Managerial Accounting final

A soft drink bottler incurred the following factory utility cost: $3,836 for 1,000 cases bottled and $3,900 for 1,300 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:

$0.21

Frankin Corporation's net cash provided by operating activities was $192; its capital expenditures were $154; and its cash dividends were $27. The company's free cash flow was:

$11 Free cash flow = Net cash provided by operating activities − Capital expenditures − Dividends = $192 - $154 - $27 = $11

Bries Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $18,000. Budgeted cash receipts total $183,000 and budgeted cash disbursements total $188,000. The desired ending cash balance is $30,000. The excess (deficiency) of cash available over disbursements for January is:

$13,000

When computing the net cash provided by operating activities using the indirect method on the statement of cash flows, which item below would NOT be added to net income?

Decrease in accounts payable.

Which of the following statements is true when referring to fixed costs?

Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

In a job-order costing system, indirect labor cost is usually recorded as a debit to:

Manufacturing Overhead.

Which of the following is an overhead activity cost pool for a manufacturer?

Settin up machines

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

The amount paid to the individual who stains a chair.

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.

Refer to the T-account below: Work In Process Bal.30,000. (12)270,000 (4)90,000 (6)70,000 (9)110,000 Bal.30,000 Entry (12) could represent which of the following?

The cost of goods manufactured transferred to Finished Goods.

Which is not pnoe of the four most commonly used perspectives on a balanced scorecard?

The external process perspective

In a job-order costing system, manufacturing overhead applied is recorded as a debit to:

Work in Process inventory.

Differential costs can:

be either fixed or variable.

As the complexity of a product's manufacturing operation increases, the number of activities and cost drivers used in an activity-based cost system will likely:

increase.

If sales volume increases and all other factors remain constant, then the:

margin of safety will increase.

Allocating common fixed expenses to business segments:

may cause managers to erroneously discontinue business segments.

McCorey Corporation recorded the following events last year: Repurchase by the company of its own common stock$60,000Sale of long-term investment$55,000Interest paid to lenders$15,000Dividends paid to the company's shareholders$70,000Collection by McCorey of a loan made to another company$75,000Payment of taxes to governmental bodies$50,000 On the statement of cash flows, some of these events are classified as operating activities, some are classified as investing activities, and some are classified as financing activities. Based solely on the information above, the net cash provided by (used in) financing activities on the statement of cash flows would be:

$(130,000)

The following events occurred last year at Dorder Corporation: Purchase of plant and equipment$45,000Sale of long-term investment$24,000Dividends received on long-term investments$9,000Paid off bonds payable$12,000Depreciation expense$32,000 Based on the above information, the net cash provided by (used in) investing activities for the year on the statement of cash flows would be:

$(21,000) Investing activities: Purchase of property, plant, and equipment$(45,000)Sale of long-term investments 24,000 Net cash provided by (used in) investing activities$(21,000)

Spackel Corporation recorded the following events last year: On the statement of cash flows, some of these events are classified as operating activities, some are classified as investing activities, and some are classified as financing activities. Based solely on the information above, the net cash provided by (used in) investing activities on the statement of cash flows would be:

$(280,000)

Alcoser Corporation's most recent balance sheet appears below: Comparative Balance Sheet Ending BalanceBeginning BalanceAssets: Cash and cash equivalents$34 $29 Accounts receivable 32 36 Inventory 53 66 Property, plant, and equipment 554 480 Less accumulated depreciation 208 206 Total assets$465 $405 Liabilities and stockholders' equity: Accounts payable$41 $50 Accrued liabilities 17 16 Income taxes payable 28 30 Bonds payable 217 200 Common stock 75 70 Retained earnings 87 39 Total liabilities and stockholders' equity$465 $405 Net income for the year was $60. Cash dividends were $12. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) investing activities for the year was:

$(74) Investing activities: Purchase of property, plant, and equipment ($554 - $480)$(74)Net cash provided by (used in) investing activities$(74)

Spackel Corporation recorded the following events last year: Issuance of shares of the company's own common stock$380,000Purchase of long-term investment$40,000Dividends paid to the company's own shareholders$18,000Cash paid to suppliers for inventory purchases$12,000Repayment of principal on the company's own bonds$370,000Interest paid to lenders$6,000Collection by Spackel of a loan made to another company$110,000Purchase of equipment$350,000 On the statement of cash flows, some of these events are classified as operating activities, some are classified as investing activities, and some are classified as financing activities. Based solely on the information above, the net cash provided by (used in) financing activities on the statement of cash flows would be:

$(8,000) Financing activities: Repayment of principal on bonds payable$(370,000) Issuance of common stock 380,000 Paying a dividend (18,000) Net cash provided by (used in) financing activities$(8,000)

Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply CostMarch 11,665 $28,352 April 11,461 $28,296 May 11,993 $28,440 June 13,800 $28,928 July 11,725 $28,368 August 11,211 $28,229 September 12,005 $28,443 October 11,696 $28,360 November 11,844 $28,400 Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to: (Round your intermediate calculations to 2 decimal places.)

