T Acct 230 Final
Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume.
True
Discretionary fixed costs arise from annual decisions by management to spend in certain fixed cost areas.
True
Fixed costs that are traceable to a segment may become common if the segment is divided into smaller units.
True
In a contribution format income statement for a merchandising company, cost of goods sold is a variable cost that gets included in the "Variable expenses" portion of the income statement.
True
In activity-based costing, there are a number of activity cost pools, each of which is allocated to products and other costing objects using its own unique measure of activity.
True
In any decision making situation, sunk costs are irrelevant and should be ignored.
True
Incremental analysis is an analytical approach that focuses only on those revenues and costs that will change as a result of a decision.
True
Period costs are expensed as incurred, rather than going into the Work in Process account.
True
Salaries of top management at corporate headquarters should not go into the Manufacturing Overhead account.
True
The practice of assigning the costs of idle capacity to products can result in unstable unit product costs.
True
Use the information on Drake Company to answer the following question. If the company desires a net operating income of $20,000, the number of units needed to be sold is: A. 28,500 unitsB. 31,000 unitsC. 31,750 unitsD. 26,500 units
C. 31,750 units
A company produces a single product. Last year, fixed manufacturing overhead was $30,000, variable production costs were $48,000, fixed selling and administration costs were $20,000, and variable selling administrative expenses were $9,600. There was no beginning inventory. During the year, 3,000 units were produced and 2,400 units were sold at a price of $40 per unit. Under variable costing, net operating income would be: A. a profit of $6,000.B. a profit of $4,000.C. a loss of $2,000.D. a loss of $4,400.
C. a loss of $2,000.
All other things being equal, if a division's traceable fixed expenses increase: A. the division's contribution margin ratio will decrease.B. the division's segment margin ratio will remain the same.C. the division's segment margin will decrease.D. the overall company profit will remain the same.
C. the division's segment margin will decrease.
Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves? A. Machine-hoursB. Power consumptionC. Direct labor-hoursD. Machine setups
C: Direct Labor-Hours
Manufacturing overhead consists of: A. all manufacturing costs.B. indirect materials but not indirect labor.C. all manufacturing costs, except direct materials and direct labor.D. indirect labor but not indirect materials.
C:all manufacturing costs, except direct materials and direct labor.
The costs of a particular department should not be split up among activity cost pools in an activity-based costing system.
False
The following costs should be considered direct costs of providing maternity delivery room services to a particular mother and her baby: the costs of drugs administered in the operating room, the attending physician's fees, and a portion of the liability insurance carried by the hospital to cover the delivery room.
False
The following journal entry would be made to apply overhead cost to jobs in a job-order costing system:Manufacturing overhead XXX Work in process XXX
False
The following would typically be considered indirect costs of manufacturing a particular Boeing 787 to be delivered to Singapore Airlines: electricity to run production equipment, the factory manager's salary, and the cost of the General Electric jet engines installed on the aircraft.
False
The unit product cost under absorption costing does not include fixed manufacturing overhead cost.
False
The use of predetermined overhead rates in a job-order cost system makes it possible to estimate the total cost of a given job as soon as production is completed.
False
Transaction drivers usually take more effort to record than duration drivers.
False
Under a job-order cost system the Work in Process account is debited with the cost of materials purchased.
False
Under the weighted-average method, the cost of materials in the beginning work in process inventory is not used in the computation of the cost per equivalent unit for materials.
