Managerial Accounting Exam 1
Manufacturing overhead
-Depreciated of manufacturing equipment -Utility costs -Property taxes -Insurance premiums incurred to operate a manufacturing facility These are all examples of what?
cost driver
A ____________ is a factor that causes overhead costs 1. overhead rate 2. cost driver 3. fixed cost
common cost
A _____________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually 1. direct cost 2. indirect cost 3. common cost
remains constant in total with changes in the level of activity
A fixed cost is a cost which ______________. 1. varies in total with changes in the level of activity 2. remains constant per unit with changes in the level of activity 3. varies inversely in total with changes in the level of activity 4. remains constant in total with changes in the level of activity
by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
A normal cost system applies overhead to jobs ____________________. 1. by multiplying a predetermined overhead rate by the estimated amount of the allocation based incurred by the job 2. by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job 3. using the actual amount of overhead caused by each job 4. using the normal amount of overhead caused by each job
indirect cost
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package. 1. direct cost 2. indirect cost 3. common cost
direct cost
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) ___________ of the branch. 1. direct cost 2. indirect cost 3. common cost
$25,000
Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ______________. 1. $25,000 2. $15,000 3. $10,000 4. $20,000
multiple predetermined overhead rates
Companies can improve job cost accuracy by using _______________. 1. a plantwide overhead rate 2. direct-labor hours to apply overhead 3. multiple predetermined overhead rates 4. number of units in the job to apply overhead
$5,000 ($5 x 1,000)
Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A turner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equals ___________. 1. $50,000 2. $5 3. $1,000 4. $5,000
$40,000
Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expensive of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin? 1. $84,000 2. $45,000 3. $40,000 4. $8,000
relevant in making business decisions
Differential costs are always ____________. 1. irrelevant in making business decisions 2. relevant in making business decisions 3. a sunk cost
Milling: $510,000, Assembly: $800,000 (Milling = $390,000 + ($2.00 x 60,000) Assembly = $500,000 + ($3.75 x 80,000) )
During the current month the company started and completed Job 407. It wants to use its predetermined departmental overhead cost and rate for the Milling and Assembly Departments. Milling Department: Machine-hours: 60,000 Direct labor-hours: 8,000 Total fixed manufacturing overhead cost: $390,000 Variable manufacturing overhead per machine-hour: $2.00 Assembly Department: Machine-hours: 80,000 Direct labor-hours: 3,000 Total fixed manufacturing overhead cost: $500,000 Variable manufacturing overhead per direct labor-hourL $3.75
Per unit
Fixed cost _____________ decreases as the activity level rises and increases as the activity level falls 1. In total 2. Per unit
20.90 (predetermined overhead rate = estimated total manufacturing overhead cost / estimated total amount of the allocation base) (29,000 x 3 = 87,000 --> estimated variable manufacturing overhead 519,000 + 87,000 = 606,000 --> total estimated manufacturing overhead 606,000 / 29,000 hours = 20.90 predetermined overhead rate)
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year, it is estimated that 29,000 direct labor hours would be required for the period's estimated level of production. The company also estimated $519,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of a $3.00 per direct labor hour. Harris's actual manufacturing overhead cost for the year was $662,173 and its actual total direct labor was 29,500 hours. Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.) Predetermined overhead rate _______ per DLH
$19.16 (direct labor hours = 37,000 x 3.00 = 111,000 111,000 + 598,000 = 709,000 709,000 / 37,000 = $19.16)
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 37,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $598,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $778,581 and its actual total direct labor was 37,500 hours. Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)
product cost
How should the wages of a sheet metal worker in a fabrication plant be classified? 1. product cost 2. period cost 3. nonmanufacturing cost 4. administrative cost
some costs will change, other costs will remain the same
If a firm increases its activity level, ___________. 1. costs will remain the same 2. all costs will rise 3. some costs will change, other costs will remain the same
$100 (Y = a + bX --> Y = $40 + ($0.03 x 2,000) --> Y = $100
If your fixed monthly utility charge is $40, your variable cost is $0.03 per kilowatt hour, and your monthly activity level is 2,000 kilowatt hours, what is the amount of your utility bill?