$0.27 per client-visit; $25,202 per month

Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August?

$1,188 Unfavorable

Tusa Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Estimated total manufacturing overhead at the beginning of the year $638,250 Estimated direct labor-hours at the beginning of the year 37,000direct labor-hours Results of operations: Actual direct labor-hours 34,000direct labor-hoursManufacturing overhead: Indirect labor cost$148,000 Other manufacturing overhead costs incurred$450,000 Cost of goods manufactured$1,611,000 Cost of goods sold (unadjusted)$1,518,000 The adjusted Cost of Goods Sold for the year is: (Round your intermediate calculations to 2 decimal places.)

$1,529,500

Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 9,700MHsActual level of activity 9,900MHsStandard variable manufacturing overhead rate$6.30per MHActual total variable manufacturing overhead$60,390 What was the variable overhead rate variance for the month?

$1,980 Favorable

Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: Cost PercentCompleteMaterials costs$5,800 50% Conversion costs$6,500 30% A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Materials costs$85,300 Conversion costs$168,000 The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs. The cost per equivalent unit for materials for the month in the first processing department is closest to:

$11.49

The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation. If the budgeted direct labor time for November is 7,000 hours, then the total budgeted manufacturing overhead for November is:

$110,000

Knappert Corporation makes one product and has provided the following information: Each unit of finished goods requires 3 pounds of raw materials. The raw materials cost $5.00 per pound. The direct labor wage rate is $24.00 per hour. Each unit of finished goods requires 2.8 direct labor-hours. Manufacturing overhead is entirely variable and is $11.00 per direct labor-hour. The variable selling and administrative expense per unit sold is $3.80. The fixed selling and administrative expense per month is $50,000. The unit product cost is closest to:(Round your intermediate calculations to 2 decimal places.)

$113.00

Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000 Variable costs per unit: Direct materials$51 Direct labor$12 Variable manufacturing overhead$2 Variable selling and administrative expense$5 Fixed costs per year: Fixed manufacturing overhead$441,000 Fixed selling and administrative expense$112,000 The absorption costing unit product cost is:

$128 per unit

Smith Corporation makes and sells a single product called a Pod. Each Pod requires 1.4 direct labor-hours at $9.60 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. Smith Corporation is preparing a Direct Labor Budget for the second quarter of the year. The budgeted direct labor cost per Pod is closest to:

$13.44

Emigh Corporation's cost of goods manufactured for the just completed month was $146,000 and its overhead was overapplied by $5,000. The beginning finished goods inventory was $35,000 and the ending finished goods inventory was $37,000. The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. How much was the adjusted cost of goods sold on the Schedule of Cost of Goods Sold?

$139,000

Uchimura Corporation has two divisions: the AFE Division and the GBI Division. The corporation's net operating income is $42,000. The AFE Division's divisional segment margin is $15,700 and the GBI Division's divisional segment margin is $175,400. What is the amount of the common fixed expense not traceable to the individual divisions?

$149,100

Hunkins Corporation has provided the following data concerning last month's operations. Purchases of raw materials$33,000Indirect materials included in manufacturing overhead$4,000Direct labor cost$58,000Manufacturing overhead applied to Work in Process$91,000 BeginningEndingRaw materials inventory$14,000$20,000Work in process inventory$57,000$70,000 How much is the cost of goods manufactured for the month on the Schedule of Cost of Goods Manufactured?

$159,000

Stockmaster Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (8,000 units)$320,000 Variable expenses 192,000 Contribution margin 128,000 Fixed expenses 121,600 Net operating income$6,400 The margin of safety in dollars is closest to:

$16,000

Carriveau Corporation's most recent balance sheet appears below: Comparative Balance Sheet Ending BalanceBeginning BalanceAssets: Current assets: Cash and cash equivalents$31 $34 Accounts receivable 73 67 Inventory 74 64 Total current assets 178 165 Property, plant, and equipment 456 370 Less accumulated depreciation 207 196 Net property, plant, and equipment 249 174 Total assets$427 $339 Liabilities and stockholders' equity: Current liabilities: Accounts payable$49 $56 Accrued liabilities 19 20 Income taxes payable 26 24 Total current liabilities 94 100 Bonds payable 152 200 Total liabilities 246 300 Stockholders' equity: Common stock 35 30 Retained earnings 146 9 Total stockholders' equity 181 39 Total liabilities and stockholders' equity$427 $339 Net income for the year was $172. Cash dividends were $35. The company did not sell or retire any property, plant, and equipment during the year. The net cash provided by (used in) operating activities for the year was:

$161 Net income $172 Adjustments to convert net income to a cash basis: Depreciation ($207 - $196)$11 Increase in accounts receivable ($73 - $67) (6) Increase in inventory ($74 - $64) (10) Decrease in accounts payable ($49 - $56) 7 Decrease in accrued liabilities ($19 - $20) (1) Increase in income taxes payable ($26 - $24) 2 (11)Net cash provided by (used in) operating activities $161

Borchardt Corporation has provided the following data concerning last month's operations. Direct materials$29,000Direct labor$58,000Manufacturing overhead applied to Work in Process$82,000 BeginningEndingWork in process inventory$66,000 $57,000 How much is the cost of goods manufactured for the month on the Schedule of Cost of Goods Manufactured?