False
Dabney Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. Production volume 7,000 units 8,000 units Direct materials $246,400 $281,600 Direct labor $350,700 $400,800 Manufacturing overhead $860,300 $872,000The best estimate of the total monthly fixed manufacturing cost is: A. $778,400B. $1,457,400C. $1,505,900D. $1,554,400
A. $778,400
Diston Company 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 30% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $44,820. An additional 90,000 units were started into production during the month. There were 21,000 units in the ending work in process inventory of the Welding Department that were 10% complete with respect to conversion costs. A total of $677,970 in conversion costs were incurred in the department during the month.What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A. $8.112B. $8.300C. $7.533D. $6.108
A. $8.112
Daguio Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $224,580. At the end of the year, actual direct labor-hours for the year were 18,200 hours, manufacturing overhead for the year was underapplied by $12,100, and the actual manufacturing overhead was $219,580. The predetermined overhead rate for the year must have been closest to: A. $11.40 per machine-hourB. $12.34 per machine-hourC. $12.06 per machine-hourD. $10.53 per machine-hour
A. $11.40 per machine-hour
Use the information above on Byklea Corporation to answer this question. The cost per equivalent unit for materials for the month in the first processing department is closest to: A. $18.88B. $18.75C. $18.33D. $18.46
A. $18.88
McKenrick Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:Costs:Wages & salaries ......................................... $280,000 Depreciation ................................................. $220,000 Utilities ........................................................... $120,000 Total ................................................................. $620,000 Percentage distribution of resource consumption: Activity Cost Pools Assembly Setting Up Other Total Wages & salaries............. 50% 25% 25% 100%Depreciation.................... 5% 45% 50% 100% Utilities.............................. 20% 50% 30% 100%How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool? A. $229,000B. $155,000C. $310,000D. $248,000
A. $229,000
Use the information on Drake Company to answer the following question. The sales manager is convinced that a $60,000 expenditure on advertising will increase unit sales by 50% without any other increase in fixed expenses. If the sales manager is correct, the company's net operating income would increase by: A. $44,000B. $34,000C. $30,000D. $49,000
A. $44,000
Use the information on Drake Company to answer the following question. The break-even point in sales dollars is: A. $731,250B. $676,000C. $675,000D. $720,000
A. $731,250
Drewniak Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total cost Total Activity Assembly ............................................... $942,480 6,600 machine hours Processing orders ................................ $ 85,050 1,800 orders Inspection ............................................. $126,854 1,820 inspection hours The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.According to the activity-based costing system, the average cost of product O37W is closest to: A. $94.11 per unitB. $89.72 per unitC. $65.18 per unitD. $92.49 per unit
A. $94.11 per unit
Use the following information on Byklea Corporation to answer the next three questions. Byklea Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 200 units. The costs and percentage completion of these units in beginning inventory were:Cost Percent complete Materials costs $3,000 75% Conversion costs $2,700 40% A total of 7,000 units were started and 6,700 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 $132,000 Conversion costs $219,100The ending inventory was 90% complete with respect to materials and 45% complete with respect to conversion costs.Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places. How many units are in ending work in process inventory in the first processing department at the end of the month? A. 500B. 900C. 300D. 6,800
A. 500
Use the information above on Byklea Corporation to answer this question. What are the equivalent units for conversion costs for the month in the first processing department? A. 6,925B. 7,200C. 6,700D. 225
A. 6,925
The cost of beginning inventory under the weighted-average method is: A. added in with current period costs in determining costs per equivalent unit for a given period.B. ignored in determining the costs per equivalent unit for a given period.C. considered separately from costs incurred during the current period.D. subtracted from current period costs in determining costs per equivalent unit for a given period.
A. added in with current period costs in determining costs per equivalent unit for a given period.
Wert Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was: A. overapplied by $60,000B. underapplied by $60,000C. overapplied by $40,000D. underapplied by $44,000
A. overapplied by $60,000
Which of the following should NOT be included as part of manufacturing overhead at a company that makes office furniture? A. Sheet steel in a file cabinet made by the company.B. Manufacturing equipment depreciation.C. Idle time for direct labor.D. Taxes on a factory building.
A: Sheet steel in a file cabinet made by the company.