$17,500 (total salaried employees required =1,300/200 = 6.5 --> round up to 7, salary paid to employees = 7*2,500 = 17,500)
In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hour, the total salaried employees expense is ____________. 1. $12,500 2. $16,250 3. $17,500 4. $15,000
total fixed manufacturing overhead cost (the vertical intercept of the line)
In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ___________. 1. total manufacturing overhead 2. total fixed manufacturing overhead 3. variable manufacturing overhead cost per unit of the allocation base 4. total amount of the allocation base
the level of activity
In the equation, Y = a + bX, X represents ___________. 1. the total mixed cost 2. the level of activity 3. the total fixed cost 4. the variable cost per unit of activity
the total mixed cost
In the formula, Y = a + bX, the "Y" refers to what? 1. the total fixed cost 2. the total mixed cost 3. the variable cost per unit of activity 4. the level of activity
the variable cost per unit of activity (the slope of the line)
In the formula, Y = a + bX, the "b" refers to what? 1. the total fixed cost 2. the total mixed cost 3. the variable cost per unit of activity 4. the level of activity
Conversion costs
Is direct labor and manufacturing overhead classified as prime costs or conversion costs?
Prime costs
Is direct materials and direct labor classified as prime costs or conversion costs?
Before
Is the predetermined overhead rate (POHR) used to apply overhead to jobs is determined before or after the period begins?
manufacturing overhead costs
Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in _______________. 1. nonmanufacturing costs 2. manufacturing overhead costs 3. direct costs
Direct
Job-order costing systems can accurately trace _______ materials and ________ labor costs to jobs 1. direct 2. indirect
$256,480 (direct labor hours incurred * predetermined overhead rate = 11,200 x 22.90 = 256,480)
Luthan Company uses a plantwide predetermined overhead rate of $22.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $274,800 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $269,000 and 11,200 total direct labor-hours during the period. Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period.
$246,480 (manufacturing overhead applied = predetermined overhead rate x total direct labor hours --> 23.70 x 10,400 = 246,480)
Luthan Company uses a plantwide predetermined overhead rate of $23.70 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $284,400 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $270,000 and 10,400 total direct labor-hours during the period. Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period.
administrative costs
Manufacturing costs include all of the following categories except ___________. 1. administrative costs 2. direct labor 3. direct materials 4. manufacturing overhead
$60,000 (Fixed selling exp. x 10,000 + fixed admin. exp. x 10,000 + sales commission x 10,000 + variable admin. exp. x 10,000)
Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct Materials: $5.50 Direct Labor: and $3.00 Variable Manufacturing Overhead: $1.50 Fixed Manufacturing Overhead: $4.00 Fixed Selling Expense: $2.50 Fixed Administrative Expense: $2.00 Sales Commission: $1.00 Variable Administrative Expense: $0.50 For financial accounting purposes, what is the total amount of period costs incurred to sell 10,000 units? (Do not round intermediate calculations.)
$140,000 (Direct materials x 10,000 + direct labor x 10,000 + variable man. OH x 10,000 + fixed man. OH x 10,000)
Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct Materials: $5.50 Direct Labor: and $3.00 Variable Manufacturing Overhead: $1.50 Fixed Manufacturing Overhead: $4.00 Fixed Selling Expense: $2.50 Fixed Administrative Expense: $2.00 Sales Commission: $1.00 Variable Administrative Expense: $0.50 For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units? (Do not round intermediate calculations).
$11.50 (Direct Materials + Direct Labor + Variable Man. OH + Sales Commission + Variable Administrative Exp.)
Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct Materials: $5.50 Direct Labor: and $3.00 Variable Manufacturing Overhead: $1.50 Fixed Manufacturing Overhead: $4.00 Fixed Selling Expense: $2.50 Fixed Administrative Expense: $2.00 Sales Commission: $1.00 Variable Administrative Expense: $0.50 If 8,000 units are produced and sold, what is the variable cost per unit produced and sold? (Round your answers to 2 decimal places.)
$5 (Fixed manufacturing overhead $4.00 x 10,000 divided by 8,000)
Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct Materials: $5.50 Direct Labor: and $3.00 Variable Manufacturing Overhead: $1.50 Fixed Manufacturing Overhead: $4.00 Fixed Selling Expense: $2.50 Fixed Administrative Expense: $2.00 Sales Commission: $1.00 Variable Administrative Expense: $0.50 If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?
direct materials
Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________. Ex: a radio installed in an automobile 1. raw materials 2. direct materials 3. indirect. materials
$570 (120/12 = 10 --> 10. x 18.00 = 180 --> 180 + 270 + 120 = 570)
Mickley Company's plantwide predetermined overhead rate is $18.00 per direct labor-hour and its direct labor wage rate is $12.00 per hour. The following information pertains to Job A-500: Direct materials: $270 Direct labor: $120 What is the total manufacturing cost assigned to Job A-500?
