accounting exam 3, pt 2

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a company that uses a just-in-time invernoty system

may find that having less inventory actually leads to increased customer satisfaction

A company that uses a just-in-time inventory system:

may find that having less inventory actually leads to increased customer satisfaction.

A cost that contains both fixed and variable elements is referred to as a:

mixed cost

Budgeting that involves the development of a master budget to direct the firm's activities over the short term is referred to as:

operations budgeting.

pilot motors corporation is an automobile manufacturer. the company produces its own motors, tires, and other automobile parts..... more info..... this type of decision is typically known as

outsourcing decisions

the inventory purchases budget is based on which budget

sales budget

which of the following is generally included in a sales budget

schedule of cash receipts for the projected sales

Budgeted sales commissions would appear on the:

selling, general, and administrative budget and pro forma income statement

select the incorrect statement regarding cost structures

the more variable cost, the higher the flucation in income as sales flucture

Gibbs corporation makes indoor gas fireplaces. a standard fireplace includes unit-level materials, labor, and overhead costs, in addition......... much more...... which of the following costs would be relevant to this special order decision

the unit-level materials, labor, and overhead

which of the following is not a step in allocting indirect costs to cost objects

trace direct costs to ind. cost pools

The first step in cost accumulation is to identify cost objects.

true

Both direct and indirect costs can be relevant to a particular decision.

true Direct costs can be traced to cost objects in a cost-effective manner. Indirect costs cannot be traced to objects in a cost-effective manner. Accountants use cost accumulation to determine the cost of a particular object. As a result, relevant costs can include direct and indirect costs.

The following information is provided for Southall Company: Sales revenue$292,000 Variable manufacturing costs 99,000 Fixed manufacturing costs 61,000 Variable selling and administrative costs 44,000 Fixed selling and administrative costs 39,000 What is this company's contribution margin?

$149,000 Contribution margin = Revenues − Variable expensesContribution margin = $292,000 − ($99,000 + $44,000) = $149,000

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1Jan. Year 2Feb. Year 2Mar. Year 2 (Actual)(Budgeted)(Budgeted)(Budgeted)Cost of goods sold$80,000 $140,000 $180,000 $120,000 Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

$165,000.

bantam industries has budgeted the following info for march....... more info...... how much cash will the company need to borrow in march

$29,000

the magnitude of operating leverage for Forbes corporation is 3.2 when sales are $240,000 and net income is $28,000. if sales increase by 5%, what is net income expected to be

$32,480

Breezy Company is disposing of equipment that was originally purchased for $600,000 and has $240,000 of accumulated depreciation to date. The same equipment would cost $800,000 to replace. What is the total amount of sunk cost in this decision?

$360,00

breezy company is disposing of equipment that was originally purchased for $600,000 and has $240,000 of accumulated depreciation to date. the same equip. would cost $800,000 to replace. what is the toal amount of sunk cost in this dicision

$360,000

$360,000 Since sunk costs have been incurred in past transactions, they cannot be changed and are not relevant for making current decisions. The book value of the equipment of $360,000 ( = $600,000 − $240,000) is not relevant.

markham company has completed its sales budget for the first quarter of year 2...... more info...... the company's past records show collection of credit sales as follow: 40% in the month of sale and the balance in the following month. the total cash collection from receivables in march is exptected to be

$39,600

skymont company wants an ending inventory each month equal to 30% of that month...... more info.... ending inventory at the end of Jan. was $12,000. based on this info, purchases for Feb would be

$46,500

costs associated with holding inventory often include

- theft, damage, and ob - financing -warehouse space - superviion

which costs are relevant for equipment replacement decisions

- unit-level costs - batch-level costs - product- level costs

Selection of a cost driver depends on:

-The availability of information for both the cost and the potential cost driver. -A cause-and-effect relationship between the cost driver and the cost. -Judgment of management.

3 levels of planning

-strategic planning--- long term - capital budgeting-- 2-5 years -operating budgeting-- short term 1-12 months - perpertal, continus

the following income statment is provided for vargas inc bunches of data overall net income--- 6360 what is the companies magnitude of operating leverage

3.74

Select the term from the list provided that best matches the following descriptions. Activity base

A factor that causes (or drives) changes in costs

Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the order. Accepting the order will increase Outdoor Living's variable manufacturing costs. Variable selling and administrative costs would be unaffected. What is the minimum price that Outdoor Living should accept for the special order?

