Accounting 4

Croc Catcher calculates its contribution margin to be less than zero. Which statement is true?

Its selling price is less than its variable costs.

What is the primary benefit of activity-based costing?

More accurate product costing

Valerio Company sells Mountain Bikes and Racing Bikes. The Mountain Bikes sell for $300 and have variable costs of $125. The Racing Bikes sell for $450 and have variable costs of $275. Valerio Company has limited machine hours for production. If Mountain Bikes take 2 machine hours and racing bikes take 2.5 machine hours which product should be emphasized if capacity (machine hours) is increased and sufficient demand exists for each product?

Mountain Bikes.

Tomy Toys is planning to sell 200 action figures and to produce 190 action figures in July. Each action figure requires 100 grams of plastic and a half hour of direct labor. The cost of the plastic used in each action figure is $5 per 100 grams. Employees of the company are paid at a rate of $15.00 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor costs. Tomy Toys has 90,000 grams of plastic in its beginning inventory and wants to have 80,000 grams in its ending inventory. What is the amount of budgeted direct labor cost for the month of July?

$1,425.

In Crawford Company, the predetermined overhead rate is 80% of direct labor cost. During the month, $210,000 of factory labor costs are incurred, of which $180,000 is direct labor and $30,000 is indirect labor. Actual overhead incurred was $200,000. The amount of overhead debited to Work in Process Inventory should be

$144,000.

Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?

$200,000.

Theodore Company's overhead rate for machine setups is $115 per setup. A total of 105 setups are estimated for the period. At year-end, it was determined that Products A and B have 60 and 45 setups, respectively. How much is the overhead cost assigned to each product?

Product A $6,900, Product B $5,175

Which one of the following is the format of a CVP income statement?

Sales - Variable costs - Fixed costs = Net income.

On a CVP income statement

Sales - Variable costs = Contribution margin.

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

Setting up machines

Which of the following activities adds value to a product or service?

Shaping a piece of metal on a lathe.

Which one of the following is a trend in industry?

The U.S. economy has shifted toward an emphasis on providing services.

What is contribution margin?

The amount available to cover fixed costs and contribute to profits.

Coronado Manufacturing thinks that the best activity base for its manufacturing overhead is machine hours. The estimate of annual overhead costs is $440000. The company used 1000 hours of processing for Job A15 during the period and incurred actual overhead costs of $460000. The budgeted machine hours for the year totaled 20000. What amount of manufacturing overhead should be applied to Job A15?

$22000.

Which one of the following is considered a basic similarity between job order cost and process cost systems?

The flow of costs through the accounts.

Which one of the following would be the best cost driver for the activity of purchasing?

The number of purchase orders issued.

Manders Corporation has $20,000 of ending finished goods inventory at December 31. If beginning finished goods inventory was $15,000 and cost of goods sold was $40,000, how much would Manders Corporation report as cost of goods manufactured?

$45,000.

Sales revenue (800 units)$80,000 Cost of goods sold -fixed20,000 Cost of goods sold -variable18,500 Selling expenses - fixed7,000 Selling expenses - variable6,000 Administrative expenses - fixed5,000 Administrative expenses - variable7,500 How much is Deighan's contribution margin?

$48,000.

Oriole Inc manufactures model airplanes and repair kits. The planes account for 75% of the sales mix, and the kits the remainder. The variable cost ratio for the planes is 80% and 65% for the kits. Fixed costs are $114000. Compute the breakeven point in sales dollars.

$480000

If the contribution per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is:

$5

At the break-even point

contribution margin equals total fixed costs.

The process of keeping the company's activities on track is

controlling

Walker Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for the year as follows: Actual manufacturing overhead$163,800 Estimated manufacturing overhead$158,600 Direct labor incurred2,500 hours @ $22 = $55,000 Direct labor estimated2,600 hours @ $21 = $54,600 How much is over or underapplied overhead at year end?

$7,262 underapplied.

Cournot Company sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and net income is $200,000. What should be reported as variable expenses in the CVP income statement?

$700,000

Raw materials are assigned to a job when

the materials are issued by the materials storeroom.

All activities associated with providing a product or service is referred to as

the value chain.

The formula for computing the direct labor budget is to multiply the direct labor cost per hour by the

total required direct labor hours.

An example of a mixed cost is

utility costs

Mixed costs consist of a

variable cost element and a fixed cost element

The mathematical equation for computing required sales to obtain target net income is: Required sales =

variable costs + fixed costs + target net income.

