ACCT 331 Exam

Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected. Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. The difference between the $100 estimated selling price for Mountainburg's Product W and its total manufacturing cost of $88 represents: Contribution margin per unit Gross margin per unit Variable cost per unit Operating profit per unit

Gross margin per unit Selling price − COGS = Gross Margin

Data visualization is: how the results of the data analysis are summarized and presented. the volume and speed with which information is generated and made available. the systematic evaluation of information to address a decision problem. a systematic process used to analyze a business issue or decision.

How the results of the data analysis are summarized and presented.

In 2023, the Merkel Company had revenues of $2,000,000 and costs of $1,500,000. During 2024, Merkel will be introducing a new product line that is expected to increase sales revenue by $200,000 and costs by $160,000. Assuming no changes are expected for the other products, the operating profits are expected to increase by:

Increase in operating profit would be $200,000 − $160,000 = $40,000.

Which of the following statements is false regarding product costing? A common decision facing managers is determining the price at which to sell their products or provide their services. Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements. Individual product costs are used to compute inventory values and cost of goods sold for financial statements. Individual product costs are used in decision-making by various product managers.

Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements.

Which of the following refers to the systematic relationship between the amount of experience in performing a task and the time required to perform it?

Learning phenomenon

Marketing costs include all of the following except: Advertising. Shipping costs. Sales commissions. Legal and accounting fees.

Legal and accounting fees

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: Cost Item Estimated Unit Cost Direct material$ 32 Direct labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 6 Variable selling expenses 3 Fixed selling expenses 4 What are the estimated prime costs per unit?

Material + Labor = $32 + $20 = $52

Which of the following best distinguishes an opportunity cost from an outlay cost? Opportunity costs are recorded, whereas outlay costs are not. Outlay costs are speculative in nature, whereas opportunity costs are easily traceable to products. Opportunity costs have very little utility in practical applications, whereas outlay costs are always relevant. Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows.

Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. Direct material costs for Mountainburg's two new products are:

Prime cost

The following cost data for the month of May were taken from the records of the Terrence Manufacturing Company: (CIA adapted) Depreciation on factory equipment$ 1,000 Depreciation on sales office 500 Advertising 7,000 Wages of production workers 28,000 Raw materials used 47,000 Sales salaries and commissions 10,000 Factory rent 2,000 Factory insurance 500 Materials handling 1,500 Administrative salaries 2,000 Based upon this information, the manufacturing cost incurred during the month was:

$1,000 + $28,000 + $47,000 + $2,000 + $500 + $1,500 = $80,000

During April, the Meade Enterprises had the following operating results: Sales revenue$ 1,500,000 Gross margin$ 600,000 Ending work-in-process inventory$ 50,000 Beginning work-in-process inventory$ 80,000 Ending finished goods inventory$ 100,000 Beginning finished goods inventory$ 125,000 Marketing costs$ 250,000 Administrative costs$ 150,000 What is the cost of goods manufactured for April?

$1,500,000 − $600,000 = $900,000 (COGS): $125,000 + COGM − $100,000 = $900,000; COGM = $875,000

Calculate the conversion costs from the following information: Fixed manufacturing overhead $ 2,400 Variable manufacturing overhead 1,400 Direct materials 2,900 Direct labor 1,900

$1,900 + $1,400 + $2,400 = $5,700

Given the following information, compute the total number of units for the period: Direct labor hours 12,100 Direct labor cost $ 2.70per hour Direct materials cost $ 75per unit Total manufacturing cost $ 135,155 Fixed overhead cost$ 38,000 Variable overhead cost 50%of total labor cost

$135,155 = ($75 × Units) + (12,100 × $2.70) + [0.50(12,100 × $2.70)] + $38,000; Units = 642.

Tulsa Company, (a merchandising company) has the following data pertaining to the year ended December 31, 2022: (CPA adapted) Purchases$ 560,000 Beginning inventory 192,000 Ending inventory 221,000 Freight-in 61,000 Freight-out 80,500 What is the cost of goods sold for the year?