A price equivalent to the hammock's variable manufacturing cost per unit

Which of the following correctly computes cost of goods manufactured?

Beginning work in process + Direct materials used + Direct labor + Overhead − Ending work in process

the margin of safety ratio can be defined as the:

Excess of budgeted sales over break-even sales divided by budgeted sales.

Which of the following items will not appear on a cash budget?

Expected credit sales

Which of the following items is not needed to prepare a sales budget by product line?

Expected purchase price of each product.

Which of the following items would be least useful in preparing a schedule of cash receipts?

Number of units expected to be purchased.

Which of the following statements is true?

Outsourcing decreases the extent of a company's vertical integration and the reputation of the supplier is a critical issue in an outsourcing decision.

Which of the following is not classified as manufacturing overhead?

Product delivery costs

The inventory purchases budget is based on which budget?

Sales budget

which of the following costs generally can be traced directly to units of product

assembly labor

when a company's district submitted their preliminary budget proposals..... more info...... which of the following advantages of budgeting reduces the likelihood that the company will end up with two incompatible systems

coordination

which of the following items will not appear on a cash budget

expected credit sales

With regards to financial statements, "pro forma" means:

-Budgeted. -Prepared in advance. -Financial condition or position that can be expected if planning assumptions prove correct.

master budget

-capital budget - operations budget - pro forma financials-- estimates and predictions

which of the following is a benefit associated with budgeting

-promotes planning and coordination - the ability to take corrective action to improve performance - enhances performance measurements

craft Inc, normally produces between 120,000 and 150,000 units each year. producing more than 150,000 units alters the companys cost structure. for example, fixed costs increase becasue more space must be rented, and additional supervisors must be hired. thie production range between 120,000 and 150,000 is called the

relevant range

select the incorrect statement regarding upstream and downstream costs

upstream and downstream costs are reported as product costs on the income statement

which of the following statements isfalse

volume measures are good drivers for fixed overhead costs

Benitez company currently outsources a relay switch that is a component in one of its products. the switches cost $20 each....... more info........ the company expects an annual need for 5,000 swutches. if the comapny makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. if the company decides to make the parts, total costs will be

$10,500 more than if the switches are purchased

Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost$3 Unit-level labor cost$2 Unit-level overhead$1 Batch-level set-up cost (5,000 units per batch)$25,000 Product-level supervisory salaries$37,500 Allocated facility-level costs$20,000 The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. If the company decides to make the parts, total costs will be:

$10,500 more than if the switches are purchased. Outsourced cost of the relay switches: $20 per unit × 5,000 units = $100,000 Relevant cost for expected production of the relay switches: Unit-level costs [($3 + $2 + $1) × 5,000 units]$30,000 Batch-level costs ($25,000 × 1 batch) 25,000 Product-level costs (supervisory salaries) 37,500 Facility-level costs (rent of factory space of $1,500 × 12 months) 18,000 Total relevant costs$110,500 The allocated factory-level costs are not relevant because the company will incur them whether it accepts or rejects the special order. If the company decides to make the parts, total costs will be $10,500 (= $110,500 − $100,000), more than if the switches are purchased.

$10,500 more than if the switches are purchased. Correct

Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.) Acquired $2,000 of capital from the owners. Purchased $600 of direct raw materials. Used $400 of these direct raw materials in the production process. Paid production workers $800 cash. Paid $400 for manufacturing overhead. Started and completed 200 units of inventory. Sold 50 units at a price of $12 each. Paid $80 for selling and administrative expenses. The amount of net income for the year was:

$120. Total manufacturing costs = Direct materials used + Direct labor + Actual overhead costs Total manufacturing costs = $400 + $800 + $400 = $1,600 Total manufacturing costs per unit = $1,600 ÷ 200 units = $8 per unit Cost of goods sold = Number of units sold = Manufacturing cost per unit Cost of goods sold = 50 units × $8 per unit = $400 Net income = Sales − Cost of goods sold − Selling and administrative expenses Net income = (50 units × $12 per unit) − $400 − $80 = $120

Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory, $42,000; Work in Process Inventory, $90,000; and Finished Goods Inventory, $20,000. During the year, the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials. Direct labor costs for the year were $120,000 and a total of $36,000 of manufacturing overhead costs were incurred. Ending work in process was $82,000 and ending finished goods was $35,000. Goods were sold to customers during the year for $360,000. How much gross margin would be reported for the year?

