 units = 250,000

58) The following is from a computer printout showing the results for an analysis of overhead (OHD) cost using regression. The R-square statistic tells us that parameter Estimate t-stat p-stat intercept 10,000.41 4.81 0.0003 labor hours 14.05 6.78 0.0001 R-Square 0.80 Standard Error 25.03 Observations 17 a. the intercept is 14.05 and significant b. the intercept is significant c. 80% of variation in OHD is explained by labor hours d. the slope is significant

c. 80% of variation in OHD is explained by labor hours

French Company provided the following showing gas cost and monthly heating degree-days (cost driver). The cost function showing the relation between the gas cost (Y) and heating degree (X) is X Y February 1,800 $162 April 600 $78 a. Y = $48.00 + $0.07X b. Y = $0.09X c. Y = $36.00 + $0.07X d. Y = $120 + 0.07X

c. Y = $36.00 + $0.07X b = ($162-$78)/(1,800-600) = 0.07 $162 = a + .07 *1,800 a = $36

59) A plot of data that results in bunched points with little apparent slope generally indicates a. a strong relationship b. a positive relationship c. a weak relationship d. a negative relationship

c. a weak relationship

60) In CVP analysis, 'cost' includes a. only manufacturing cost b. only cost of goods sold c. all relevant cost (manufacturing cost plus selling & admin) d. not fix manufacturing cost

c. all relevant cost (manufacturing cost plus selling & admin)

53) Cost A is fixed and cost B is variable with respect to the cost driver. If the cost driver has increased, the cost per unit of cost driver of a. cost A remains unchanged b. cost B has decreased c. cost A has decreased d. cost B has increased

c. cost A has decreased Change in cost driver Total VC changes the amount of CD Unit FC changes inversely of CD

94) One of the departments in Parry Company has contribution margin of $50,000 per year and total fixed expenses of $65,000 per year, of which $25,000 are allocated. If the department is discontinued, the company's earnings would a. decrease by $25,000 b. increase by $25,000 c. decrease by $10,000

c. decrease by $10,000 Income Statement CM $50,000 FC ($65,000) OI ($15,000) Allocated Loss is discontinued is $25,000 ($15,000) + 25,000 = $10,000

97) When preparing a flexible budget, ________ costs are constant at different levels of cost driver activity. a. variable b. step c. fixed d. contributed

c. fixed

24) Accountants classify cost on external financial statements as a. historical, replacement, and budgeted b. variable, fixed, and mixed c. product and period d. relevant, sunk, and quality

c. product and period

65) Which of the following would take place if a company experienced an increase in fixed cost? a. the contribution margin would decrease b. more than one of the response occurs c. the break-even point would increase d. the contribution margin would increase e. Income would increase

c. the break-even point would increase CM does not involve FC

81) Which of the following costs is not relevant to a special-order decision? a. direct labor costs to manufacture the special-order units b. the variable manufacturing overhead incurred to manufacture the special-order units c. the portion of the cost of leasing the factoring that is allocated to the special order d. all are relevant

c. the portion of the cost of leasing the factoring that is allocated to the special order

8) For product costs to become expenses, a. the product must be finished and in stock b. the product must be expensed based on percent of completion c. the product must be sold d. all accounts payable must be settled

c. the product must be sold

38) The following is an estimate of overhead cost using regression. Select the correct statement. Parameter Estimate t-stat p-stat Intercept 10,000.41 4.81 0.0003 labor hours 14.05 6.78 0.0001 a. if an additional labor hour is worked, total OHD will increase by $10,000.41 b. the slope of the cost relation is 6.78 c. when 1,000 labor hours are worked, total OHD is more than $24,000 d. none of these

c. when 1,000 labor hours are worked, total OHD is more than $24,000 OHD = intercept estimate + labor estimate * hours OHD = 10,000.41 +14.05 * labor OHD = 10,000.41 + 14.05 * 1,000 = 24,050.41

39) Explain why average cost per unit of cost driver cannot be used to estimate cost at other cost driver levels.

Average cost includes VC that changes with the cost driver and FC does not change with the cost driver

66) The following results were recorded for Thomas Company. What is the contribution margin ratio? Sales @ 10,000 units = $120,000 Variable Cost $72,000 Fixed Cost $36,000

CM ratio = CM/revenue CM = Revenue - VC = $120,000 - $72,000 = $48,000 CM ratio - $48,000/$120,000 = 40%

40) A Purchasing Dept can process 20,000 purchases orders at a total fixed cost of $300,000. During the year, 16,000 orders were processed. What is the cost of excess capacity?

Excess Capacity = 60,000 Capacity per hour = 300,000/20,000 = 15 Excess Capacity = Resource Available-Resource Used Resources Available = 300,000 Resources Used = (16,000 * 15) = 240,000 Excess Capacity = 300,000 - 240,000 = 60,000

100) Based on plan production of 12,000 units (cost driver), a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are

FC = $150,000, VC = $102,500

33) Exec Funeral can provide up to 8 funeral a week with present resources. Cost information is below. What is the Exec's cost function? Funerals TC 4 $72,400 5 $75,600 6 $78,800 7 $82,000 8 $85,200

TC = 3,200*funerals + 59,600 VC = (75,600-72,400)/(5-4) = 3,200 FC = TC - VC = 72,400 - (3,200*4) = 59,600