Final Exam Suggested Homework

Amalgamated Manipulation Manufacturing's (AMM) standards anticipate that there will be 3 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 5,000 pounds of raw material, purchased 15,000 pounds for $19,500 and ended the month with 4,000 pounds on hand. The company produced 5,000 units of finished goods. The company estimates standard costs at $1.50 per pound. The materials price and efficiency variances for the month of May were:

$3,000 F $1,500 U

Year 1 financial data for the ABC Company is as follows: Sales $5,000,000 Direct materials 850,000 Direct manufacturing labor 1,700,000 Variable manufacturing overhead 400,000 Fixed manufacturing overhead 750,000 Variable SG&A 150,000 Fixed SG&A 250,000 Under the absorption method, Year 1 Cost of Goods sold will be:

$3,700,000

Fordham Corporation produces a single product. The standard costs for one unit of its Concourse product are as follows: What is the variable overhead efficiency variance for Concourse for November Year 2?

$1,000 unfavorable

Queen Sales, Inc. has just completed its first year of operations. The company has not had any sales to date. Queen has incurred the following costs associated with its production as of December 31, Year 1: Under absorption costing, what is the inventory amount shown on the balance sheet at December 31, Year 1?

$115,600

The following information was extracted from the accounting records of Roosevelt Manufacturing Company: Direct materials purchased 80,000 Direct materials used 76,000 Direct manufacturing labor costs 10,000 Indirect manufacturing labor costs 12,000 Sales salaries 14,000 Other plant expenses 22,000 Selling and administrative expenses 20,000 What was the cost of goods manufactured?

$120,000

Culpepper Corporation applies factory overhead at a rate of 40% of direct labor cost, and any overapplied or underapplied factory overhead is deferred until the end of the year. Culpepper's balance in its factory overhead control account at the end of January was:

$15,000 underapplied

Sturdy Manufacturing Co. assembled the following cost data for job order: What are the total manufacturing costs for job order #23 if the company uses normal job-order costing?

$195,500

A company needs to sell 10,000 units of its only product in order to break even. Fixed costs are $110,000, and the per unit selling price and variable costs are $20 and $9, respectively. If total sales are $220,000, the company's margin of safety will be equal to:

$20,000

Atlantic Company has a manufacturing facility in Brooklyn that manufactures robotic equipment for the auto industry. For Year 1, Atlantic collected the following information from its main production line: Atlantic isolates price variances at the time of purchase. What is the materials price variance for Year 1?

$400 favorable

HL Co. uses the high-low method to derive a total cost formula. Using a range of units produced from 1,500 to 7,500, and a range of total costs from $21,000 to $45,000, producing 2,000 units will cost HL:

$23,000

ABC Company uses job-order costing and has assembled the following cost data for the production and assembly of item X: Based on the above cost data, the manufacturing overhead for item X is:

$500 underallocated

Under Stanford Corporation's job costing system, manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During November, Year 1, Stanford's transactions included the following: Stanford had neither beginning nor ending work-in-process inventory. What was the cost of jobs completed and transferred to finished goods in November 20X1?

$620,000

Steed Co. budgets production of 150,000 units in the next year. Steed's CFO expects that each unit will take 8 hours to produce at an hourly wage rate of $10 per hour. If factory overhead is applied on the basis of direct labor hours at $6 per hour, the budget for factory overhead will total:

$7,200,000

What would be the approximate value of the coefficient of correlation between advertising and sales where a company advertises aggressively as an alternative to temporary worker layoffs and cuts off advertising when incoming jobs are on backorder?

-1.0

Four approaches to estimating a cost function are:

1. Industrial engineering method. 2. Conference method. 3. Account analysis method. 4. Quantitative analysis of current or past cost relationships.

A firm uses simple linear regression to forecast the costs for its main product line. If fixed costs are equal to $235,000 and variable costs are $10 per unit, how many units does it need to sell at $15 per unit to make a $300,000 profit?

107,000

Jack's Jax has total fixed costs of $25,000. If the company's contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need to sell to produce a net income of $15,000?

3,750

The following information relates to Drexler Inc.'s Year 3 financials: Year 3 period costs for Drexler, under both the absorption and variable cost methods, will be

Absorption Cost Method: $345,000 Variable Cost Method: $700,000

For which of the following industries would job-order costing most likely not be appropriate?

Cereal Production

Which of the following is not a primary function of the management accountant?

Communicates financial results and position to external parties

The Kitakyushu, Japan, plant of Nissan Motor Corporation assembles two types of cars (Teanas and Muranos). Separate assembly lines are used for each type of car.

Cost object: Type of car assembled (Teana or Murano) Cost variability: With respect to changes in the number of Teanas assembled There may be some debate over classifications of individual items, especially with regard to cost variability.

Chade Corp. is considering a special order brought to it by a new client. If Chade determines the variable cost to be $9 per unit, and the contribution margin of the next best alternative of the facility to be $5 per unit, then if Chade has:

Excess capacity, the selling price must be greater than $9 per unit.

Comprehensive Care Nursing Home is required by statute and regulation to maintain a minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with the Nursing Home beds. The salary expense associated with direct service staff for the Comprehensive Care Nursing Home would most likely be classified as:

Fixed Cost

Conroe Company is reviewing the data provided by its management accounting system. Which of the following statements is/are correct? I. A cost driver is a causal factor that increases the total cost of a cost object. II. Cost drivers may be volume based or activity based. III. Cost drivers are normally the largest cost in the manufacturing process.