$178,000

Inacio Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below: Beginning work in process inventory: Units in beginning work in process inventory 800 Materials costs$12,900 Conversion costs$5,000 Percent complete with respect to materials 75%Percent complete with respect to conversion 20%Units started into production during the month 9,500 Units transferred to the next department during the month 8,400 Materials costs added during the month$172,000 Conversion costs added during the month$240,200 Ending work in process inventory: Units in ending work in process inventory 1,900 Percent complete with respect to materials 90%Percent complete with respect to conversion 30% The cost per equivalent unit for materials for the month in the first processing department is closest to:

$18.29

Brendal Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year: Estimated total manufacturing overhead at the beginning of the year $693,000 Estimated direct labor-hours at the beginning of the year 42,000direct labor-hours Results of operations: Raw materials (all direct) requisitioned for use in production$525,000 Direct labor cost$690,000 Actual direct labor-hours 49,000direct labor-hoursManufacturing Overhead: Indirect labor cost$138,000 Other manufacturing overhead costs incurred$506,000 How much is the total manufacturing cost added to Work in Process during the year? (Round your intermediate calculations to 2 decimal places.)

$2,023,500

Ramkissoon Midwifery's cost formula for its wages and salaries is $2,060 per month plus $442 per birth. For the month of July, the company planned for activity of 117 births, but the actual level of activity was 114 births. The actual wages and salaries for the month was $54,500. The spending variance for wages and salaries in July would be closest to:

$2,052 U

A tile manufacturer has supplied the following data: Boxes of tiles produced and sold 520,000 Sales revenue$2,132,000 Variable manufacturing expense$650,000 Fixed manufacturing expense$464,000 Variable selling and administrative expense$260,000 Fixed selling and administrative expense$312,000 Net operating income$446,000 What is the company's unit contribution margin? (Round your intermediate calculations to 2 decimal places.)

$2.35 per unit

Schuepfer Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 1,300 units are planned to be sold in March. The variable selling and administrative expense is $4.20 per unit. The budgeted fixed selling and administrative expense is $19,240 per month, which includes depreciation of $3,380 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:

$21,320

Reith Inc. has provided the following data for the month of November. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Work In ProcessFinished GoodsCost of Goods SoldTotalDirect materials$1,850 $10,440 $58,560 $70,850 Direct labor 3,510 22,620 126,880 153,010 Manufacturing overhead applied 1,560 7,800 42,640 52,000 Total$6,920 $40,860 $228,080 $275,860 Manufacturing overhead for the month was overapplied by $4,000. The company allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The cost of goods sold for November after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:

$224,800

Hopi Corporation expects the following operating results for next year: Sales$400,000 Margin of safety$100,000 Contribution margin ratio 75% Degree of operating leverage 4 What is Hopi expecting total fixed expenses to be next year?

$225,000

Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: Cost PercentCompleteMaterials costs$5,800 50% Conversion costs$6,500 30% A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Materials costs$85,300 Conversion costs$168,000 The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs. The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round your intermediate calculations to 3 decimal places.)

$245,441

The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200. The sunk cost in this situation is:

$26,800

Catano Corporation pays for 40% of its raw materials purchases in the month of purchase and 60% in the following month. If the budgeted cost of raw materials purchases in July is $256,550 and in August is $278,050, then in August the total budgeted cash disbursements for raw materials purchases is closest to:

$265,150

Arciba Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,400 direct labor-hours will be required in January. The variable overhead rate is $9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $130,980 per month, which includes depreciation of $10,360. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for January should be:

$27.20

Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period. Direct materials$8Direct labor$9Manufacturing overhead (70% variable and 30% unavoidable fixed)$10 A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

$28 per fan

Glew Corporation has provided the following information: Cost per UnitCost per PeriodDirect materials$6.00 Direct labor$3.35 Variable manufacturing overhead$1.75 Fixed manufacturing overhead $8,800Sales commissions$1.00 Variable administrative expense$0.40 Fixed selling and administrative expense $4,000 If 3,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:

$28,050

Given the cost formula, Y = $16,000 + $3.40X, total cost for an activity level of 4,000 units would be:

$29,600

In August, one of the processing departments at Tsuzuki Corporation had beginning work in process inventory of $24,000 and ending work in process inventory of $13,000. During the month, $283,000 of costs were added to production. In the department's cost reconciliation report for August, the cost of units transferred out of the department would be:

$294,000

Gordon Corporation produces 1,000 units of a part per year which are used in the assembly of one of its products. The unit cost of producing these parts is: Variable manufacturing cost$15 Fixed manufacturing cost 12 Total manufacturing cost$27 The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from the outside supplier, two thirds of the total fixed costs incurred in producing the part can be avoided. The annual financial advantage (disadvantage) for the company as a result of buying the part from the outside supplier would be:

$3,000

Cybil Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop purchased the car 40 years ago for $8,000. Cybil is either going to sell the car for $10,000 or have it restored and then sell it for $22,000. The restoration will cost $9,000. Cybil would be financially better off by:

$3,000 to have the vehicle restored

Saada Corporation uses the weighted-average method in its process costing system. The Fitting Department is the second department in its production process. The data below summarize the department's operations in March. Units Percent Complete withRespect to ConversionBeginning work in process inventory 3,700 20%Transferred in from the prior department during March 59,000 Ending work in process inventory 7,200 60% The Fitting Department's cost per equivalent unit for conversion cost for March was $5.99. How much conversion cost was assigned to the units transferred out of the Fitting Department during March?

$332,445.00

Warp Manufacturing Corporation uses a standard cost system for the production of its ski lift chairs. Warp uses machine-hours as an overhead base. The variable manufacturing overhead standards for each chair are 1.2 machine-hours at a standard cost of $18 per hour. During the month of September, Warp incurred 34,000 machine-hours in the production of 32,000 ski lift chairs. The total variable manufacturing overhead cost was $649,400. What is Warp's variable overhead rate variance for September?

$37,400 Unfavorable

Jennifer Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: EstimatedExpected ActivityActivity Cost PoolsOverhead CostProduct AProduct BTotalProduct design$23,500400100500Assembling$18,000500200700Supporting customers$34,600600300900 The activity rate under the activity-based costing system for Supporting customers is closest to:

$38.44

Sedita Inc. is working on its cash budget for July. The budgeted beginning cash balance is $46,000. Budgeted cash receipts total $175,000 and budgeted cash disbursements total $174,000. The desired ending cash balance is $50,000. The excess (deficiency) of cash available over disbursements for July will be:

$47,000

Schwiesow Corporation has provided the following information: Cost per UnitCost per PeriodDirect materials$7.05 Direct labor$3.50 Variable manufacturing overhead$1.65 Fixed manufacturing overhead $11,000Sales commissions$1.00 Variable administrative expense$0.40 Fixed selling and administrative expense $5,500 If the selling price is $18.70 per unit, the contribution margin per unit sold is closest to:

$5.10

The data given below are from the accounting records of the Kuhn Corporation: Net Income (accrual basis)$45,000Depreciation Expense$9,000Decrease in Accounts Payable$2,500Decrease in Inventory$3,000Increase in Bonds Payable$10,000Sale of Common Stock for cash$30,000Increase in Accounts Receivable$4,500 Based on this information, the net cash provided by (used in) operating activities using the indirect method would be:

$50,000 Net income$45,000 Adjustments to convert net income to a cash basis: Depreciation 9,000 Increase in accounts receivable (4,500)Decrease in inventory 3,000 Decrease in accounts payable (2,500)Net cash provided by (used in) operating activities$50,000

The following accounts are from last year's books at Sharp Manufacturing: Raw MaterialsBal0(b)154,000(a)164,000 10,000 Work In ProcessBal0(f)510,000(b)132,000 (c)168,000 (e)210,000 0 Finished GoodsBal0(g)460,000(f)510,000 50,000 Manufacturing Overhead(b)22,000(e)210,000(c)26,000 (d)156,000 6,000 Cost of Goods Sold(g)460,000 Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the amount of cost of goods manufactured for the year?

$510,000

Meginnis Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: AverageCost per UnitDirect materials$5.20 Direct labor$3.75 Variable manufacturing overhead$1.65 Fixed manufacturing overhead$2.60 Fixed selling expense$0.50 Fixed administrative expense$0.40 Sales commissions$1.50 Variable administrative expense$0.50 If 6,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:

$53,700

The Consumer Products Division of Goich Corporation had average operating assets of $490,000 and net operating income of $41,000 in May. The minimum required rate of return for performance evaluation purposes is 11%. What was the Consumer Products Division's minimum required return in May?

$53,900

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory 0 Units produced 8,900 Units sold 8,500 Units in ending inventory 400 Variable costs per unit: Direct materials$26 Direct labor$25 Variable manufacturing overhead$4 Variable selling and administrative expense$4 Fixed costs: Fixed manufacturing overhead$249,200 Fixed selling and administrative expense$17,000 What is the variable costing unit product cost for the month?