The following costs were incurred in September: Direct materials $38,000 Direct labor $29,000 Manufacturing overhead $21,000 Selling expenses $17,000 Administrative expenses $32,000 Conversion costs during the month totaled: A. $50,000B. $59,000C. $137,000D. $67,000
A:$50,000
Olds Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 1,000 Variable costs per unit: Direct materials $50 Direct labor $47 Variable manufacturing overhead $ 2 Variable selling and administrative overhead $ 8 Fixed costs: Fixed manufacturing overhead $31,000 Fixed selling and administrative overhead $69,000 There were no beginning or ending inventories. The absorption costing unit product cost was: A. $97B. $130C. $99D. $207
B. $130
The controller of Ferrence Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: Wall mirrors Specialty windows Total expected units produced 7000 1000 Total expected material moves 700 900 Expected direct labor hours per unit 6 4The total materials handling cost for the year is expected to be $16,486.40. If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost would be allocated to the wall mirrors? (Round off your answer to the nearest whole dollar.) A. $13,220B. $15,053C. $9,892D. $8,243
B. $15,053
In February, one of the processing departments at Carpentier Corporation had beginning work in process inventory of $14,000 and ending work in process inventory of $29,000. During the month, $148,000 of costs were added to production and the cost of units transferred out from the department was $133,000. In the department's cost reconciliation report for February, the total cost to be accounted for would be: A. $310,000B. $162,000C. $324,000D. $43,000
B. $162,000
Kaiser Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine hours 70,000 Estimated variable manufacturing overhead $6.68 per machine hour Estimated total fixed manufacturing overhead $1,283,800 The predetermined overhead rate for the recently completed year was closest to: A. $6.68B. $25.02C. $25.59D. $18.34
B. $25.02
Use the information above on Ormond Corporation to answer the following question What is the overhead cost assigned to Product B6 under activity-based costing? A. $442B. $4,722C. $11,000D. $4,280
B. $4,722
Roy Corporation produces a single product. During July, Roy produced 10,000 units. Costs incurred during the month were as follows:Direct materials $10,000 Direct labor $20,000 Variable manufacturing overhead $ 5,000 Variable selling & administrative overhead $ 3,000 Fixed manufacturing overhead $ 9,000 Fixed selling & administrative overhead $,4000 Total cost $51,000Under absorption costing, any unsold units would be carried in the inventory account at a unit product cost of: A. $5.10B. $4.40C. $3.80D. $3.50
B. $4.40
Use the information below to answer the next four questions. Drake Company's contribution format income statement for the most recent year appears below:Sales (26,000 units) $650,000 Variable expenses 442,000 Contribution margin 208,000 Fixed expenses 234,000 Net operating loss (26,000) The unit contribution margin is: A. $17B. $8C. $1D. $9
B. $8
The Work in Process inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $500 and $300 for direct materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: A. 83%B. 120%C. 40%D. 300%
B. 120%
The Collins Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and machine-hours in Dept. B. At the beginning of the year, the company made the following estimates: Dept. A Dept. B Direct labor cost $65,000 $42,000 Manufacturing overhead $91,000 $48,000 Direct labor hours 8,000 10,000 Machine hours 3,000 12,000 What predetermined overhead rates would be used in Dept A and Dept B, respectively? A. 71% and $4.00B. 140% and $4.00C. 140% and $4.80D. 71% and $4.80
B. 140% and $4.00
Use the information below to answer the next two questions. The following is Allison Corporation's contribution format income statement for last month: Sales $800,000 Variable expenses 300,000 Contribution margin 500,000 Fixed expenses 400,000 Net operating income 100,000 The company has no beginning or ending inventories. The company produced and sold 10,000 units last month. What is the company's margin of safety percentage? A. 25%B. 20%C. 40%D. 10%
B. 20%
Evans Company produces a single product. During the most recent year, the company had a net operating income of $90,000 using absorption costing and $84,000 using variable costing. The fixed overhead application rate was $6 per unit. There were no beginning inventories. If 22,000 units were produced last year, then sales for last year were: A. 15,000 unitsB. 21,000 unitsC. 23,000 unitsD. 28,000 units
B. 21,000 units
Vandagriff Corporation has provided data concerning the company's Manufacturing Overhead account for the month of June. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $77,000 and the total of the credits to the account was $64,000. Which of the following statements is true? A. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $77,000.B. Manufacturing overhead applied to Work in Process for the month was $64,000.C. Manufacturing overhead for the month was overapplied by $13,000.D. Actual manufacturing overhead incurred during the month was $64,000.
