Acc Ch. 1-3

Investigating production variances and adjusting the production process is an example of: a. controlling. b. planning. c. decision making. d. All of these choices are correct.

A.

Materials in the raw materials account do not become direct materials a. until they are withdrawn from inventory for use in production. b. until the finished product is sold. c. until they are purchased from a vendor. d. None of these choices are correct.

A.

Product costs are expensed a. when the product is sold. b. when the product is finished. c. when the product unit cost is calculated. d. All of these choices are correct.

A.

The detailed formulation of action to achieve a particular end is the management activity called: a. planning. b. decision making. c. controlling. d. All of these choices are correct.

A.

The lease cost of office computers is a _____ for an accounting firm. a. committed fixed cost b. variable cost c. discretionary fixed cost d. semi-variable cost

A.

The primary objective of managerial accounting is: a. to provide management with financial and nonfinancial information useful in planning, controlling, and decision making. b. to produce financial information that must comply with various accounting standards. c. to provide the Internal Revenue Service with financial and nonfinancial information about the taxable income of an organization. d. to produce information for external users, including investors, creditors, customers, suppliers, and government agencies.

A.

Which of the following is true of unit fixed costs? a. They decrease in value with an increase in output units. b. They act as a causal factor for sales that measures the output of an activity. c. They lead to more effective business decisions when compared to total fixed costs. d. They are used to calculate the contribution margin.

A.

Which of the following statements best describes an indirect cost? a. An indirect cost is assigned to a cost object using allocation. b. An indirect cost can be easily and accurately traced to a cost object. c. It is not important to assign an indirect cost as it can be traced to a cost object. d. None of these statements are true.

A.

Information from the records of Davies & Moore Corporation for December of the current year is as follows: Sales $1,353,000 Selling and administrative expenses 231,000 Direct materials used 290,400 Direct labor 330,000 Manufacturing overhead 445,500 Inventories Dec. 1 . Dec. 31 Direct materials $39,600 $46,200 Work in process 82,500 92,400 Finished goods 75,900 62,700 The conversion costs are: a. $775,500. b. $1,179,000. c. $564,000. d. $960,000.

A. Conversion Cost = Direct Labor + Manufacturing Overhead

Fixed cost per unit is $10 when 12,000 units are produced and $3 when 40,000 units are produced. What is the total fixed cost when nothing is produced? a. $120,000 b. $200,000 c. $175,000 d. $100,000

A. Total fixed cost = Unit fixed cost × Number of units produced = $10 × 12,000 units or $3 × 40,000 units = $120,000

Conversion cost is the sum of a. selling cost and administrative costs. b. direct labor cost and overhead costs. c. product costs and period costs. d. direct labor cost and direct materials costs.

B.

Indirect labor would include a. salary of the vice-president of marketing. b. salary of factory supervisor. c. salary of CEO. d. None of these choices are correct.

B.

Managerial accounting reports are prepared: a. to present historical information. b. to meet the needs of decision makers within the firm. c. to provide creditors with information useful in making credit decisions. d. All of these choices are correct.

B.

Per-unit variable costs a. increase as output increases. b. remain constant within the relevant range. c. decrease as output decreases. d. can be misleading and lead to poor decisions.

B.

Period costs a. are used to compute product cost. b. are selling costs and administrative costs. c. are carried in inventory until the goods are sold. d. can be included in overhead costs.

B.

Persons in the United States who provide assurance service are designated as: a. Chartered Accountants. b. Certified Public Accountants. c. Certified Management Accountants. d. Certified Financial Accountants.

B.

Step costs a. remain the same within the relevant range. b. have an increased fixed component at specified intervals. c. increase in direct proportion to increases in output. d. None of these choices are correct.

B.

Taran Company incurred the following costs for the months of January and February. Type of Cost January February Insurance $5,000 $5,000 Utilities 4,000 5,000 Depreciation 3,500 3,500 Materials 10,000 20,000 From the information above we can assume that a. output decreased from January to February. b. insurance and depreciation are fixed costs. c. insurance is a mixed cost. d. output stayed the same from January to February.