$125,000 Direct raw materials used = Beginning raw materials inventory + Purchases − Ending raw materials inventory Direct raw materials used = $42,000 + $60,000 − $16,000 = $86,000 Total manufacturing costs = Direct materials used + Direct labor + Actual overhead costs Total manufacturing costs = $86,000 + $120,000 + $36,000 = $242,000 Cost of goods manufactured = Beginning work in process + Total manufacturing costs − Ending work in process Cost of goods manufactured = $90,000 + $242,000 − $82,000 = $250,000 Cost of goods sold = Beginning finished goods + Cost of goods manufactured − Ending finished goods Cost of goods sold = $20,000 + $250,000 − $35,000 = $235,000 Gross margin = Sales − Cost of goods sold Gross margin = $360,000 − $235,000 = $125,000

$165,000. Budgeted purchases of inventory = Budgeted cost of goods sold + Desired ending inventory − Beginning inventory Budgeted purchases of inventory in February = Budgeted cost of goods sold + (Budgeted cost of goods sold in March × 25%) − (Budgeted cost of goods sold in February × 25%) Budgeted purchases of inventory in February = $180,000 + ($120,000 × 25%) − ($180,000 × 25%) = $180,000 + $30,000 − $45,000 = $165,000

the folowing income statmentis provided for ramirez company for the current year bunches of other data overall net income--- 6760 what amount was the companies contribution margin?

$18,360

Hilliard Company budgeted the following transactions for April Year 2: Sales (75% collected in month of sale)$200,000 Cash operating expenses 105,000 Cash purchases of investments 75,000 Cash payment of debt 15,000 Depreciation on operating assets 12,000 The beginning cash balance was $50,000. The company desires to have a $25,000 ending cash balance. The surplus (or shortage) of cash before considering any borrowings in April would be:

$20,000 shortage. Projected ending cash balance (before borrowing, if any) = Beginning cash balance + Cash receipts − Cash payments Projected ending cash balance (before borrowing, if any) = $50,000 + ($200,000 × 75%) − ($105,000 + $75,000) − $15,000 = $50,000 + $150,000 − $180,000 − $15,000 = $5,000 Since the projected ending cash balance (before borrowing, if any) = $5,000 and the company's desired ending cash balance is $25,000, the company has a $20,000 cash shortage.

At its $40 selling price, Atlantic Company has sales of $20,000, variable manufacturing costs of $5,000, fixed manufacturing costs of $2,000, variable selling and administrative costs of $4,000 and fixed selling and administrative costs of $2,000. What is the company's contribution margin per unit?

$22 First, determine the number of units sold:Number of units sold = Sales ÷ Selling price per unitNumber of units sold = $20,000 ÷ $40 per unit = 500 unitsThen, determine the variable cost per unit:Variable cost per unit = (Variable manufacturing costs of $5,000 + Variable selling and administrative costs of $4,000) ÷ 500 units = $18 per unitFinally, determine the contribution margin per unit:Contribution margin per unit = Selling price per unit − Variable costs per unitContribution margin per unit = $40 per unit − $18 per unit = $22 per unit

Scranton Company expects to begin operating on July 1, Year 1. The company's master budget contained the following operating expense budget: JulyAugustSeptemberSalary expense$36,000 $36,000 $36,000 Sales commissions, 5% of sales 30,000 32,000 24,000 Utilities 2,800 2,800 2,800 Depreciation on store equipment 1,000 1,000 1,000 Rent 7,200 7,200 7,200 Miscellaneous 1,800 1,800 1,800 Total operating expenses$78,800 $80,800 $72,800 Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of commissions payable that would appear on the company's pro forma balance sheet as of September 30, Year 1 is:

$24,000.

$24,000. Since sales commissions are paid in cash in the month following the month in which the expense is recognized, the commissions payable at September 30 equal the September sales commissions of $24,000.

bantam Industries has budgeted the following information for March: Cash receipts$271,000 Beginning cash balance 5,000 Cash payments 280,000 Desired ending cash balance 25,000 If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments, and interest is paid monthly at 1% on the first day of the following month. The company had no debt before March 1. How much cash will the company need to borrow in March?

$29,000

The magnitude of operating leverage for Forbes Corporation is 3.2 when sales are $240,000 and net income is $28,000. If sales increase by 5%, what is net income expected to be?

$32,480 Expected net income = Net income + (Net income × (Percentage increase in sales × Magnitude of operating leverage))Expected net income = $28,000 + ($28,000 × 0.05 × 3.2) = $32,480

The magnitude of operating leverage for Forbes Corporation is 3.3 when sales are $250,000 and net income is $29,000. If sales increase by 5%, what is net income expected to be?