$192,000 + $560,000 + $61,000 − $221,000 = $592,000

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: Cost Item Estimated Unit Cost Direct material$ 32 Direct labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 6 Variable selling expenses 3 Fixed selling expenses 4 What are the estimated variable costs per unit?

$32 + $20 + $15 + $3 = $70

The estimated unit costs for a company to produce and sell a product at a level of 12,400 units per month are as follows: Cost Item Estimated Unit Cost Direct material$ 33 Direct labor 24 Variable manufacturing overhead 19 Fixed manufacturing overhead 7 Variable selling expenses 2 Fixed selling expenses 3 What are the estimated variable costs per unit?

$33 + $24 + $19 + $2 = $78

The Shoal Company's manufacturing costs for the third quarter of 2022 were as follows: (CPA adapted) What amount should be considered product costs for external reporting purposes?

$700,000 + $100,000 + $80,000 + $18,000 = $898,000

Ballard Company incurred a total cost of $8,600 to produce 400 units of pulp. Each unit of pulp required five (5) direct labor hours to complete. What is the total fixed cost if the variable cost was $1.50 per direct labor hour?

$8,600 = FC + $1.50(400 × 5); FC = $5,600

The following information is available for Barnes Company for the fiscal year ended December 31: Beginning finished goods inventory in units 0 Units produced 8,600 Units sold 5,900 Sales $ 767,000 Materials cost $ 172,000 Variable conversion cost used $ 86,000 Fixed manufacturing cost $ 946,000 Indirect operating costs (fixed) $ 118,000 The variable costing ending finished goods inventory is:

($172,000 + $86,000)/8,600 = $30 per unit; $30 per unit × (8,600 units − 5,900 units) = $81,000

San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs$ 39,000 $ 68,000 Processing costs 44,000 68,000 Building costs 13,900 38,000 Equipment rental 20,900 20,900 If only the differential costs of the two decisions are considered, the total differential costs of Alternative B are:

All of the costs except equipment rental are differential ($29,000 + $24,000 + $24,100 = $77,100).

Which of the following is a false statement regarding cost information and ethical responsibilities? Compliance with Sarbanes-Oxley guarantees that a manager has met all of his or her ethical responsibilities. Sarbanes-Oxley is important for managers who design cost information systems. Managers must be aware of the potential that cost information could be misleading or support fraudulent activity. Managers need to understand that performance measurement and compensation systems can lead to unethical conduct.

Compliance with Sarbanes-Oxley guarantees that a manager has met all of his or her ethical responsibilities.

The field of accounting that focuses on the criterion of relevant information rather than comparability of firms is: cost accounting. financial accounting. responsibility accounting. international accounting.

Cost accounting

The Macon Company uses the high-low method to determine its cost equation. The following information was gathered for the past year: Machine Hours Direct Labor Costs Busiest month (June) 14,000 $ 200,000 Slowest month (December) 6,000 $ 120,000 What are the direct labor costs per machine hour?

Direct Labor Costs per Machine Hour = ($200,000 − $120,000) ÷ (14,000 − 6,000) = $10.00.

The basic cost flow model is: EB + BB = TI + TO. BB + EB = TI + TO. EB − BB = TI − TO. EB − BB = TO − TI.

EB − BB = TI − TO.

According to the Institute of Management Accountants (IMA), the final step in resolving an ethical dilemma is to: consult your own attorney as to legal obligations and rights concerning the ethical conflict. clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethical Counselor, an appropriate and confidential ethics hotline, or another impartial advisor. consult with the local police. discuss the situation with an immediate supervisor.

consult your own attorney as to legal obligations and rights concerning the ethical conflict.