B.

Which of the following is true of a mixed cost? a. It does not change with a change in the level of output. b. It contains both a fixed and variable component. c. It cannot be separated into fixed and variable components. d. All of these choices are correct.

B.

Which of the following would probably be a discretionary fixed cost for a law firm? a. depreciation on furniture and equipment b. advertising c. salary of receptionist d. cost of legal forms

B.

Excellent Inc. had a per-unit conversion cost of $3.00 during April and incurred direct materials cost of $112,000, direct labor costs of $84,000, and manufacturing overhead costs of $50,400 during the month. How many units did it manufacture during the month? a. 18,000 b. 44,800 c. 30,000 d. 70,000

B. Direct labor $ 84,000 Manufacturing overhead 50,400 Total conversion cost $134,400 Units manufactured during the month = Total conversion cost / Per-unit conversion cost Units manufactured during the month = $134,400 / $3.00 = 44,800 units

Taylor & Edwards Inc. manufactures television sets. Last month, direct materials (electronic components, etc.) costing $550,000 were put into production. Direct labor of $880,000 was incurred, manufacturing overhead equaled $495,000, and selling and administrative costs totaled $396,000. The company manufactured 8,400 television sets during the month. Assume that there were no beginning or ending work in process balances. What was the per-unit conversion cost? (Note: Round answer to two decimal places.) a. $162.54 b. $163.69 c. $218.75 d. $100.15

B. Per-unit conversion cost = Total conversion cost / Number of television sets manufactured Per-unit conversion cost = (Direct Labor + Manufacturing Overhead) / Number of television

During the month of January, Robinson & Green Inc. had total manufacturing costs of $121,000. It incurred $44,000 of direct labor cost and $33,000 of manufacturing overhead cost during the month. If the materials inventory on January 1 was $3,300 less that the materials inventory on January 31, what was the cost of materials purchased during the month? a. $40,000 b. $47,300 c. $37,000 d. None of these choices are correct.

B. Direct materials purchased [(Direct materials used* + Difference in inventory balances) = ($44,000 + 3,300)] = $47,300 *Direct materials used = Total manufacturing costs − (Direct labor cost + Overhead cost) = $121,000 - ($44,000 + $33,000) = $44,000

Number of toys produced Total cost of materials 60,000 $18,000 120,000 36,000 150,000 45,000 What is the materials cost per unit of output? a. $0.50 b. $0.30 c. $0.20 d. $0.70

B. Unit cost = Total cost of materials ÷ Number of toys produced = $18,000 / 60,000 toys = $0.30

Chrysntag Company incurred the following costs for the months of January and February. Type of Cost January February Insurance $ 7,000 $ 7,000 Utilities 2,600 4,000 Depreciation 2,000 2,000 Materials 5,000 8,000 Assume that output was 1,000 units in January and 3,500 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $2,000. What was the variable rate per unit of output for utilities cost? a. $0.40 b. $0.60 c. $0.20 d. $0.30

B. Variable Cost = Total Cost - Total Fixed Cost = $2,600 - $2,000 = $600 Variable Rate = Variable Cost ÷ Output = $600 / 1,000 units = $0.60

No. of toys produced Total cost of materials 100,000 $20,000 200,000 40,000 300,000 60,000 What should the total materials cost be at a production level of 220,000 toys? a. $22,000 b. $132,000 c. $44,000 d. $88,000

C.

The fixed cost per unit _____ within the relevant range when the output decreases. a. remains the same b. decreases c. increases d. decreases at first and then increases

C.

Which of the following areas is not emphasized by the Certified Management Accountant (CMA) examination? a. Economics, finance, and management b. Management reporting, analysis, and behavioral issues c. External auditing and business law d. Decision analysis and information systems

C.