$33,785 Expected net income = Net income + (Net income × (Percentage increase in sales × Magnitude of operating leverage))Expected net income = $29,000 + ($29,000 × 0.05 × 3.3) = $33,785

Markham Company has completed its sales budget for the first quarter of Year 2. Projected credit sales for the first four months of the year are shown below: January$30,000 February$36,000 March$45,000 April$48,000 The company's past records show collection of credit sales as follows: 40% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be:

$39,600. March collections = (February sales × Percent collected in month following month of sale) + (March sales × Percent collected in month of sale) March collections = ($36,000 × 60%) + ($45,000 × 40%) = $21,600 + $18,000 = $39,600

Wu Company incurred $58,000 of fixed cost and $69,600 of variable cost when 2,400 units of product were made and sold. If the company's volume increases to 2,900 units, the total cost per unit will be:

$49.00. Variable cost per unit = Total variable cost ÷ Number of unitsVariable cost per unit = $69,600 ÷ 2,400 units = $29.00 per unitTotal cost per unit = Fixed cost per unit + Variable cost per unitTotal cost per unit = ($58,000 ÷ 2,900 units) + $29.00 per unit = $49.00 per unit

Tucker Company's work in process account decreased by $1,000, while its Finished Goods Inventory account increased by $500. Assuming total manufacturing costs were $5,000, what was the company's cost of goods sold amount?

$5,500 If the inventory balances increased, the ending balances are more than the beginning balances and vice versa. Cost of goods manufactured = Beginning work in process + Total manufacturing costs − Ending work in process Cost of goods manufactured = Beginning work in process + $5,000 − (Ending work in process − $1,000) Cost of goods manufactured = $5,000 + $1,000 = $6,000 Cost of goods sold = Beginning finished goods + Cost of goods manufactured − Ending finished goods Cost of goods sold = Beginning finished goods + $6,000 − (Beginning finished goods + $500) Cost of goods sold = $6,000 − $500 = $5,500

pickard company pays its sales staff a based salary of $5,800 a month plus commission for each product sold. If a salesperson sells 520 units of production in jan, the employee would be paid

$6,944

Pickard Company pays its sales staff a base salary of $4,600 a month plus a $3.60 commission for each product sold. If a salesperson sells 660 units of product in January, the employee would be paid:

$6,976. Total cost = Fixed cost + Variable costTotal cost = $4,600 + (660 units × $3.60 per unit) = $6,976

Warren company applies overhead based on direct labor costs. Warren company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs dur9ing the current year. Actual maunufactuing overhead cost totaled $150,000 and actual direct labor costs totalted $110,000 during the current year. if total manufacturing costs were $320,000 what amount of direct materials were used during the year

$60,000

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2: Dec. Year 1Jan. Year 2Feb. Year 2Mar. Year 2 (Actual)(Budgeted)(Budgeted)(Budgeted)Credit sales$120,000 $280,000 $310,000 $220,000 Cash sales$20,000 $50,000 $60,000 $24,000 Based on the company's collection history, 42% of credit sales are collected in month of sale, and the remainder is collected in the following month. Cash collections in January from December credit sales would be:

$69,600. Collections in January from December credit sales = December credit sales × Percent collected in month following month of sale Collections in January from December credit sales = $120,000 × (100% − 42%) = $69,600

the mighty music company produces and sells desktop speakers....... more info........ assuming that no sales to regular customers will be lost if the order if accepted, at what selling priice will the company be indifferent between accepting and rejecting the special order.

$75

travis company had no beginning work in progressor finished goods. its total manufactuing costs for the year were $427,000. if cost og goods manufacuted was $332,000 and cost of goods sold was $250,000, the amount of ending work in process would have been

$95,000

Fortune Company had beginning raw materials inventory of $16,000. During the period, the company purchased $92,000 of raw materials on account. If the ending balance in raw materials was $10,000, the amount of raw materials transferred to work in process is:

$98,000. Direct raw materials used = Beginning raw materials inventory + Purchases − Ending raw materials inventory Direct raw materials used = $16,000 + $92,000 − $10,000 = $98,000

The following income statement is provided for Grant, Inc. Sales revenue (2,400 @ $15.90 per unit)$38,160 Variable costs (2,400 @ $7.90 per unit) 18,960 Fixed costs 5,900 Net income$13,300 What is this company's magnitude of operating leverage?