B. Manufacturing overhead applied to Work in Process for the month was $64,000.
In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause: A. Manufacturing Overhead to be overapplied.B. The Cost of Goods Manufactured to be understated.C. The debits to the Manufacturing Overhead account to be understated.D. The ending balance in Work in Process to be overstated.
B. The Cost of Goods Manufactured to be understated.
Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine-hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates:Dept. A Dept. B Direct labor cost $56,000 $33,000 Manufacturing overhead $67,200 $45,000 Direct labor hours 8,000 9,000 Machine hours 4,000 15,000 What predetermined overhead rate would be used in Department A and Department B, respectively? A. 83% and $5B. 83% and $3C. 120% and $3D. 83% and $120
C. 120% and $3
Moore Company produces a single product. During last year, Moore's variable production costs totaled $10,000 and its fixed manufacturing overhead costs totaled $6,800. The company produced 5,000 units during the year and sold 4,600 units. There were no units in the beginning inventory. Which of the following statements is true? A. The net operating income under absorption costing for the year will be $800 higher than net operating income under variable costing.B. The net operating income under absorption costing for the year will be $544 higher than net operating income under variable costing.C. The net operating income under absorption costing for the year will be $544 lower than net operating income under variable costing.D. The net operating income under absorption costing for the year will be $800 lower than net operating income under variable costing.
B. The net operating income under absorption costing for the year will be $544 higher than net operating income under variable costing.
Martinez Aerospace Company uses a job-order costing system. The direct materials for Job #045391 were purchased in July and put into production in August. The job was not completed by the end of August. At the end of August, in what account would the direct material cost assigned to Job #045391 be located? A. Raw materials inventoryB. Work in process inventoryC. Finished goods inventoryD. Cost of goods manufactured
B. Work in process inventory
During December at Ingrim Corporation, $74,000 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 $6,000. The journal entry to record the requisition from the storeroom would include a: A. debit to Raw Materials of $74,000B. debit to Work in Process of $68,000C. credit to Manufacturing Overhead of $6,000D. debit to Work in Process of $74,000
B. debit to Work in Process of $68,000
The salary of the president of a manufacturing company would be classified as which of the following? A. Product costB. Period costC. Manufacturing overheadD. Direct labor
B:Period Cost
Use the information below to answer the next two questions. Starwalt Corporation produces and sells a single product. The company has provided its contribution format income statement for March.Sales (7,700 units) $546,700 Variable expenses 238,700 Contribution margin 308,000 Fixed expenses 232,900 Net operating income 75,100 If the company sells 7,900 units, its total contribution margin should be closest to: A. $77,051B. $322,200C. $316,000D. $308,000
C. $316,000
The Gasson Company uses the weighted-average method in its process costing system. The company's ending work in process inventory consists of 10,000 units, 100% complete with respect to materials and 70% complete with respect to labor and overhead. If the costs per equivalent unit are $4.50 for the materials and $2.00 for labor and overhead, the balance of the ending work in process inventory account would be: A. $44,500B. $50,500C. $59,000D. $65,000
C. $59,000
Use the information on Starwalt Corporation to answer the following question. If the company sells 7,300 units, its net operating income should be closest to: A. $46,700B. $75,100C. $59,100D. $71,199
C. $59,100
Washtenaw Corporation uses a job-order costing system. The following data are for last year: Estimated direct labor-hours......................... 12,000 Estimated manufacturing overhead costs.. $39,000 Actual direct labor-hours................................ 11,000 Actual manufacturing overhead costs....... $37,000 Washtenaw applies overhead using a predetermined overhead rate based on direct labor hours. What predetermined overhead rate per direct labor hour was used last year?