Variable costs are costs that

vary in total directly and proportionately with changes in the activity level and remain the same per unit at every activity level.

One of the following is not involved in CVP analysis. That factor is

volume or level of activity.

The Molding Department of the Coronado Company has the following production data: beginning work in process 18900 units (60% complete), started in production 337000 units, completed and transferred out 325000 units, and ending working process 44000 units (40% complete). Assume materials are entered at the beginning of the process, the equivalent units under the FIFO method for materials are:

337000

The Molding Department of the Smith Company has the following production data: beginning work in process 20,000 units (60% complete), started in production 340,000 units, completed and transferred out 320,000 units, and ending working process 40,000 units (40% complete). Assume materials are entered at the beginning of the process, the equivalent units under the FIFO method for materials are:

340,000.

Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss' target net income?

$227,500.

For the year, Redder Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is

550,000

Dougan, Inc. allocates overhead based on a predetermined overhead rate of $2.40 per direct labor hour. Employees are paid $12.00 per hour. Job 24 requires 4.2 pounds of direct materials at a cost of $15.00 per pound. Employees worked a total of 17.5 hours to complete the job. Actual manufacturing overhead costs totaled $80,000 for the year for the company. How much is the cost of Job 24?

$315.

If Morton Company expects to sell VCR's at $100 a unit with variable costs of $60 per unit and DVD's at $200 per unit with variable costs of $120 per unit, what is the weighted average contribution margin if the sales mix is 4 DVD's for 1 VCR?

$72

Windathon, Inc. expects sales volume totaling $500,000 for June. Data for the month follows: Sales commissions4% of sales Sales manager's salary$30,000 per month Advertising expense$25,000 per month Shipping expense.1% of sales Miscellaneous selling expenses$2,100 per month plus 3/4% of sales How much is Windathon's selling expense budget for June?

$85,850.

Direct materials inventories are kept in pounds in Byrd Company, and the total pounds of direct materials needed for production is 9,500. If the beginning inventory is 1,000 pounds and the desired ending inventory is 2,200 pounds, the total pounds to be purchased are

10,700.

Dahlia Company sells a product which has a unit selling price of $5. Variable costs are 60% of the sales and total fixed costs are $200,000. The number of units that the Dahlia Company must sell to break even is

100,000 units.

Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?

2,050

Raw materials purchased$254,000 Beginning raw materials inventory12,000 Ending raw materials inventory7,900 Direct labor incurred51,000 Indirect materials requisitioned and used4,000 Actual manufacturing overhead costs36,800 Beginning work-in-process inventory15,100 Ending work-in-process inventory12,000 How much is the cost of direct materials used in production?

254,100

The Molding Department of the Smith Company has the following production data: beginning work in process 20,000 units (60% complete), started in production 340,000 units, completed and transferred out 320,000 units, and ending working process 40,000 units (40% complete). the equivalent units under the FIFO method for conversion costs are:

324,000.

Werth Company produces tie racks. Its estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 racks at a price of $20 per unit. How many units will be sold at breakeven?

48,000.

Braker Manufacturing has a target of carrying closing monthly inventory equal to fifteen percent of next month's projected sales. If the current month's beginning inventory is 8,000 units and it expects to sell 50,000 units this month and 45,000 units next month, how many units should it produce this month?

48,750 units

Oriole Company had the following department information for the month of September: Total materials costs, $50000; equivalent units of materials, 20000; total conversion costs, $32000; and equivalent units of conversion costs, 8000. What is the total manufacturing cost per unit for the month of September?

6.50

Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?

7,800.

Dartmouth Company has two process departments, machining and assembly, that produce products. At what point can the company add manufacturing overhead costs to the products?

As the production takes place in each of the two process departments.

Which of the following lists includes only financial budgets?

Budgeted balance sheet, cash budget, and the capital expenditures budget.

In most cases, not-for-profit entities

begin the budgeting process by budgeting expenditures rather than receipts.

If the amount of underapplied overhead is immaterial, companies will debit underapplied overhead to

cost of goods sold.

The total costs accounted for in a production cost report are equal to the

cost of units completed and transferred out plus the cost of ending work in process.

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

decreasing, complex

The formula for the production budget is budgeted sales in units plus

desired ending finished goods units less beginning finished goods units.