1.44 Magnitude of operating leverage = Contribution margin ÷ Net incomeMagnitude of operating leverage = ($38,160 − $18,960) ÷ $13,300 = 1.44

The following income statement is provided for Grant, Inc. Sales revenue (3,100 @ $14.40 per unit)$44,640 Variable costs (3,100 @ $6.40 per unit) 19,840 Fixed costs 9,400 Net income$15,400 What is this company's magnitude of operating leverage?

1.61 Magnitude of operating leverage = Contribution margin ÷ Net incomeMagnitude of operating leverage = ($44,640 − $19,840) ÷ $15,400 = 1.61

Phan Company has not reported a profit in five years. This year the company would like to narrow its loss to $12,000. Assuming its selling price is $40.50 per unit and its variable costs per unit are $28, how many units must be sold to achieve its target given that total fixed costs are $60,000? (Do not round intermediate calculations.)

3,840 Sales volume in units = (Fixed costs + Desired profit) ÷ Contribution margin per unitSales volume in units = [$60,000 + ($12,000)] ÷ ($40.50 per unit − $28 per unit) = $48,000 ÷ $12.50 per unit = 3,840 units

Phan Company has not reported a profit in five years. This year the company would like to narrow its loss to $15,000. Assuming its selling price is $42.50 per unit and its variable costs per unit are $30, how many units must be sold to achieve its target given that total fixed costs are $63,000? (Do not round intermediate calculations.)

3,840 Sales volume in units = (Fixed costs + Desired profit) ÷ Contribution margin per unitSales volume in units = [$63,000 + ($15,000)] ÷ ($42.50 per unit − $30 per unit) = $48,000 ÷ $12.50 per unit = 3,840 units

phan comany has not reported a profit in 5 years. this year the comapny would like to narrow its loss to $15,000. assuming its selling price is $45.50 per unit and its variable costs per unit are $33, how many units must be sold to achieve its target given that total fixed costs are $73,000

4,640

The Page Turner Publishing Company is trying to decide whether to accept a special order for its latest blockbuster. In making this decision, which level of costs will most likely be relevant to the decision?

Unit-level costs.

Which of the following is not an important factor in determining the appropriate cost driver to use in allocating a cost?

A cause-and-effect relationship between the cost and the cost driver. The availability of information about the cost and cost driver. The ability of the cost driver to allocate indirect costs to cost objects. Incorrect - ALL OF THEM

Select the correct statement from the following.

A fixed cost structure offers greater risk but higher opportunity for profitability than does a variable cost structure. Shifting the cost structure from fixed to variable reduces not only the level of risk but also the potential for profits.

Which of the following statements is incorrect?

A predetermined overhead rate is calculated using actual cost and volume data.

A price equivalent to the hammock's variable manufacturing cost per unit If the relevant revenue exceeds the relevant (avoidable) costs, the special order should be accepted. As such, the minimum selling price should equal the relevant cost per unit. The relevant costs in a special order decision are the unit-level and batch-level costs that will be incurred if the special order is accepted. In this situation, the variable manufacturing cost per unit is the relevant cost.

At the break-even point:

Both sales would be equal to total costs and contribution margin would be equal to total fixed costs are correct. Since net income is zero at the breakeven point, sales would be equal to total costs and contribution margin would be equal to total fixed costs. However, sales would not be equal to fixed costs.

select the incorrect statement regarding the human factor in the budgeting process.

Budgets force employees to follow the organization's plan.

Asset replacement decisions involve:

Choices between continuing to operate existing equipment or replacing it with new equipment.

companies A and B are in the same industry and are identical except for cost structure. At a volume of 50,000 units, the companies have equal net incomes. When sales at both companies increase to 60,000 units, Company A's net income would be substantially higher than B's. Based on this information,

Company A's cost structure has higher fixed costs than B's.

Companies A and B are in the same industry and are identical except for cost structure. At a volume of 50,000 units, the companies have equal net incomes. When sales at both companies increase to 60,000 units, Company A's net income would be substantially higher than B's. Based on this information,

Company A's cost structure has higher fixed costs than B's. When sales change, the amount of the corresponding change in net income is directly influenced by the company's cost structure. The more fixed cost, the greater the fluctuation in net income. Since Company A's net income is substantially higher than Company B's when both companies experience an equal increase in sales, Company A has a fixed cost structure while Company B has a variable cost structure.