$55 per unit

Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to:

$555,750

The following accounts are from last year's books at Sharp Manufacturing: Raw Materials Bal0. (b)154,000 (a)164,000 10,000 Work In Process Bal 0. (f)510,000 (b)132,000 (c)168,000 (e)210,000 0 Finished Goods Bal 0. (g) 460,000 (f)510,000 50,000 Manufacturing Overhead (b)22,000. (e)210,000 (c)26,000 (d)156,000 6,000 Cost of Goods Sold (g)460,000 Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the manufacturing overapplied or underapplied for the year?

$6,000 overapplied

Gabel Inc. is a merchandising company. Last month the company's merchandise purchases totaled $63,000. The company's beginning merchandise inventory was $13,000 and its ending merchandise inventory was $15,000. What was the company's cost of goods sold for the month?

$61,000

The following transactions occurred last year at Jogger Corporation: Issuance of shares of the company's own common stock$110,000Dividends paid to the company's own shareholders$3,000Sale of long-term investment$4,000Interest paid to lenders$8,000Retirement of the company's own bonds payable$100,000Proceeds from sale of the company's used equipment$29,000Purchase of new equipment$170,000 Based solely on the above information, the net cash provided by (used in) financing activities for the year on the statement of cash flows would be:

$7,000 Financing activities: Repaying principal on bonds payable$(100,000)Issuance of common stock 110,000 Paying a dividend (3,000)Net cash provided by (used in) financing activities$7,000

St. Johns Corporation uses a job-order costing system and has provided the following partially completed summary T-accounts for the just-completed period: Work In Process Bal22,000. Credits534,000 Direct materials85,000 Direct labor161,000 Overhead applied273,000 Bal.? Manufacturing Overhead Debits200,000. Credits? Manufacturing overhead for the period was:

$73,000 Overapplied

A company produces a single product. Variable production costs are $21 per unit and variable selling and administrative expenses are $4 per unit. Fixed manufacturing overhead totals $30,000 and fixed selling and administration expenses total $36,000. Assuming a beginning inventory of zero, production of 6,000 units and sales of 5,600 units, the dollar value of the ending inventory under variable costing would be:

$8,400

Darden Corporation uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 18,000 units in its beginning work in process inventory that were 10% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $16,200. An additional 84,000 units were started into production during the month. There were 17,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $836,880 in conversion costs were incurred in the department during the month. The cost per equivalent unit for conversion costs for the month is closest to:

$8.804

Lap Corporation uses the weighted-average method in its process costing system. The beginning work in process inventory in a particular department consisted of 80,000 units, 100% complete with respect to materials and 25% complete with respect to conversion costs. The total dollar value of this inventory was $226,000. During the month, 150,000 units were transferred out of the department. The costs per equivalent unit for the month were $2.00 for materials and $3.50 for conversion costs. The cost of the units completed and transferred out of the department was:

$825,000

How much will a company's net operating income change if it undertakes an advertising campaign given the following data: Cost of advertising campaign$25,000 Variable expense as a percentage of sales 42% Increase in sales$60,000

$9,800 increase

The Richmond Corporation uses the weighted-average method in its process costing system. The company has only a single processing department. The company's ending work in process inventory on August 31 consisted of 18,000 units. The units in the ending work in process inventory were 100% complete with respect to materials and 60% complete with respect to labor and overhead. If the cost per equivalent unit for August was $2.75 for materials and $4.25 for labor and overhead, the total cost assigned to the ending work in process inventory was:

$95,400

Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs. Of the fixed costs, $90,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

($10,000)

Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be:

($30,000)

Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $580,000, variable expenses of $301,600, and traceable fixed expenses of $186,500. The Alpha Division has sales of $510,000, variable expenses of $178,500, and traceable fixed expenses of $222,100. The total amount of common fixed expenses not traceable to the individual divisions is $235,500. What is the company's net operating income?

($34,200)

Hodge Inc. has some material that originally cost $74,600. The material has a scrap value of $57,400 as is, but if reworked at a cost of $1,500, it could be sold for $54,400. What would be the financial advantage (disadvantage) of reworking and selling the material rather than selling it as is as scrap?

($4,500)

Klicker Corporation's most recent balance sheet appears below: The company's net income for the year was $152 and it did not issue any bonds or repurchase any of its common stock during the year. Cash dividends were $40. The net cash provided by (used in) financing activities for the year was:

($49)

Domingo Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were: Cost PercentCompleteMaterials costs$5,500 50% Conversion costs$1,700 20% A total of 6,800 units were started and 6,100 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: CostMaterials costs$158,700 Conversion costs$120,400 The ending inventory was 85% complete with respect to materials and 75% complete with respect to conversion costs. How many units are in ending work in process inventory in the first processing department at the end of the month?

1,100

Goodman Corporation has sales of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed costs are $66,000, the degree of operating leverage is:

1.73

Bims Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 2,000 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 61,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 18,000 units in the ending work in process inventory of the Assembly Department that were 60% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month?