D
Use the following information to answer the next two questions. Ormond Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $6,800; Order Filling, $10,700; and Other, $4,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: Machine hours (Machining) Orders (Order Filling) Product B6 1,300 400 Product R1 18,700 600 The activity rate for the Machining activity cost pool under activity-based costing is closest to: A. $0.32 per MHB. $1.25 per MHC. $1.10 per MHD. $0.34 per MH
D. $0.34 per MH
Yista Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at $510,000 for the year and direct labor-hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totaled $540,000. Actual direct labor-hours were 105,000. What was the overapplied or underapplied overhead for the year? A. $30,000 overappliedB. $30,000 underappliedC. $4,500 overappliedD. $4,500 underapplied
D. $4,500 underapplied
The following data have been recorded for recently completed Job 674 on its job cost sheet. Direct materials cost was $2,039. A total of 32 direct labor-hours and 175 machine-hours were worked on the job. The direct labor wage rate is $14 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $15 per machine-hour. The total cost for the job on its job cost sheet would be: A. $2,967B. $2,487C. $2,068D. $5,112
D. $5,112
Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in March and 11,000 tons for $549,000 in April. Shipping costs for 12,000 tons to be shipped in May would be expected to be: A. $548,780B. $549,020C. $594,000D. $598,500
D. $598,500
Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with total cost and total activity as follows: Activity Level______________ Activity cost pool Total Cost Product A Product B Total Activity 1 .............................. $20,000 100 400 500 Activity 2 ............................. $37,000 800 200 1000 Activity 3 ............................. $91,200 800 3000 3800The activity-based costing cost per unit of Product A is closest to: A. $2.40B. $3.90C. $10.59D. $6.60
D. $6.60
A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700 and is paid at the beginning of the first year. Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?Product Period A. $2700 $0 B. $2160 $540 C. $1440 $360 D. $720 $180
D. $720 $180
Loll Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below: Units Percent Complete Related to Conversion Costs Beginning work in process inventory 11,000 50% Started into production during June 98,000 Ending work in process inventory 21,000 80% According to the company's records, the conversion cost in beginning work in process inventory was $46,915 at the beginning of June. Additional conversion costs of $825,183 were incurred in the department during the month.What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A. $8.420B. $6.934C. $8.530D. $8.322
D. $8.322
At the beginning of the year, manufacturing overhead for the year was estimated to be $267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the actual manufacturing overhead for the year was $262,500, and manufacturing overhead for the year was overapplied by $13,750. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: A. 22,100 direct labor-hoursB. 19,900 direct labor-hoursC. 21,000 direct labor-hoursD. 21,400 direct labor-hours
D. 21,400 direct labor-hours
Use the information on Allison Corporation above to answer the following question. What is the company's degree of operating leverage? A. 0.2B. 8.0C. 1.7D. 5.0
D. 5.0
In a process costing system, overhead costs are traced to units of product as they are incurred.
False
Fayard Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 5,000 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 67,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. During the month 63,000 units were completed in the Assembly Department and transferred to the next processing department. There were 9,000 units in the ending work in process inventory of the Assembly Department that were 50% complete with respect to conversion costs.What were the equivalent units for conversion costs in the Assembly Department for the month? A. 71,000B. 64,000C. 63,000D. 67,500
D. 67,500
Which of the following is not a limitation of activity-based costing? A. Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.B. Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.C. In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.D. More accurate product costs may result in increasing the selling prices of some products.
D. More accurate product costs may result in increasing the selling prices of some products.
The term "relevant range" means the range of activity over which: A. relevant costs are incurred.B. costs may fluctuate.C. production may vary.D. the assumptions about fixed and variable cost behavior are reasonably valid.