Stephenson Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below: Contract X Contract ZContract Revenue$200,000 $260,000 Materials 10,000 10,000 Labor 88,000 120,000 Depreciation on Equipment 8,000 10,000 Cost Incurred for Consulting Advice 1,500 1,500 Allocated Portion of Overhead 5,000 3,000 The equipment was purchased last year and has no resale value. Which of these amounts is relevant for the selection of one contract over another?

Contract revenue and labor cost Since the contract revenue differs among the alternatives, it is a differential revenue. Since the labor cost differs among the alternatives, it is a differential cost. The following are not relevant to this decision for the reasons stated. The materials and cost incurred for consulting advice do not differ among the alternatives. The book value of the asset and associated depreciation is based on a sunk cost that cannot be avoided because it has already been incurred and therefore is not relevant to current decisions. There is no indication that the allocated portion of the overhead can be avoided.

Rachel is deciding whether to remain in the home she has lived in for the past ten years, which is located very near her work, or to move into a newer home that is located in the suburbs farther from her job. The old house was purchased for $160,000 and has a market value of $220,000. The new home can be purchased for $285,000. Which of the following is not relevant to Rachel's decision?

Cost of the old house

Which of the following would appear on a selling and administrative expense budget, but would not appear on a schedule of cash payments for selling and administrative expenses?

Depreciation expense Depreciation expense does not affect the cash payments schedule. The cash outflow for the related fixed assets occurs when the assets are purchased, not when they are depreciated.

Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the order. Accepting the order will increase Outdoor Living's variable manufacturing costs. Which type of cost is considered a sunk cost to Outdoor Living's decision whether to accept or reject the special order?

Depreciation on equipment that would be used to make the hammocks The annual depreciation expense is a measure of a cost that was incurred in a prior period. Since sunk costs have been incurred in past transactions, they cannot be changed and are not relevant for making current decisions.

Which of the following is a benefit of participative budgeting?

Employees tend to be more motivated to achieve the budget.

Which of the following items is not needed to prepare a sales budget by product line?

Expected purchase price of each product. The sales budget includes the expected selling (rather than purchase) price of each product.

Which of the following costs is not considered a period cost?

Freight paid on a purchase of raw materials Period costs are associated with the general, selling, and administrative functions of the business. Product costs are all costs incurred to obtain a product or provide a service. Freight paid on a purchase of raw materials is considered a product cost.

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. The company expects to make 2,000 comforters during the current year. With respect to the comforters, how would the supervisory salaries be classified?

Indirect and fixed

Levenworth Company incurs unnecessary costs each period because of the excess quantities of inventory maintained to meet unexpected customer demand. The costs of inventory financing, storage, supervision, and obsolescence could most likely be reduced by which of the following practices?

Just-in-time inventory Inventory holding costs include, but are not limited to, financing, warehouse space, supervision, theft, damage, and obsolescence. Many businesses have been able to reduce their inventory holding costs by making products available just in time (JIT) for customer consumption.

Select the incorrect statement regarding costs and expenses.

Manufacturing-related costs are initially recorded as expenses. Product costs (i.e. manufacturing costs) are all costs incurred to obtain or manufacture a product or provide a service. These costs are treated as assets, recorded in inventory, and expensed when the associated products are sold. Period costs (i.e. non-manufacturing costs) are all costs not associated with a product. They are associated with the general, selling, and administrative functions of the business and most are expensed in the period in which the associated economic sacrifice is made.

Easton Company makes and sells scooters. Easton incurred the following costs in its most recent fiscal year: Cost Items Appearing on the Income StatementMaterials cost ($10 per unit)Depreciation on manufacturing equipmentCompany president's salarySalaries of administrative personnelLabor cost ($4 per unit)Research and development costsAdvertising costs ($150,000 per year)Real estate taxes on factoryShipping and handling ($0.15 per unit)Inspection costs Easton can currently purchase the scooters it makes from another company. If the company purchases the scooters, Easton would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified as a unit-level cost?

Materials cost Costs incurred each time a company generates one unit of product are unit-level costs. Examples include the cost of direct materials, direct labor, inspections, packaging, shipping, and handling.

Which of the following statements is true with regard to product costs versus general, selling, and administrative costs?

Product costs associated with units sold appear on the income statement as cost of goods sold. Product costs are all costs incurred to obtain a product or provide a service. These costs are treated as assets, recorded in inventory, and expensed (as cost of goods sold) when the associated products are sold. Period costs are all costs not associated with a product. They are associated with the general, selling, and administrative functions of the business and most are expensed in the period in which the associated economic sacrifice is made. A product cost would be the cost of direct materials used in the production of a product. A period cost would be rent on administrative facilities.