$14.25 (570 / 40 = 14.25)
Mickley Company's plantwide predetermined overhead rate is $18.00 per direct labor-hour and its direct labor wage rate is $12.00 per hour. The following information pertains to Job A-500: Direct materials: $270 Direct labor: $120 Total manufacturing cost: $570 If Job A-500 consists of 40 units, what is the unit product cost for this job? (Round your answer to 2 decimal places.)
$49,600 (10,100 x 113% = 11,413 --> 11,413 + 28,087 + 10,100 = 49,600)
Newhard Company assigns overhead cost to jobs on the basis of 113% of direct labor cost. The job cost sheet for Job 313 includes $28,087 in direct materials cost and $10,100 in direct labor cost. A total of 1,550 units were produced in Job 313. What is the total manufacturing cost assigned to Job 313?
$32 (49,600 / 1,550 = 32)
Newhard Company assigns overhead cost to jobs on the basis of 113% of direct labor cost. The job cost sheet for Job 313 includes $28,087 in direct materials cost and $10,100 in direct labor cost. A total of 1,550 units were produced in Job 313. Total manufacturing cost: $49,600 What is the unit product cost for Job 313?
nonmanufacturing costs
Property taxes associated with a company's administrative facility are considered _________________. 1. nonmanufacturing costs 2. manufacturing overhead costs 3. selling costs
$4,000 (200,000/10,000 = $20 per direct labor hour, $20*200 = $4,000)
Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor hours? 1. $2,000 2. $4,000 3. $6,000 4. $10,000
Molding: $5.40, Fabrication: $12.20 (estimated total fixed manufacturing overhead / estimated total machine-hours used + estimated variable manufacturing overhead per machine-hour)
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Molding: Estimated total machine-hours used: 4,200 Estimated total fixed manufacturing overhead: $16,800 Estimated variable manufacturing overhead per machine-hour: and $1.40 Fabrication: Estimated total machine-hours used: 2,520 Estimated total fixed manufacturing overhead: $25,200 Estimated variable manufacturing overhead per machine-hour: and $2.20 Job P: Direct materials: $21,840 Direct labor cost: $35,280 Actual. machine-hours used for molding: 2,890 Actual machine-hours used for fabrication: 1,010 Total machine-hours used for molding and fabrication: 3,900 Job Q: Direct materials: $13,440 Direct labor cost: $12,600 Actual. machine-hours used for molding: 1,340 Actual machine-hours used for fabrication: 1,480 Total machine-hours used for molding and fabrication: 2,820 Assume that Sweeten Company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments and Job P included 20 units and Job Q included 30 units. What were the company's predetermined overhead rates in the Molding Department and the Fabrication Department? (Round your answers to 2 decimal places.)
Job P: $12,322, Job Q: $18,056 (actual machine-hours used x predetermined overhead rate --> 1,010 x 12.20 & 1,480 x 12.20)
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Molding: Estimated total machine-hours used: 4,200 Estimated total fixed manufacturing overhead: $16,800 Estimated variable manufacturing overhead per machine-hour: and $1.40 Predetermined overhead rate: $5.40 Fabrication: Estimated total machine-hours used: 2,520 Estimated total fixed manufacturing overhead: $25,200 Estimated variable manufacturing overhead per machine-hour: and $2.20 Predetermined overhead rate: $12.20 Job P: Direct materials: $21,840 Direct labor cost: $35,280 Actual. machine-hours used for molding: 2,890 Actual machine-hours used for fabrication: 1,010 Total machine-hours used for molding and fabrication: 3,900 Job Q: Direct materials: $13,440 Direct labor cost: $12,600 Actual. machine-hours used for molding: 1,340 Actual machine-hours used for fabrication: 1,480 Total machine-hours used for molding and fabrication: 2,820 Assume that Sweeten Company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments and Job P included 20 units and Job Q included 30 units. How much manufacturing overhead was applied from the Fabrication Department to Job P and how much was applied to Job Q? (Do not round intermediate calculations).