Which of the following provides much of the information necessary for the coordination of the value chain? Distribution chain Financial accounting system Cost accounting system Supply chain

cost accounting system

The beginning Finished Goods Inventory plus the cost of goods manufactured equals: ending finished goods inventory. cost of goods sold for the period. total work-in-process during the period. cost of goods available for sale for the period.

cost of goods available for sale for the period.

All of the following actions enhance the new focus on making cost accounting information more relevant in helping a firm achieve strategic goals except: increasing emphasis on the management accountant as a business partner. increasing emphasis on external financial reporting. decreasing emphasis on financial statement inventory cost valuation. increasing emphasis on timely and useful information.

increasing emphasis on external financial reporting

Examples of the controller's functions include all of the following except: cost accounting policies budgeting investor relations general ledger

investor relations

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. The total overhead cost of $27 for Mountainburg's Product W is a(n):

mixed cost

Having one or more of the firm's activities performed by another firm or individual in the supply or distribution chain is called: lean accounting. responsibility centers. activity-based costing. outsourcing.

outsourcing

A company that manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers. Which of the following is a proper classification of this cost? Product cost Period cost Conversion cost Prime cost

period cost

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. The advertising costs for the product selected by Mountainburg will be:

period costs

An example of period cost: fire insurance on a factory building. salary of a factory supervisor. direct materials. rent on a headquarters building.

rent on a headquarters building.

The beginning Work-in-Process Inventory plus the total of the manufacturing costs equals: total finished goods during the period. cost of goods sold for the period. total work-in-process during the period. cost of goods manufactured for the period.

total work-in-process during the period.

A disadvantage of the high-low method of cost analysis is that it: typically results in a totally inaccurate cost formula. is too time consuming to apply. uses only two data points, which may not be representative of normal conditions. relies totally on the judgment of the person performing the cost analysis.

uses only two data points, which may not be representative of normal conditions.

The set of activities that transforms raw resources into the goods and services end users purchase and consume is called the:

Value Chain

How would a 5% sales commission paid to sales personnel be classified in a manufacturing company? Fixed, period cost. Fixed, product cost. Variable, period cost. Variable, product cost.

Variable, period cost.

How would miscellaneous supplies used in assembling a product be classified for a manufacturing company? Fixed, period cost. Fixed, product cost. Variable, period cost. Variable, product cost.

Variable, product cost.

Which of the following critical thinking questions can big data help to best answer? What are the relevant questions? How can I effectively and persuasively communicate the results of my analysis? What are the data relevant to the analysis and where do I find them? What are the appropriate tools for analyzing data?

What are the data relevant to the analysis and where do I find them?

Which of the following activities would not be included in the value chain of a manufacturing company? Research and Development Customer Service Design Accounting

accounting

In the cost equation TC = F + VX, "X" is best described as the:

activity level used to estimate the total cost.

Which of the following is not normally considered part of the value chain? Research and development Purchasing Administration Distribution

administration

A company had beginning inventories as follows: Direct Materials, $300; Work-in-Process, $500; Finished Goods, $700. It had ending inventories as follows: Direct Materials, $400; Work-in-Process, $600; Finished Goods, $800. Material Purchases net were $1,400, Direct Labor $1,500, and Manufacturing Overhead $1,600. What is the Cost of Goods Sold for the period?

4,200 $300 + $1,400 − $400 = $1,300 (Direct materials used in production) $500 + $1,300 + $1,500 + $1,600 − $600 = $4,300 (COGM) $700 + $4,300 − $800 = $4,200 (COGS)

In 2023, the Allen Company had consulting revenues of $1,000,000, while, operating costs were $750,000. In 2024, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential operating costs for 2024 will be:

60,000

Two alternatives, identified X and Y, are under consideration at Hayden Corporation. Costs associated with the alternatives are listed below: Alternative X Alternative Y Material costs$ 44,000 $ 56,000 Processing costs 37,000 59,000 Building costs 14,000 14,000 Equipment rental 11,000 11,000 Are the materials costs and processing costs differential in the choice between alternatives X and Y?

