EXAM 1 ACT 252
Cost other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as a) miscellaneous expense b) factory overhead c) period cost d) product costs
b)
Direct labor and direct materials are a) product costs expensed when the goods are sold b) product costs and expenses when incurred c) period coats and expensed when the goods are sold d) period costs expensed when incurred
b)
The following budget data are available for sharp company estimated direct labor hours 12,000 estimated direct labor dollars $90,000 estimated factory overhead costs $179,000 actual direct labor hours 11,500 actual direct labor dollars $92,000 actual factory overhead costs $180,000 If factory overhead is to be applied based on direct labor dollars, the predetermined overhead rate is a) 196% b) 199% c) $15.65 d) $14.92
b)
The recording of the jobs completed would include a debit to a) factory overhead b) finished goods c) cost of goods sold d) work in process
b)
Jensen Company reports the following: Direct materials used $345,000 Direct labor incurred 250,000 Factory overhead incurred 400,000 Operating expenses 175,000 Jensen Company's period costs are a) 250,000 b) 345,00 c) 400,000 d) 175,000
d)
Period cost are a) found on the job order cost sheets b) classified as direct labor, direct material, or factory overhead c) found on the balance sheet d) not involved in the production process
d)
The period costs of a textbook printer would include a) factory insurance costs b) wages if a press operator c) paper costs d) CEO salary expense
d)
The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed a) budgetary analysis b) contribution margin c) gross profit analysis d) cost-volume profit analysis
d)
Which of the following activity bases would be the most appropriate for food costs if a hospital? a) quantity of prescription filled b) how many MRI's are taken c) number of hurdles scheduled to work d) number of patients who stay in the hospital
d)
what ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit a) costs and expenses ratio b) profit ratio c) margin of safety ratio d) contribution margin ratio
d)
which if the following is most associated with managerial accounting? a) always reports on the entire entity b) is prepared for users outside the organization c) must follow gaap d) may rely on estimates and forecasts
d)
which of the following is a period cost? a) salary of a security guard for the factory parking lot b) computer chips used by a computer manufacturer c) depreciation on factory lunchroom furniture d) salary of telephone receptionist in the sales office
d)
which of the following is not a factory overhead cost? a) insurance on factory equipment b) property tax on factory building c) salaries of production supervisors d) materials used directly in the manufacturing process of the product
d)
If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, what is the contribution margo ratio a) 26.8% b) 11.8% c) 62% d) 38%
d) total variable costs = sales*variable cost percentage $425,000*0.62 = $263,500 Contribution margin = sales - total variable cost $425,000 -$263,500 = $161,500 Contribution Margin Ratio = contribution margin / sales $161,500/$425,000 = 0.38
A mixed cost has characteristics of both a variable and a fixed cost.
true
A rental cost of $20,00 plus $0.70 per machine hour of use is an example of mixed cost
true
Depreciation expense on factory equipment is a part of factory overhead cost
true
Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption concept
true
For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.
true
For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
true
For the purpose of analysis, mixed costs can generally be separated into their variable and fixed components
true
Goods that are partway through the manufacturing process, but not yet complete, are referred to as inventory
true
If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease
true
If direct materials costs per unit increases, the break-even point will increase
true
If the underapplied factory overhead amount is material, it is transferred to Cost of Goods Sold at the end of the fiscal year.
true
In a factory with several processing departments, a single factory overhead rate may not provide accurate product costs and effective cost control
true
In the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit
true
In variable costing, fixed costs do not become part of the cost of goods manufactured, but are considered an expense of the period
true
In variable costing, the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of the production rises or falls
true
On the variable costing income statement, all of fixed costs are deducted from the contribution margin
true
Planning is the process of developing the company's objectives or goals and translating these objectives into courses of action
true
The current year's advertising costs are normally considered period costs.
true
The debit to factory overhead for the cost of indirect materials is obtained from the summary of the materials requisitions.
true
The factory superintendent's salary would be included as part of products manufactured under absorption coating concept
true
The ratio that indicated the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio
true
Under the absorption concept, the cost of finished goods includes direct materials, direct labor and all factory overhead
true
Variable costing is also know as direct costing
true
a manufacturing business report just two types of inventory on its balance sheet: work in process inventory and finished goods inventory
true
a production supervisors salary that does not vary with the number of units produced is an example of a fixed cost
true
depreciation on factory plant and equipment is an example of factory overhead cost.