Job P: $15,606, Job Q: $7,236 (actual machine-hours used x predetermined overhead rate --> 2,890 x 5.40 & 1,340 x 5.40)
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Molding: Estimated total machine-hours used: 4,200 Estimated total fixed manufacturing overhead: $16,800 Estimated variable manufacturing overhead per machine-hour: and $1.40 Predetermined overhead rate: $5.40 Fabrication: Estimated total machine-hours used: 2,520 Estimated total fixed manufacturing overhead: $25,200 Estimated variable manufacturing overhead per machine-hour: and $2.20 Predetermined overhead rate: $12.20 Job P: Direct materials: $21,840 Direct labor cost: $35,280 Actual. machine-hours used for molding: 2,890 Actual machine-hours used for fabrication: 1,010 Total machine-hours used for molding and fabrication: 3,900 Job Q: Direct materials: $13,440 Direct labor cost: $12,600 Actual. machine-hours used for molding: 1,340 Actual machine-hours used for fabrication: 1,480 Total machine-hours used for molding and fabrication: 2,820 Assume that Sweeten Company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments and Job P included 20 units and Job Q included 30 units. How much manufacturing overhead was applied from the Molding Department to Job P and how much was applied to Job Q? (Do not round intermediate calculations.)
$85,048 (add applied manufacturing overhead for molding and fabrication for job P to get actual manufacturing overhead, then add direct materials and direct labor cost to get total manufacturing cost assigned to Job P) (15,606 + 12,322 = 27,928 (manufacturing overhead for Job P) 27,928 + 21,840 + 35,280 = $85,048)
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Molding: Estimated total machine-hours used: 4,200 Estimated total fixed manufacturing overhead: $16,800 Estimated variable manufacturing overhead per machine-hour: and $1.40 Predetermined overhead rate: $5.40 Fabrication: Estimated total machine-hours used: 2,520 Estimated total fixed manufacturing overhead: $25,200 Estimated variable manufacturing overhead per machine-hour: and $2.20 Predetermined overhead rate: $12.20 Job P: Direct materials: $21,840 Direct labor cost: $35,280 Actual. machine-hours used for molding: 2,890 Actual machine-hours used for fabrication: 1,010 Total machine-hours used for molding and fabrication: 3,900 Applied manufacturing overhead for Molding: 15,606 Applied manufacturing overhead for Fabrication: 12,322 Job Q: Direct materials: $13,440 Direct labor cost: $12,600 Actual. machine-hours used for molding: 1,340 Actual machine-hours used for fabrication: 1,480 Total machine-hours used for molding and fabrication: 2,820 Applied manufacturing overhead for Molding: 7,236 Applied manufacturing overhead for Fabrication: 18,056 Assume that Sweeten Company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments and Job P included 20 units and Job Q included 30 units. What was the total manufacturing cost assigned to Job P? (Do not round intermediate calculations.)
True
T/F: A mixed cost contains both variable and fixed elements. Consider the example of utility cost.
True
T/F: Manufacturing overhead includes both indirect materials AND indirect labor, and both of these cannot be easily or conveniently traced to specific units of product.
True
T/F: Manufacturing overhead, including indirect materials and indirect labor, are allocated to all jobs rather than directly traced to each job
False (The total fixed cost remains constant even if activity level is at zero.)
T/F: The total fixed cost increases when the activity level is at zero.