D. the assumptions about fixed and variable cost behavior are reasonably valid.
In process costing, the equivalent units computed for materials is generally the same as that computed for direct labor.
False
In segment reporting, sales dollars is usually an appropriate allocation base for selling, general, and administrative expenses.
False
Managerial accounting reports are mandatory, and they must be prepared using a prescribed format and frequency.
False
Organization-sustaining activities are activities of the general organization that support specific products.
False
The concept of the relevant range does not apply to fixed costs.
False
The contribution margin tells us what happens to profits as volume changes if a segment's capacity and fixed costs change as well.
False
The cost of a completed job in a job-order costing system typically consists of the actual direct materials cost of the job, the actual direct labor cost of the job, and the actual manufacturing overhead cost of the job.
False
A debit balance in the Manufacturing Overhead account at the end of the year means that manufacturing overhead is overapplied.
False
A process cost system would be used to account for the cost of manufacturing an oil tanker.
False
A variable cost is a cost whose cost per unit varies as the activity level rises and falls.
False
Absorption costing is more compatible with cost-volume-profit analysis than is variable costing.
False
Although the contribution format income statement is useful for external reporting purposes, it has serious limitations when used for internal purposes because it does not distinguish between fixed and variable costs.
False
An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy.
False
An example of a controlling activity at Amazon would consist of management setting a budget of how many delivery people to add during the holiday season.
False
Designing a new product would be classified as a batch-level activity
False
If fixed expenses increase by $10,000 per year, then the level of sales needed to break even will also increase by $10,000.
False
If two companies produce the same product and have the same total sales and same total expenses, operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.
False
In a contribution format income statement, sales minus cost of goods sold equals the gross margin.
False
Dull Corporation has been producing and selling electric razors for the past ten years. Shown below are the actual net operating incomes for the last three years of operations at Dull: Year 8 Year 9 Year 10 Variable Costing Net Operating Income $45,000 $19,000 $(7,000) Absorption Costing Net Operating Income $15,000 $ 9,000 $ 3,000 Dull Corporation's cost structure and selling price has not changed during its ten years of operations. Based on the information presented above, which of the following statements is true? A. Dull Corporation operated above the breakeven point in each of the three years presented.B. For the three years presented in total, Dull Corporation sold more units than it produced.C. In Year 10, Dull Corporation produced fewer units than it sold.D. In Year 9, Dull Corporation produced more units than it sold.
NOT B. For the three years presented in total, Dull Corporation sold more units than it produced.
Last year, Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory decreased by 600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorption costing net operating income last year? A. $64,200B. $63,000C. $63,600D. $600
NOT A. $64,200
Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.
TRUE
A company with a degree of operating leverage of 4 would expect net operating income to increase by 200% if sales increased from $100,000 to $150,000.
True
A decrease in production will ordinarily result in an increase in fixed production costs per unit.
True
A shift in the sales mix from products with a low contribution margin ratio toward products with a high contribution margin ratio will lower the break-even point in the company as a whole.
True
At the break-even point: Sales - Variable expenses = Fixed expenses.
True
Automation results in a shift away from variable costs toward more fixed costs.
True
The following costs should be considered by a law firm to be indirect costs of defending a particular client in court: rent on the law firm's offices, the law firm's receptionist's wages, the costs of heating the law firm's offices, and the depreciation on the personal computer in the office of the attorney who has been assigned the client.
True
The salary of the treasurer of a corporation is an example of a common cost which normally cannot be traced to product segments.
True
The variable expense per unit is $12 and the selling price per unit is $40. Then the contribution margin ratio is 70%.
True
When a job has been completed, the goods are transferred from the production department to the finished goods warehouse and the journal entry would include a credit to Work in Process.
True
When computing the cost per equivalent unit, it is not necessary to consider the percentage completion of the units in beginning inventory under the weighted-average method.
True
When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.
True