55,800

Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: Cost PercentCompleteMaterials costs$5,800 50% Conversion costs$6,500 30% A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Materials costs$85,300 Conversion costs$168,000 The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs. What are the equivalent units for conversion costs for the month in the first processing department?

6,790

Jared Beverage Corporation uses a process costing system to collect costs related to the production of its celery flavored cola. The cola is first processed in a Mixing Department and is then transferred out and finished up in the Bottling Department. The finished cases of cola are then transferred to Finished Goods Inventory. The following information relates to the company's two departments for the month of January: Mixing BottlingCases of cola in work in process, January 1 10,000 5,000 Cases of cola completed/transferred out during January 65,000 ? Cases of cola in work in process, January 31 4,000 7,000 How many cases of cola were completed and transferred to Finished Goods Inventory during January?

63,000

Kota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments. On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What are the Molding Department's equivalent units related to materials for January?

86,000

Cassius Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (7,000 units)$210,000 Variable expenses 136,500 Contribution margin 73,500 Fixed expenses 67,200 Net operating income$6,300 The number of units that must be sold to achieve a target profit of $31,500 is closest to:

9,400 units

Arona Corporation manufactures canoes in two departments, Fabrication and Waterproofing. In the Fabrication Department, fiberglass panels are attached to a canoe- shaped aluminum frame. The canoes are then transferred to the Waterproofing department to be coated with sealant. Arona uses a weighted-average process cost system to collect costs in both departments. All materials in the Fabrication Department are added at the beginning of the production process. On July 1, the Fabrication Department had 30 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 20 canoes in process that were 40% complete with respect to conversion cost. During July, the Fabrication Department completed 70 canoes and transferred them to the Waterproofing Department. What are the Fabrication Department's equivalent units of production related to materials for July?

90

Which of the following is a limitation of activity-based costing?

Activity-based costing can be expensive to use.

Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?

An increase in operating assets.

Purchase order processing is an example of a:

Batch-level activity.

The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a:

Batch-level activity.

As the level of activity increases, how will a mixed cost in total and per unit behave? In TotalPer UnitA)IncreaseDecreaseB)IncreaseIncreaseC)IncreaseNo effectD)DecreaseIncreaseE)DecreaseNo effect

Choice A

Edith Carolina is president of the Deed Corporation. The company is decentralized, and leaves investment decisions up to the discretion of the division managers. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%. Suppose Deed Corporation evaluates managerial performance using return on investment. Edith Carolina, as president of the company, may view the opportunity for taking on the cosmetics line differently from Michael Sanders, manager of the Cosmetics Division. What action would each of them prefer with respect to the decision of whether to take on the new cosmetics line? CarolinaSandersA)acceptrejectB)rejectacceptC)acceptacceptD)rejectreject

Choice A

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? ContributionMargin RatioBreak-evenPoint A)IncreaseDecrease B)DecreaseDecrease C)IncreaseNo effect D)DecreaseNo effect

Choice A

Tomlin Corporation prepares its statement of cash flows using the indirect method. Which of the following would be subtracted from net income in the operating activities section of the statement? Increase inAccountsReceivableDecrease inAccruedLiabilitiesA)YesYesB)YesNoC)NoYesD)NoNo

Choice A

Which of the following will increase a company's manufacturing cycle efficiency (MCE)? Decrease in Inspection TimeDecrease in Queue TimeA)YesYesB)YesNoC)NoYesD)NoNo

Choice A

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,100 and is paid at the beginning of the first year. Sixty percent of the premium applies to manufacturing operations and forty percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? ProductPeriodA)$280$420B)$420$280C)$700$0D)$0$700

Choice B

The following data have been collected for four different cost items. Cost ItemCost at100 unitsCost at140 unitsW$8,000 $10,560 X$5,000 $5,000 Y$6,500 $9,100 Z$6,700 $8,580 Which of the following classifications of these cost items by cost behavior is correct? Cost WCost XCost YCost ZA)variablefixedmixedvariableB)mixedfixedvariablemixedC)variablefixedvariablevariableD)mixedfixedmixedmixed

Choice B

Adah Corporation prepares its statement of cash flows using the indirect method. Which of the following would be subtracted from net income in the operating activities section of the statement? Decrease inAccountsReceivableDecrease inInventoryA)YesYesB)YesNoC)NoYesD)NoNo

Choice C

Poorly trained workers could have an unfavorable effect on which of the following variances? Labor Rate VarianceMaterials Quantity VarianceA)YesYesB)YesNoC)NoYesD)NoNo

Choice C

The costs of direct materials are classified as: Conversion costManufacturing costPrime costA)YesYesYesB)NoNoNoC)YesYesNoD)NoYesYes

Choice D

Which of the following segment performance measures will decrease if there is an increase in the interest expense for that segment? Return on InvestmentResidual IncomeA)YesYesB)NoYesC)YesNoD)NoNo

Choice D

Which of the following would be relevant in the decision to sell or throw out obsolete inventory? Direct materialcost assignedto the inventoryFixed overheadcost assignedto the inventoryA)YesYesB)YesNoC)NoYesD)NoNo

Choice D

In the cost reconciliation report under the weighted-average method, the "Total cost accounted for" equals:

Cost of ending work in process inventory + Cost of units transferred out

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?

Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory

All other things equal, which of the following would increase a division's residual income?

Decrease in average operating assets.

Which of the following costs is classified as both a prime cost and a conversion cost?

Direct labor.

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?

Gross margin will increase.

What is the primary benefit of activity-based costing?

More accurate product costing.

In a sell or process further decision, consider the following costs: A variable production cost incurred prior to split-off. A variable production cost incurred after split-off. An avoidable fixed production cost incurred after split-off. Which of the above costs is (are) not relevant in a decision regarding whether the product should be processed further?

Only I

Two alternatives, code-named X and Y, are under consideration at Guyer Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative YMaterials costs$41,000 $59,000Processing costs$45,000 $45,000Equipment rental$17,000 $17,000Occupancy costs$16,000 $24,000 Are the materials costs and processing costs relevant in the choice between alternatives X and Y?

Only materials costs are relevant

Refer to the T-account below: Manufacturing Overhead(2)9,000(12)167,000(3)15,000 (4)80,000 (5)30,000 (6)25,000 159,000 167,000 Bal.8,000 The ending balance of $8,000 represents which of the following?

Overapplied overhead.

Which one of the following transactions should be classified as a financing activity on the statement of cash flows?

Purchase of the company's own stock.

Refer to the T-account below: Raw MaterialsBal.15,000(9)75,000(5)85,000 Bal.25,000 Entry (5) could represent which of the following?

Purchases of raw materials.

Contribution margin is:

Sales less variable production, variable selling, and variable administrative expenses.

Excerpts from Neuwirth Corporation's comparative balance sheet appear below: Ending BalanceBeginning BalanceCash and cash equivalents$37,000 $27,000 Accounts receivable$24,000 $28,000 Inventory$65,000 $68,000 Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?

The change in Accounts Receivable is added to net income; The change in Inventory is added to net income

The most recent comparative balance sheet of Giacomelli Corporation appears below: Comparative Balance Sheet Ending BalanceBeginning BalanceAssets: Current assets: Cash and cash equivalents$37,000 $29,000 Accounts receivable 20,000 24,000 Inventory 65,000 61,000 Prepaid expenses 5,000 7,000 Total current assets 127,000 121,000 Property, plant, and equipment 424,000 399,000 Less accumulated depreciation 231,000 200,000 Net property, plant, and equipment 193,000 199,000 Total assets$320,000 $320,000 Liabilities and stockholders' equity: Current liabilities: Accounts payable$19,000 $17,000 Accrued liabilities 58,000 51,000 Income taxes payable 47,000 42,000 Total current liabilities 124,000 110,000 Bonds payable 77,000 80,000 Total liabilities 201,000 190,000 Stockholders' equity: Common stock 31,000 30,000 Retained earnings 88,000 100,000 Total stockholders' equity 119,000 130,000 Total liabilities and stockholders' equity$320,000 $320,000 The company uses the indirect method to construct the operating activities section of its statement of cash flows. Which of the following is correct regarding the operating activities section of the statement of cash flows?

The change in Accounts Receivable will be added to net income; The change in Inventory will be subtracted from net income

The most recent comparative balance sheet of Giacomelli Corporation appears below: Comparative Balance Sheet Ending BalanceBeginning BalanceAssets: Current assets: Cash and cash equivalents$37,000 $29,000 Accounts receivable 20,000 24,000 Inventory 65,000 61,000 Prepaid expenses 5,000 7,000 Total current assets 127,000 121,000 Property, plant, and equipment 424,000 399,000 Less accumulated depreciation 231,000 200,000 Net property, plant, and equipment 193,000 199,000 Total assets$320,000 $320,000 Liabilities and stockholders' equity: Current liabilities: Accounts payable$19,000 $17,000 Accrued liabilities 58,000 51,000 Income taxes payable 47,000 42,000 Total current liabilities 124,000 110,000 Bonds payable 77,000 80,000 Total liabilities 201,000 190,000 Stockholders' equity: Common stock 31,000 30,000 Retained earnings 88,000 100,000 Total stockholders' equity 119,000 130,000 Total liabilities and stockholders' equity$320,000 $320,000 The company uses the indirect method to construct the operating activities section of its statement of cash flows. Which of the following is correct regarding the operating activities section of the statement of cash flows?

The change in Prepaid Expenses will be added to net income; The change in Income Taxes Payable will be added to net income

When using data from a segmented income statement, the dollar sales for a segment to break even is equal to:

Traceable fixed expenses ÷ Segment CM ratio

Which of the following is true of a company that uses absorption costing?