matching principle
The __________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized. 1. materiality concept 2. consistency concept 3. matching principle 4. going concern assumption
decreases cost of goods sold and increases net operating income
The adjustment for overapplied overhead ______________. 1. decreases cost of goods sold and decreases net operating income 2. decreases cost of goods sold and increases net operating income 3. increases cost of goods sold and decreases net operating income 4. increases cost of goods sold and increases net operating income
bill of materials
The direct materials required to manufacture each unit of product are listed on a ______________. 1. bill of materials 2. materials requisition form 3. materials ticket 4. job order cost sheet
$10.00 per machine hour (300,000/50,000 = 6 + 4 = $10)
The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate? 1. $6.00 per machine hour 2. $8.00 per machine hour 3. $10.00 per machine hour 4. $12.50 per machine hour
Flat
The relevant range of activity for a fixed cost is the range of activity over which the graph of the cost is __________. 1. round 2. straight 3. flat 4. curved
Cost of goods sold and selling and administrative expenses
The traditional income statement uses which of the following cost categories? 1. variable expenses and fixed expenses 2. cost of goods sold and fixed expenses 3. operating expenses and selling and administrative expenses 4. cost of goods sold and selling and administrative expenses
Job Order Costing
These are examples of companies that would use ______________ : 1. Boeing (aircraft manufacturing) 2. Bechtel International (large scale construction) 3. Walt Disney Studios (movie production)
Milling: $8.50, Assembly: $10.00 (Milling: 510,000 / 60,000 & Assembly: 800,000 / 80,000)
Using the predetermined overhead cost for Milling: $510,000 and Assembly: $800,000, find the predetermined overhead rate for each department: Milling Department: Machine-hours: 60,000 Direct labor-hours: 8,000 Total fixed manufacturing overhead cost: $390,000 Variable manufacturing overhead per machine-hour: $2.00 Assembly Department: Machine-hours: 80,000 Direct labor-hours: 3,000 Total fixed manufacturing overhead cost: $500,000 Variable manufacturing overhead per direct labor-hourL $3.75
Milling: $765, Assembly: $200 (Milling: 90 x 8.50 = 765 Assembly: 20 x 10 = 200)
Using the predetermined overhead rate for Milling: $8.50 and Assembly: $10.00, determine the overhead applied from both departments: Milling: Machine-hours: 90 Direct labor-hours: 5 Direct materials: $800 Direct labor cost: 💲 $70 Assembly: Machine-hours: 20 Direct labor-hours: 4 Direct materials: $370 Direct labor cost: $280
underapplied
What is the term used when a company applies less overhead to production than it actually incurs? 1. misapplied 2. overapplied 3. unadjusted 4. underapplied
Activity-based costing
When a company creates overhead rates based on the activities that it performs, it is employing an approach called..... Mangers use this to more accurately measure the demands that jobs, products, customers, and other cost objects make on overhead resources
cost of goods sold
When a manufacturer sells its finished goods to customers, the costs are transferred from finished goods to .......
does not change
When activity level decreases, then the total fixed cost will _____________ 1. increase 2. decrease 3. does not change
decrease
When activity level decreases, then the total variable cost will ____________ 1. increase 2. decrease 3. does not change
does not change
When activity level increases, then the total fixed cost will _____________ 1. increase 2. decrease 3. does not change
increase
When activity level increases, then the total variable cost will _____________ 1. increase 2. decrease 3. does not change
subsidiary ledger
When all of a company's job costs sheets are viewed collectively they form what is known as a __________. 1. general ledger 2. inventory 3. job-ordering cost system 4. subsidiary ledger
Contribution Format
Which income statement format is displayed below and should be used primarily by management? Sales XXX -Variable expenses XXX (AKA variable costs) Contribution margin = XXX -Fixed expenses XXX (AKA fixed costs) Net operating income = XXX 1. Contribution Format 2. Traditional Format
Traditional Format
Which income statement format is displayed below and should be used primarily for external reporting? Sales XXX -Cost of goods sold XXX Gross Margin = XXX -Operating Exp (AKA selling & admin exp) XXX Net Operating Income = XXX 1. Contribution Format 2. Traditional Format
sunk cost
Which of the following is always an irrelevant cost? 1. differential cost 2. sunk cost 3. opportunity cost
It separates costs into fixed and variable categories
Which of the following is true of the contribution approach? 1. it is mainly used for external reporting purposes 2. it separates costs into fixed and variable categories 3. It is not useful for merchandising companies 4. It calculates gross margin by deducting cost of goods sold from sales
An opportunity cost cannot be changed by any decision made now or in the future
Which of the following statements about opportunity costs is not correct? 1. an opportunity cost is the potential benefit that is given up when one alternative is selected over another 2. an opportunity cost cannot be changed by any decision made now or in the future 3. opportunity costs are not usually found in the accounting records 4. opportunity costs are costs that must be explicitly considered in every decision a manager makes
committed