On average, studies have shown that the smallest component of total manufacturing cost is

direct labor.

The break-even point in dollars is computed by dividing

fixed costs by contribution margin ratio.

Required sales in dollars to meet a target net income is computed by dividing

fixed costs plus target net income by contribution margin ratio.

In order to achieve the most accurate costing, the cost driver chosen for a given activity must show a ___________ between the cost driver and the actual consumption of overhead costs.

high degree of correlation

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

All of the following are distinguishing features of managerial accounting except

independent audits.

The source documents for assigning costs to job cost sheets are

invoices, time tickets, and the predetermined overhead rate.

In a process cost system, manufacturing overhead

is assigned to a work in process account for each production department on the basis of a predetermined overhead rate

A budget

is the primary method of communicating agreed-upon objectives throughout an organization.

A company is more likely to use a job costing system if

it manufactures products with unique characteristics.

Many companies have significantly lowered inventory levels and costs using

just-in-time inventory methods.

Conversion costs are the sum of

labor costs and overhead costs

What overhead allocation basis is used by many companies with automated manufacturing processes to reduce product cost distortions?

machine hours

A sales budget is

management's best estimate of sales revenue for the year.

Amount Units Produced March$20,000 16,000 April$18,000 12,000 Which type of cost are delivery costs at Hernandez?

mixed

An activity that adds costs to the product but does not increase its market value is a

non-value-added activity.

Managerial accounting

places emphasis on special-purpose information

The management function that requires management to look ahead and establish objectives is

planning.

Companies assign manufacturing overhead to work in process on an estimated basis through the use of a(n

predetermined overhead rate.

A process cost system would be used for all of the following except the

printing of wedding invitations.

Cost accounting involves the measuring, recording, and reporting of

product costs.

Contribution margin is

the amount available to cover fixed costs and contribute to income for the company.

After passage of the Sarbanes-Oxley Act of 2002

the audit committee, rather than top management, is responsible for the company's financial statements.

The budgeted income statement is

the end-product of the operating budgets.

Unit sales price$14$36$10 Unit variable costs6 32 3 Machine hours per unit5 4 2 Determine the order that these products should be produced given the following data:

C33, A11, B22

Which one of the following budgets is considered to be the most important financial budget?

Cash budget.

Of the four steps in preparing a production cost report, which step occurs first?

Compute the physical unit flow.

______ is the amount of revenue that remains after deducting variable costs in a CVP income statement.

Contribution margin.

Why is determination of a relevant range important?

Cost behavior outside the relevant range may be distorted.

During June, Crane, Inc. produced a job consisting of 90 widgets with a job cost of $1980. Which of the following is one effect that occurs when the company sells half of the products for $1080?

Cost of Goods Sold increases.

During June, McDougal, Inc. produced a job consisting of 100 widgets with a job cost of $2,200. Which of the following is one effect that occurs when the company sells half of the products for $1,300?

Cost of Goods Sold increases.

Which one of the following occurs in a process cost system?

Costs are accumulated in a production cost report.

Which of the following are correct statements about a budget?

It is a formal written statement of management's plans for a specified future time period. It becomes an important basis for evaluating performance. It promotes efficiency and serves as a deterrent to waste and inefficiency.

Which one of the following describes the break-even point?

It is the point where total sales equals total variable costs plus total fixed costs.

Which of the following are considered to be management's three broad functions?

Planning, directing, and controlling

If a traditional costing system allocates too much overhead to one product, the firm is likely to experience which of the following problems?

The firm may lose market share to competitors

Which of the following items is not a characteristic of a process cost system?

The products produced are heterogeneous in nature.

Which of the following costs are classified as a period cost?

Wages paid to a cost accountant department supervisor.

When is it appropriate to use direct labor as a basis for assigning overhead costs to products?

When direct labor constitutes a significant part of total product costs.

Marco Company has two processing departments and uses a process costing system. Which account is increased when the company assigns factory labor costs to production?

Work in Process is increased

Manufacturing overhead is underapplied if

actual overhead is greater than applied.

A process cost system would be used by all of the following except a(n)

advertising company

Which of the following would not be an overhead activity cost pool?

Direct materials

The activity-based overhead rate is computed by dividing

Estimated overhead per activity by expected use of cost drivers per activity.

Which of the following companies would most likely use process costing for the product or service it produces?

Friskies Cat Food - cans of tuna flavored food.