Both materials costs and processing costs are differential.

Which cost estimation method does not use the company's cost information as its primary source of information about the relationship between total costs and activity levels? Scattergraph. High-low. Account analysis. Engineering estimates.

Engineering estimates.

Cost accounting information developed for managers to use in making decisions must comply with generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS).

False

Cost of goods sold includes the actual costs of the goods sold and the costs required to sell them to the customer. T/F

False

Financial accounting information is designed for decision makers who are directly involved in the daily management of the firm. T/F

False

Hospitals are more likely to use a process costing system than a job costing system. T/F

False

Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements. T/F

False

The basic cost flow model applies only to physical units and not to costs. T/F

False

The first step in determining whether a cost is direct or indirect is to specify the cost allocation rule. T/F

False

The value chain is comprised of the activities that take place only during the production process. T/F

False

Which of the following statements is false? -In essence, the value chain and the supply chain are similar; each creates something for which the customer is willing to pay. - Financial accounting information is important since it is sufficient to provide all the information for operational decisions commonly made by managers. -The supply or distribution chain is a linked set of organizations that exchange goods and services in combination to provide a final product or service to the customer. -Eliminating nonvalue-added activities always reduces costs without affecting the value of the product to customers.

Financial accounting information is important since it is sufficient to provide all the information for operational decisions commonly made by managers.

Which of the following is a nonvalue-added activity? Product design Customer service Research and development Rework of defective items

Rework of defective items

Brewsky's is a chain of micro-breweries. Managers are interested in the costs of the stores and believe that the costs can be explained in large part by the number of customers patronizing the stores. Monthly data regarding customer visits and costs for the preceding year for one of the stores have been entered into the regression analysis and the analysis is as follows: Average monthly customer visits1,462 Average monthly total costs$ 4,629 Regression Results Intercept $ 1,496 b coefficient $ 2.08 R^2 0.86814 The Macon Company uses the high-low method to determine its cost equation. The following information was gathered for the past year: In a regression equation expressed as y = a + bx, how is the letter b best described? (CMA adapted)

The estimate of the cost for an additional customer visit.

According to the IMA Code of Ethics, what should a management accountant do if a significant ethical situation cannot be resolved by following established policies? The accountant should confront the guilty party and demand the unethical action be stopped. The accountant should try to rationalize and understand the position of the other party. The accountant should say nothing about the matter until he or she has retired. The accountant should first discuss the matter with the immediate supervisor.

The accountant should first discuss the matter with the immediate supervisor.

In 2023, the Allen Company had consulting revenues of $1,050,000, while, operating costs were $770,000. In 2024, Allen will be introducing a new service that will generate $154,000 in sales revenues and $62,000 in operating costs. Assuming no changes are expected for the other services, the differential operating costs for 2024 will be:

The additional operating costs are the differential amount of $62,000.

Geno's Body Shop had sales revenues and operating costs in 2023 of $650,000 and $525,000, respectively. In 2024, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $85,000 and operating costs by $50,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, what is the amount of operating profits that are expected to be earned in 2024?

Total Revenues ($650,000 + $85,000) − Total Operating costs ($525,000 + $50,000) = Total operating profit = $160,000.

Cost behavior is the most important characteristic of costs for managerial decision making. T/F

True

If a poor facility layout exists and work-in-process inventory must be moved during the production process, the company is likely to be performing some nonvalue-added activities. T/F

True

In general, indirect costs are allocated, while direct costs are assigned. T/F

True

One advantage of the account analysis method for estimating cost behavior is that it includes actual work conditions. T/F

True

One advantage of the engineering method is that it does not require data from prior periods to estimate cost behavior. T/F

True

One disadvantage of the high-low method is the highest and lowest points may not be representative of normal operating activities. T/F

True

The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs. T/F

True

The three categories of product costs are direct materials, direct labor, and manufacturing overhead. T/F

True