Which of the following is not classified as manufacturing overhead?

Product delivery costs Downstream costs are costs incurred after the manufacturing process including marketing, distribution, and customer services. Distribution costs include product delivery costs. Downstream costs are classified as general, selling, and administrative expenses and are expensed in the period they are incurred.

Which of the following is a true statement regarding product-level costs?

Product-level costs are generally relevant to outsourcing decisions. If a company decides to outsource, it can avoid the unit-level costs (materials, labor, overhead), the batch-level costs (assembly setup and materials handling), and product-level costs. Deciding to outsource will not, however, affect the facility-level costs.

Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the order. Accepting the order will increase Outdoor Living's total variable manufacturing costs. Which type of cost is considered relevant to Outdoor Living's decision whether to accept or reject the special order?

Raw materials to make the 500 hammocks

Select the correct statement from the following.

Relevant costs can include direct and indirect costs. Accountants use cost accumulation to determine the cost of a particular object. As a result, relevant costs can include direct and indirect costs.

The inventory purchases budget is based on which budget?

Sales budget The inventory purchases budget shows the amount of inventory that must be purchased each month to satisfy the demand projected in the sales budget.

The cash budget is based on which budget?

Sales budget Inventory purchases budget Selling and administrative expense budget The schedule of cash receipts (arising from the sales budget) and the schedule of cash payments (arising from the inventory purchases and selling and administrative expense budget) provide the foundation for preparing the cash budget.

Which of the following is generally included in a sales budget?

Schedule of cash receipts for the projected sales Desired ending inventory and budgeted cost of goods sold appear on the inventory purchases budget. The schedule of cash payments for inventory purchases is prepared using information from the inventory purchases budget and provides information for the cash budget.

All of the following are variables that could be considered in a decision to outsource a component that is currently being produced in-house. Which of the following is not likely to be relevant?

The book value of equipment used in making the component

Chesterfield Corporation has been operating well above its break-even point. What will happen to Chesterfield's margin of safety if the variable cost per unit increases?

The break-even point would increase, and the margin of safety would decrease.

Clean, Inc. cleans and waxes floors for commercial customers. The company is presently operating at less than capacity, with equipment and employees idle at times. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $4,500. The size of the proposed job is 11,000 square feet. The company's normal service costs are as follows: Unit-level materials$0.18per square footUnit-level labor$0.25per square footUnit-level variable overhead$0.08per square footFacility-level overheadAllocated at $0.10 per square foot If the company accepts the special offer:

The company will lose $1,110 on the job.

The company will lose $1,110 on the job. Budgeted cost for production of 11,000 square foot (sf) special order: Per sf Revenue $4,500 Unit-level costs: Materials$0.18 1,980 Labor$0.25 2,750 Variable overhead$0.08 880 5,610 Excess (deficiency) of relevant revenue over relevant cost $(1,110) The other costs are not relevant because the company will incur them whether it accepts or rejects the special order.

Alex brought his lunch today but now a coworker has asked him to go to the deli across the street. Select the correct statement from the following.

The cost of the lunch that Alex had brought has nothing to do with his current decision. The cost of the lunch Alex had brought is a sunk cost. Since sunk costs have been incurred in past transactions, they cannot be changed and are not relevant for making current decisions.

Select the incorrect statement regarding service companies.

The primary difference between manufacturing entities and service companies is that the finished products provided by service companies are consumed immediately.

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

The schedule is an internal document, which is not presented with the company's financial statements, and, in addition, the schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period. To help managers analyze manufacturing results, companies summarize the ledger data in a schedule that shows the overall cost of goods manufactured and sold. The schedule is an internal document, which is not presented with a company's published financial statements. Only the final total on the schedule (cost of goods sold) is disclosed; it is reported on the income statement. This schedule does report the amount of direct materials used during the period.

Which of the following is not a step in allocating indirect costs to cost objects?

Trace direct costs to individual cost pools.

Which of the following transactions would cause net income for the period to decrease?

Used $2,000 of office supplies Costs that are not classified as product costs are normally expensed in the period in which they are incurred and, as such, decrease net income. These costs include general operating costs, selling and administrative costs (such as the use of office supplies), interest costs, and the cost of income taxes.

A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true?