Which of the following is an example of direct labor? a. staff accountant b. vice president of marketing c. assembly line worker for televisions d. supervisor at a manufacturing plant

C.

Which of the following is true when output decreases? a. Semi-mixed costs increase b. Per-unit step costs decrease c. Total fixed costs remain the same d. All of these choices are correct.

C.

Synergy Inc. manufactured 6,000 units during the month of March. They incurred direct materials cost of $120,000 and manufacturing overhead costs of $48,000. If their per-unit prime cost was $31.20 per unit, how much direct labor cost did it incur during March? a. $90,000 b. $20,000 c. $67,200 d. $35,000

C. Prime Cost = Units manufactured × Per-unit prime cost = 6,000 units × $31.20 = $187,200 Prime Cost = Direct Materials + Direct Labor $187,200 = $120,000 + Direct labor Direct labor = $187,200 - $120,000 = $67,200

Non-manufacturing costs include a. overhead. b. indirect materials. c. direct materials. d. marketing and administration.

D.

Overhead includes a. indirect materials. b. factory supplies. c. indirect labor. d. All of these choices are correct.

D.

Product costs a. include direct materials, direct labor, and overhead. b. are costs that are included in the determining the value of the inventory. c. are manufacturing costs. d. All of these choices are correct.

D.

The relevant range a. may change from period to period. b. is the normal range of output. c. is the range of output where cost relationships are valid. d. All of these choices are correct.

D.

The standards of ethical conduct for managerial accountants include: a. confidentiality, confidence, integrity, and observance. b. pursuit of excellence, credibility, and immediacy. c. caring for others, intuition, and respect for others. d. competence, confidentiality, integrity, and credibility

D.

Which of the following is an example of a tangible product? a. accounting services b. lawn care c. customer service d. computer

D.

Which of the following is true if output increases by 20% and is still within the relevant range? a. Contribution margin decreases by 60%. b. Net income decreases by 40%. c. Total fixed costs increase by 20%. d. Total variable costs increase by 20%.

D.

Which of the following is true of a mixed cost? a. It has the same cost behavior as a step cost. b. It consists of only one cost component. c. It remains constant irrespective of changes in output. d. It decreases when output decreases.

D.

Which of the following is true of a variable cost? a. A variable cost in total remains constant regardless of the level of output. b. A variable cost is a cost that is not linked to a company's output. c. A variable cost in total increases as output decreases and decreases as output increases. d. A variable cost in total changes in direct proportion to changes in output within the relevant range.

D.

Which of the following is true of assigning costs to cost objects? a. The choice of a method for assigning costs to cost objects depends on a number of factors, such as the need for accuracy. b. Assigning costs to cost objects typically is more difficult than cost accumulation. c. Assigning costs to cost objects can be accomplished in a number of ways. d. All of these choices are true.

D.

Which of the following statements is true of financial accounting? a. Financial accounting is directed toward external users. b. Financial accounting is subject to externally imposed rules. c. Financial accounting is able to provide audited, objective financial information. d. All of these choices are correct.

D.

Which of the following would not be included in overhead? a. factory utility costs b. deprecation on factory machinery c. property taxes on the factory d. marketing costs

D.

Which of the following would probably be a fixed cost in a fast-food restaurant? a. cost of french fries b. cost of hamburger c. utility cost d. shift manager's salary

D.

Information from the records of Garcia & Gordon Corp. for December of the current year is as follows: Sales $1,353,000 Selling and administrative expenses 231,000 Direct materials used 290,400 Direct labor 330,000 Factory overhead 445,500 Inventories Dec. 1 Dec. 31 Direct materials $39,600 $46,200 Work in process 82,500 92,400 Finished goods 75,900 62,700 The prime costs are: a. $969,000. b. $960,000. c. $705,000. d. $620,400.

D. Prime Cost = Direct Materials + Direct Labor $290,400 + $330,000 = $620,400

Costs are subdivided into what two major functional categories?

Product and non-production