true
electricity purchased to operate factory machinery would be included as part of the costs of products manufactured under the absorption concept
true
factory overhead is applied to production using a predetermined overhead rate
true
if factory overhead applied exceeds the actual costs, the factory overhead account will have a credit balance
true
managerial accounting information includes both historical and estimated data
true
on the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead are categorized as either materials inventory, work in process inventory, or finished goods inventory
true
prime costs are the combination of direct materials and direct labor costs
true
the range of activity over which changes in coat are of interest to management is called the relevant range
true
total variable costs change as the level of activity changes
true
variable costs are costs that vary on a per-unit basis with the changes in activity level
true
The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost
true (direct labor)
Period costs can be found on both the balance sheet and the income statement.
true IDK
The contribution margin ratio is the same as the profit-volume ratio
false
The fixed cost per unit varies with changes in the level of activity
false
Total fixed costs change as the level of activity changes
false
Under absorption costing, the cost of finished goods includes only direct materials, direct labor and variable factory overhead
false
Unit variable cost does not change as the number of units of activity changes
false
Variable costs are costs that remain constant in the total dollar amount as activity changes.
false
because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle
false
conversions costs are the combination of direct labor, direct material, and factory overhead costs
false
direct labor costs is an example of a period cost
false
for a construction contractor, the wages of carpenters would be classified as factory overhead costs
false
if factory overhead applied exceeds the actual costs, overhead is said to be underapplied
false
if the cost of employee wages is not a significant portion of the total cost, the wages are classified as direct materials cost
false
in a job order cost accounting system for a service business, materials costs are normally included in part of overhead
false
job order coat accounting systems can be used only for companies that manufacture a product
false
managerial accounting reports must be made repeated accordingly to generally accepted accounting principles
false
managerial information is for external as well as internal stakeholders
false
period costs include direct materials and direct labor costs
false
variable costs are costs that remain constant in a per-unit basis as the level of activity changes
false
the cost of materials entering directly into the manufacturing process is classified as factory overhead costs
false (work in process)
Prime costs consist of direct materials, indirect materials, and direct labor
fasle
The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured: A) exceed units sold B) are equal to or greater than units sold C) are less than units sold D) equal units sold
C)
Which of the following would be included in the cost of a product manufactured according to variable costing A) office supply cost B) sales commissions C) direct materials D) interest expense
C)
Under variable costing, which of the following would not be included in the finished goods inventory a) steel costs for a machine tool manufacturer b) wages of machine operator C) electricity used by factory machine D) salary of factory supervisor
D)
Philadelphia company has the following information for March: Sales $450,000 Variable coat of goods sold $240,000 Fixed manufacturing costs $70,000 Variable selling and administrative expenses $52,000 Fixed selling and administrating expenses $35,000 Determine the march
Manufacturing margin: $210,000 (sales-variable COGS) Contribution margin: $158,000 (manufacturing margin-variable expenses) Income from operations for Philadelphia company: $53,000 (contribution margin-fixed costs-fixed expenses)
As production increases, variable costs per unit a) stays the same d) decrease c) increase d) either increase or decrease, depending on the fixed costs
a)
For which of the following business would the job order cost system be appropriate? a) lumber mill b) canned soup processor c) hospital d) oil refinery
a)
The Winston Company estimates that that factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which estimates to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year were $1,375,000. Determine the over or underapplied amount for the year. a) 17,500 overapplied b) 118,250 underapplied c) 118,250 overapplied d) 17,500 underapplied
a)
The direct labor and overhead costs providing services to clients are accumulated in a) work in process b) overhead c) finished services expense d) administrative salaries expense
a)
The recording of the jobs completed would include a debit to a) finished goods b) work in process c) cost of goods sold d) factory overhead
a)
The recording of the jobs shipped and customers billed would include a debit to a) cash b) cost of goods sold c) accounts payable d) finished goods
a)
Under variable costing, which of the following would not be included in the finished goods inventory a) fixed factory overhead cost b) direct materials cost c) direct labor cost d) variable factory overhead cost
a)
Which of the following describes the behavior of the fixed cost per unit? a) remains constant with changes in production b) increase with increasing production c) decrease with increasing production d) decrease with decreasing production
a)
Which of the following is an example of a factory overhead cost? a) factory heating and lighting b) insurance premiums on salespersons automobiles c) presidents salary d) repair and maintenance cost on the administrative building
a)
Which of the following statements is false? a) there is no overlap between financial and managerial accounting b) managerial accounting sometimes relies on past information c) financial accounting must conform to gaap d) managerial accounting does not need to conform to gaap
a)