Wood would be accounted for as a direct cost, and glue and varnish as indirect costs.

rock creek bottling company pays its production manager a salary of $6,000 per month. salespersons are paid strictly on commission, at $1.50 for each case of product sold for rock creek bottling company, the production manager's salary is an example of

a fixed cost

outdoor living company has just received a special order for 500 hammocks. outdoor living has sufficient idle capacity to accept the order..... more info...... what is the min price that outdoor living should accept for the special order

a price equivalent to the hammocks variable manufacturing cost per unit

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold. For Rock Creek Bottling Company, the cost of the salespersons' commissions is an example of:

a variable cost. Since the salespersons are paid strictly on commission, at $1.50 for each case of product sold, the total cost of the salespersons' commissions would increase as the sales volume increases. As such, this cost would be classified as a variable cost.

allocation of costs to various cost objects may

affect managers' performance evaluation and the apparent profitability of the various products a comany makes

Allocation of costs to various cost objects may:

affect managers' performance evaluation and the apparent profitability of the various products a company makes.

ann is trying to decide between which one of two job offers she will accept. several items are presented below info on both job offers

base salary moving allowance job search costs incurred

which of the following correctly computes cost of goods maunfactured

beginning work in process + direct materiels used + direct labor + overhead - ending work in process

for a manufacturer, measures of volume may include

both number of units produced and amount of direct materials used in production are correct

which of the following would not be included in a selling and administrative expenses budget

budgeted intrest expense

Expressing plans for a business in financial terms is commonly called:

budgeting

companies a and b are in the same industry and are identical except for cost structure. at a volume of 50,000 units, the companies have equal net incomes. When sales at both companies increase to 60,000 units, company A's net income would be substantially higher than bs. based on this info

comapay a cost structure has higher fixed costs than bs

which of the following items is qualitative

degree to which the new machine can be integrated with existing machinery

which of the following is not an example of a cost object and its related cost driver chart

direct labor hours & indirect labor

cocts such as transportation-out, sales commissions, uncollectible accounts receivable, and advertsing costs are sometimes called

downstream costs

which of the following costs is not considered a period cost

freight paid on a purchase of raw material

once sales reach the break- even point, each additional unit sold will

increase profit by an amount equal to the per unit contribuntion margin

The benefits of a just-in-time system would include all of the following except:

increased warehousing costs.

Easton company makes and sells scooter. easton incurred.... more info.......... if the company purchases the scooter, Easton would still continue to use its own logo, sales staff, and advertising programs. which of the following costs would be classified as a unit level cost.

materials cost

A company that uses a just-in-time inventory system:

may find that having less inventory actually leads to increased customer satisfaction. Many businesses have been able to simultaneously reduce their inventory holding costs and increase customer satisfaction by making products available just in time (JIT) for customer consumption. Many fast-food restaurants have discovered that JIT systems lead not only to greater customer satisfaction but also to lower costs through reduced waste.

which of the following items would be least useful in preparing a schedule of cash recipts

number of units expected to be purchased

The budgeting technique that provides for employee input into the planning process is known as:

participative budgeting. \ Participative budgeting invites participation in the budget process by personnel at all levels of the organization, not just upper-level managers. Information flows from the bottom up as well as from the top down during budget preparation.

which of the following statements is true with regard to product costs versus general, selling, and administravtive costs

product cocts associated with units sold appear on the income statement as cost of goods sold

which of the following is not classified as manufacturing overhead

product delivery costs

Select the incorrect statement regarding upstream and downstream costs.

pstream and downstream costs are reported as product costs on the income statement. Upstream costs are costs that are incurred prior to manufacturing process including research and development costs and product design costs. Downstream costs are costs incurred after the manufacturing process including marketing, distribution, and customer services. Upstream and downstream cost are not reported as product costs on the income statement; instead, they are classified as general, selling, and administrative expenses and are expensed in the period they are incurred.

Craft, Inc. normally produces between 120,000 and 150,000 units each year. Producing more than 150,000 units alters the company's cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired. The production range between 120,000 and 150,000 is called the:

relevant range.

All of the following are downstream costs except:

research and development. Downstream costs are costs incurred after the manufacturing process including marketing, distribution, and customer services. Research and development is considered an upstream cost because it is incurred before the manufacturing process.

which of the following is not considered a pro forma financial statement

sales budget

what budget us generally not included in a master budget

strategic budget

which of the following costs is most likely to be directly tracable to a specific department in retail clothing store

accounting exam 3, pt 2

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