Unit product costs can change as a result of changes in the number of units manufactured.

Assembling a product is an example of a:

Unit-level activity.

Kota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments. On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What account would Kota debit to record the transfer of dolls out of the Molding Department?

Work in Process -- Assembly

Which of the following journal entries would be used to record direct labor costs in a company having two processing departments (Department A and Department B)?

Work in Process-Department AXXX Work in Process-Department BXXX Salaries and Wages Payable XXX

A segment of a business responsible for both revenues and expenses would be called:

a profit center.

An unfavorable materials quantity variance indicates that:

actual usage of material exceeds the standard material allowed for output.

In a statement of cash flows, the sale of a long-term investment would ordinarily be classified as:

an investing activity.

Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:

avoidable costs.

Generally speaking, net operating income under variable and absorption costing will:

be equal only when production and sales are equal.

At the break-even point:

contribution margin equals total fixed costs.

Product costs that have become expenses can be found in:

cost of goods sold.

The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:

cost structure.

When computing the cost per equivalent unit, the weighted-average method of process costing considers:

costs incurred during the current period plus cost of beginning work in process inventory.

Direct costs:

costs that can be easily and accurately traced to a cost object

Dacosta Corporation had only one job in process on May 1. The job had been charged with $1,800 of direct materials, $6,966 of direct labor, and $9,936 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined overhead rate of $18.40 per direct labor-hour. During May, the following activity was recorded: Raw materials (all direct materials): Beginning balance$8,500Purchased during the month$38,000Used in production$39,300Labor: Direct labor-hours worked during the month 1,900Direct labor cost incurred$24,510Actual manufacturing overhead costs incurred$33,300Inventories: Raw materials, May 30 ?Work in process, May 30$16,937 Work in process inventory on May 30 contains $3,741 of direct labor cost. Raw materials consist solely of items that are classified as direct materials. The entry to dispose of the underapplied or overapplied manufacturing overhead cost for the month would include a:

debit of $1,660 to Manufacturing Overhead.

In October, Raddatz Inc. incurred $73,000 of direct labor costs and $6,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

debit to Manufacturing Overhead of $6,000

During July at Loeb Corporation, $83,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a:

debit to Work in Process of $79,000

When using a flexible budget, a decrease in activity within the relevant range:

decreases total costs.

Activity-based costing is most appropriate to use when labor coasts are a(n) __________ proportion of total product costs and the manufacturing process is ____________.

decxreasing, complex

Which of the following is NOT a period cost?

depreciation of factory maintenance equipment

In activity-based costing, unit product costs computed for external financial reports include:

direct materials, direct labor, and manufacturing overhead.

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:

favorable.

In a statement of cash flows, issuing bonds payable affects the:

financing activities section.

A budget that is based on the actual activity of a period is known as a:

flexible budget.

Kinsi Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that:

generates the highest contribution margin per stamping machine hour.

The balanced scorecard:

incorporates financial and nonfinancial measures into an integrated system.

Data concerning Dorazio Corporation's single product appear below: Per UnitPercent of SalesSelling price$160 100%Variable expenses 48 30%Contribution margin$112 70% Fixed expenses are $87,000 per month. The company is currently selling 1,000 units per month. Management is considering using a new component that would increase the unit variable cost by $28. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

increase of $5,600

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

net operating income.

Which of the following would not affect the break-even point?

number of units sold

In a statement of cash flows, a change in an income taxes payable account would be recorded in the:

operating activities section.

Departmental overhead rates may not correctly assign overhead costs due to:

overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

The Wyeth Corporation produces three products, A, B, and C, from a single raw material input. Product A can be sold at the splitoff point for $40,000, or it can be processed further at a total cost of $15,000 and then sold for $58,000. Joint costs total $60,000 annually. Product A should be:

processed further and then sold.

In process costing, a separate work in process account is kept for each:

processing department.

When preparing a direct materials budget, the required purchases of raw materials in units equals:

raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets?

residual income

Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:

return on investment.

A cost incurred in the past that is not relevant to any current decision is classified as a(n):

sunk cost.

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:

the incremental costs associated with the order.

Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole?

the product line's segment margin

The usual starting point for a master budget is:

the sales forecast or sales budget.

n the standard cost formula Y = a + bX, what does the "Y" represent?

total cost

Net operating income computed under variable costing would exceed net operating income computed using absorption costing if:

units sold exceed units produced.

Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:

variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.

The costing method that treats all fixed costs as period costs is:

variable costing.

A cost that would be included in product costs under both absorption costing and variable costing is:

variable manufacturing costs.

A process costing system is employed in those situations where:

where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.

Overhead allocation based solely on a measure of volume such as direct labor-hours:

will systematically overcost high-volume products and undercost low-volume products.

The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is:

zero.