under absorption costing, which of the following would not be included in finished goods inventory a) variable and fixed selling and administrative expenses b) variable and fixed factory overhead cost c) direct materials cost d) direct labor cost
a)
what is the primary criterion for the preparation of managerial accounting reports? a) relevance of the reports b) timing of the reports c) cost of the reports d) manager needs
a)
which of the following is not an example of a cost that varies in total as the number of untie produced changes? a) straight line depreciation on factory equipment b) wages of assembly worker c) direct materials cost d) electricity let KWH to operate factory equipment
a)
The manufacturing cost of Calico Industries for three months of the year are provided: April: Total Cost: $120,000 Production: 280,000 May: Total Cost: $74,000 Production: 165,000 June: Total Cost: $90,900 Production: 230,000 Using the high-low method, the variable cost per unit and the total fixed costs are a) $0.40 per unit and $8,000 b) $0.78 per unit and $4,000 c) $4.00 per unit and $800 d) $7.80 per unit and $4,000
a) variable cost per unit =($120,00-$74,000)/(280,000-165,000) =$0.40 total fixed costs =$120,000+($0.40*280,000) =$8,000
Aspen Technologies has the following budget data: Estimated direct labor hours 15,000 Estimated direct labor dollars $90,000 Estimated factory overhead costs $198,000 If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is a) 16.50 b) 13.20 c) 2.20 d) 7.50
b)
Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by15% next year. If this is expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs. v - variable costs f - fixed costs m - mixed costs a) v decrease f increases m increase b) v increase f no change m increase c) v no change f no change m increase d) v increase f increase m increase
b)
Under absorption costing, which of the following would not be included in the finished goods inventory a) overtime wages paid to factory workers b) the salaries for salespeople c) hourly wages of assembly worker d) straight-line depreciation of factory equipment
b)
Which of the following is an example of a cost that varies in total as the number of units produced changes? a) property taxes on factory buildings b) salary of a production supervise or c) straight-line depreciation o factory equipment d) direct materials cost
b)
in cost-volume-profit analysis, all costs are classified into the following two categories a) sunk costs and fixed costs b) variable costs and fixed costs c) mixed costs and variable coats d) discretionary costs and sunk costs
b)
which of the following is an example of direct materials cost for an automobile manufacturer? a) salary of production supervisor b) coat of interior upholstery c) cost of oil lubricants for factory machinery d) cost if wages of assembly worker
b)
which of the following systems provides a separate record of the cost of each particular quantity of product that passes through the factory? a) job order cost system b) process cost system c) replacement cost system d) general cost system
b)
A firm operated at 90% capacity for the past year, during which fixed costs were $420,000, variable costs were 40% of sales, and sales were $1,000,000. Operating profit was a) $980,000 b) $180,000 c) $1,080,000 d) $420,000
b) total variable costs = sales*variable cost percentage $1,000,000*0.40 = $400,000 total costs = fixed costs + total variable costs $420,000+$400,000 = $820,000 Operating Profit = Sales - Total Costs $1,000,000-$820,000 = $180,000
Jensen Company reports the following: Direct materials used $345,000 Direct labor incurred 250,000 Factory overhead incurred 400,000 Operating expenses 175,000 Jensen Company's product costs are a) 770,000 b) 995,000 c) 835,000 d) 920,000
b) (direct materials+direct labor+factory overhead) 345,000+250,000+400,000 = 995,000
A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $36,00 and direct labor hours would be 30,000. Actual factory overhead costs were incurred $377,200 and direct labor hours were 36,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year? a) 54,800 overapplied b) 6,000 overapplied c) 6,000 underapplied d) 54,800 underapplied
c)
All of the following are true regarding product costs expect a) product costs can be found in three accounts on the balance sheet b) product costs consist of direct labor, direct materials, and factory overhead c) product costs include sales and administrative expenses d) product costs are found on the balance sheet until they are sold
c)
when a job is completed in a service organization, the job costs are transferred to the a) work in process account b) coat of goods sold account c) cost of services account d) finished goods account
c)
which of the following are the two main types of coat accounting systems for manufacturing operations? a) process cost and general accounting systems b) job order and general accounting systems c) job order cost and process cost systems d) process cost and replacement cost systems
c)
which of the following is a an example of direct labor cost for a cell phone manufacturer? a) coat of oil lubricants b) coat of phone components c) cost of wages of assembly worker d) salary of plant supervisor
c)
which of the following would most likely use a job order costing system a) paper mill b) a company that manufactures chlorine for swimming pools c) a swimming pool installer d) an oil refinery
c)
Cost of oil used to lubricate factory machinery and equipment is an example of a direct materials cost
false
If fixed costs are $450,000 and the unit contribution margin is $50, the sales necessary to earn operating income of $50,000 are 10,000 units
false
If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000
false
If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,00, the margin of safety is 14,500 units.
false
In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing
false
On the variable costing income statement, variable selling and administrative expenses are deducted from manufacturing margin to yield contribution
false
Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the profit-volume chart.
false
Prime costs are the combination of direct labor costs and factory overhead costs.
false