I and II only are correct

Frisco Corporation is analyzing its fixed and variable costs within its current relevant range. As its cost driver activity changes within the relevant range, which of the following statements is/are correct? I. As the cost driver level increases, total fixed cost remains unchanged. II. As the cost driver level increases, unit fixed cost increases. III. As the cost driver level decreases, unit variable cost decreases.

I is only correct

Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project to achieve some cost savings. Which of the following statements is/are correct? I. The cost of the direct materials in Applewhite's products is considered a variable cost. II. The cost of the depreciation of Applewhite's plant machinery is considered a variable cost because Applewhite uses an accelerated depreciation method for both book and income tax purposes. III. The cost of electricity for Applewhite's manufacturing facility is considered a fixed cost, even if the cost of the electricity has both variable and fixed components.

I only is correct.

Mary Jacobs, the controller of the Jenks Company is working on Jenks' cash budget for year 2. She has information on each of the following items: I. Wages due to workers accrued as of December 31, year 1. II. Limits on a line of credit that may be used to fund Jenks' operations in year 2. III. The balance in accounts payable as of December 31, year 1, from credit purchases made in year 1. Which of the items above should Jacobs take into account when building the cash budget for year 2?

I, II, III

Elmhurst Corporation is considering changes to its responsibility accounting system. Which of the following statements is/are correct for a responsibility accounting system. I. In a cost center, managers are responsible for controlling costs but not revenue. II. The idea behind responsibility accounting is that a manager should be held responsible for those items that the manager can control to a significant extent. III. To be effective, a good responsibility accounting system must help managers to plan and to control. Costs that are allocated to a responsibility center are normally controllable by the responsibility center manager.

I, II, and III are correct

Nobis Company uses an ABC system. Which of the following statements is/are correct with respect to ABC? I. Departmental costing systems are a refinement of ABC systems. II. ABC systems are useful in manufacturing, but not in merchandising or service industries. III. ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed.

III only is correct

All of the following statements regarding standards are accurate except:

Ideal standards account for a minimal amount of normal spoilage.

In regression analysis, the coefficient of determination:

Is used to determine the proportion of the total variation in the dependent variable (y) explained by the independent variable (X).

Lees Corp. is deciding whether to keep or drop a small segment of its business. Key information regarding the segment includes: Contribution margin: 35,000 Avoidable fixed costs: 30,000 Unavoidable fixed costs: 25,000

Keep the segment because the contribution margin exceeds avoidable fixed costs.

Under the contribution income statement, a company's contribution margin will be:

Lower if variable manufacturing overhead costs increase

Which of the following does not accurately describe the application of job-order costing?

Manufacturing overhead costs incurred is used to determine total manufacturing costs.

Which of the following statements is correct regarding the components of the master budget?

Operating budgets are used to create cash budgets

During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SG&A expenses the same. As a result, XYZ's:

Operating income will be the same under both the financial accounting income statement and contribution income statement.

As part of her annual review of her company's budgets versus actuals, Mary Gerard isolates unfavorable variances with the hope of getting a better understanding of what caused them and how to avoid them next year. The variable overhead efficiency variance was the most unfavorable over the previous year, which Gerard will specifically be able to trace to:

Standard direct labor hours below actual direct labor hours.

Which of the following statements is not true regarding the use of variable and absorption costing for performance measurement?

The Internal Revenue Service allows either absorption or variable costing as long as the method is not changed from year to year, while U.S. GAAP only allows absorption costing.

Once a company exceeds its breakeven level, operating income can be calculated by multiplying:

The contribution margin per unit by the difference between unit sales and breakeven sales.

Each of the following statements is correct regarding overhead variances except:

The efficiency overhead variance ignores the standard variable overhead rate.

A regression equation is set up, where the dependent variable is total costs and the independent variable is production. A correlation coefficient of 0.70 implies that:

The level of production explains 49% of the variation in total costs

Basix Inc. calculates direct manufacturing labor variances and has the following information: Given the information above, which of the following is correct regarding direct manufacturing labor variances?

The price variance is unfavorable, while the efficiency variance is favorable.

Metal Shelf Company's standard cost for raw materials is $4.00 per pound and it is expected that each metal shelf uses two pounds of material. During October Year 2, 25,000 pounds of materials are purchased from a new supplier for $97,000 and 13,000 shelves are produced using 27,000 pounds of materials. Which statement is a possible explanation concerning the direct materials variances?

The production department had to use more materials since the quality of the materials was inferior.

Which of the following statements is correct regarding the drivers of operating and financial budgets?

The sales budget will drive the cost of goods sold budget

In order to determine whether a special order should be accepted at full capacity, the sales price of the special order must be compared to the per unit:

Variable cost of current production and the contribution margin of the next best alternative.

Which of the following is not a qualitative factor that Atlas Manufacturing should consider when deciding whether to buy or make a part used in manufacturing their product?

Variable cost per unit of the product.

In comparing the absorption and variable cost methods, each of the following statements is true except:

When inventory increases over the period, variable net income will exceed absorption net income.

King Tooling has produced and sold the following number of units of their only product during their first two years in business: Production costs per unit have not changed over the two-year period. Under variable costing, what is the amount of cost of sales relative to the cost of sales shown on the GAAP income statement of the company?

Year 1: Higher Year 2: Lower

Ace Cleaning Service is considering expanding into one or more new market areas. Which costs are relevant to Ace's decision on whether to expand?

a. No, Yes, Yes