Which type of fixed cost is this? Long-term, cannot be significantly reduced in the short term. Ex: You work a job that has a fixed salary. 1. discretionary 2. committed
discretionary
Which type of fixed cost is this? May be altered in the short-term by current managerial decisions. Ex: You pay insurance on a building that you own every 6 months, but after the last 6 month payment you found a better policy that is cheaper. 1. discretionary 2. committed
$6,200 (direct materials + direct labor + manufacturing overhead --> 4000 + 1200 + (100*10) = 6200)
Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If job X23 used 100 direct labor hours, what is the total cost assigned to this job. 1. $5,000 2. $5,200 3. $6,000 4. $6,200
$124 (unit product cost = total cost/unit = 6200/50 = 124)
Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor hour. Direct material and direct labor associated with job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor hour to produce 50 audio controllers, what is this job unit's product cost (per audio controller)? 1. $52 2. $62 3. $100 4. $124
period costs
____________ include all selling and administrative costs. 1. product costs 2. period costs 3. fixed costs 4. variable costs
product costs
____________ includes all the costs that are involved in acquiring or making a product. They attach to a unit of product as it is purchased or manufactured and they stay attached to each unit of product as long as it remains in inventory awaiting sale. It includes direct materials, direct labor, and manufacturing overhead. 1. product costs 2. period costs 3. fixed costs 4. variable costs
raw materials
____________ includes any materials that go into the final product 1. work in process 2. raw materials 3. finished goods costs
fixed cost
______________ a cost that remains constant, in total, regardless of changes in the level of the activity. Cost per unit varies inversely with changes in activity, if expressed on a per unit basis. 1. product cost 2. fixed cost 3. period cost 4. variable cost
finished goods costs
______________ consists of completed units of product that have not yet been sold to customers 1. work in process 2. raw materials 3. finished goods costs
work in process
______________ consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer 1. work in process 2. raw materials 3. finished goods costs
sunk costs
______________ have already been incurred and cannot be changed now or in the future. These are irrelevant costs and should be ignored when making decisions 1. sunk costs 2. direct costs 3. indirect costs 4. conversion costs
opportunity cost
______________ the potential benefit that is given up when one alternative is selected over another. These costs are not found in accounting records but must be explicitly considered in every decision 1. differential revenue 2. differential costs 3. opportunity costs 4. fixed costs
variable cost
_______________ a cost that varies, in total, in direct proportion to changes in the level of activity. Cost per unit is constant 1. product cost 2. fixed cost 3. period cost 4. variable cost
differential costs
_______________ are the difference in cost between any two alternatives, can be fixed or variable. 1. differential revenue 2. differential costs 3. opportunity cost 4. fixed costs
direct labor
_______________ those labor costs that can be easily traced to individual units of product and is sometimes called "touch labor." Ex: Wages paid to automobile assembly workers 1. direct labor 2. indirect labor 3. overhead labor
differential revenue
________________ a difference in revenue between two alternatives. 1. differential revenue 2. differential costs 3. opportunity cost 4. fixed costs
Selling costs
________________ are costs necessary to secure the order and deliver the product. They can be either direct or indirect costs 1. selling costs 2. administrative costs 3. fixed costs 4. variable costs
direct costs
________________ are costs that can be easily and conveniently traced to a unit of product or other cost objects. An example is direct materials or direct labor 1. indirect costs 2. common costs 3. direct costs
manufacturing overhead
________________ includes all manufacturing costs except direct material and direct labor. These costs cannot be readily traced to finished products 1. raw materials 2. manufacturing overhead 3. total fixed variable cost 4. direct materials
adminsitrative costs
_________________ are al executive, organizational, and clerical costs. They can be either direct or indirect costs. 1. selling costs 2. administrative costs 3. fixed costs 4. variable costs
common costs
_________________ are indirect costs incurred to support a number of cost objects. These costs cannot be traced to any individual cost object 1. indirect costs 2. common costs 3. direct costs
indirect costs
__________________ are costs that cannot be easily and conveniently traced to a unit of product or other cost object. An example is manufacturing overhead 1. indirect costs 2. common costs 3. direct costs
financial accounting
___________________ is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators 1. financial accounting 2. managerial accounting
managerial accounting
____________________ is concerned with providing information to managers within an organization so that they can formulate plans, control operations, and make decisions. 1. financial accounting 2. managerial accounting
predetermined overhead rate (POHR)
estimated total manufacturing overhead cost for the coming period divided by estimated total units in the allocation base for the coming period equal what?
