Acct Notes 2020 (3)

Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are use for machining, while 2,000 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

$1,000

Washington, Inc. produces two different products (Product C and Product 2) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows: product c . product 2 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the activity rate for Inspection?

$1,500 per batch

Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials price variance?

$1,750 unfavorable

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Machining cost assigned to Product 5?

$100,000

Orchard has forecast sales to be $250,000 in February, $270,000 in March, $300,000 in April, and $280,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31? $196,000 $117,600 $112,000 $168,000

$112,000

When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its total fixed cost when it sells 54,000 units?

$115,200

Parker Corp expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter? $32,000 $96,000 $115,200 $116,480

$116480

After selling 4,300 units during the period, Dole Corp. prepared a flexible budget that included $22,962 for direct materials, $36,120 for direct labor, $19,350 for variable overhead, and $46,440 for fixed overhead. Dole originally planned its master budget based on sales of 4,000 units. What would total costs have been on the master budget?

$119,400

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Machining cost assigned to Product A?

$125,000

Grover has forecast sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 70% of sales. All sales are on made on credit and sales are collected 60% in the month of sale, and 40% the month following. What are budgeted cash receipts in March? $131,000 $135,000 $94,500 $91,700

$131,000

Grover has forecast sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What are budgeted cash receipts in April? $105,000 $141,000 $150,000 $144,000

$144,000

Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1,000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?

$15 + $5 + [($4 × 1,000)/400] + [($20 × 40)/400] = $32.

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is $___ TO CALCULATE: 200-(200*15%)

$170

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

$171,000

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $270,000, while the cost of Inspection is $38,000. Product 5 uses 35% of total machine hours and 50% of total batches. What is the total Machining cost assigned to Product Z?

$175,500 Multiply the percentage of total machine hours used by Product Z by the total cost of machining: 65% × $270,000 = $175,500. (If product 5 uses 35% of the machine hours, then the remaining 65% of the hours must have been used on Product Z.)

Washington, Inc. produces two different products (Product C and Product 2) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows: product c . product 2 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the activity rate for Machining?

$187.50 per machine hour

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. TO CALCULATE: 625000/(8000x4)

$19.53

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.

$19.53 Rationale: $625,000/(8,000 × 4) = $19.53

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $___ TO CALCULATE: 500000/250000

$2

Yuma, Inc. manufactures teddy bears and dolls. Currently, Yuma makes 2,000 teddy bears each month. Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor. Yuma uses two activities in manufacturing the teddy bears: Sewing and Processing. The cost associated with Sewing is $15,000 a month, allocated on the basis of direct labor hours. The cost associated with Processing is $10,000 a month, allocated on the basis of batches. Teddy bears use 1/2 of the direct labor hours, and 35% of total batches. What is the total manufacturing cost for one teddy bear?

$2.00 + $0.50 + [($15,000 × 1/2)/2,000] + [($10,000 × 35%)/2,000] = $8.00.

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ___. TO CALCULATE: 2100000/1000000

$2.10

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ______

$2.10 $2,100,000/1,000,000 = $2.10 per machine hour

Last month Carlos Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Carlos to break even?

$200,000

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______

$200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour

Audrey has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What is the budgeted Accounts Receivable balance on May 31? $155,000 $213,000 $127,800 $186,000

$213,000

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Inspection cost assigned to Product 5?

$22,500

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Inspection cost assigned to Product A?

$22,500

Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6-year life. There is no salvage value for the equipment. If the hurdle rate is 8%, what is the approximate net present value? Ignore income taxes.

$24,580

Manufacturing overhead was estimated to be $489,600 for the year along with 20,400 direct labor hours. Actual manufacturing overhead was $470,220, actual labor hours were 21,800. The predetermined manufacturing overhead rate per direct labor hour would be:

$24.00 $489,600 / 20,400 = $24.00

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory will stay constant. Direct Materials $4.00 per unit Direct Labor $7.20 per unit Manufacturing Overhead $10.00 per unit Selling and Administrative expense $8.00 per unit What is budgeted cost of goods sold for March? $20,367 $21,200 $25,440 $35,040

$25,440

Dade Corp. has residual income of $10,000. If operating income equals $30,000 and the minimum required rate of return is 8%, what are average invested assets?

$250,000

Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. Direct Materials-$5200 Direct Labor- $9,360 Manufacturing Overhead-$13,000 Selling and Administrative expense $10,400 What is budgeted cost of goods sold for March? $14,560 $24,960 $27,560 $37,960

$27,560

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: Product V3 Product G8 Total Machine hours 1,000 3,000 4,000 Number of batches 45 15 60 The activity rate for Machining is $67.50 per machine hour. What is the total cost of Machining?

$270,000

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: product v3 . product g8 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 15 . 60 The activity rate for Machining is $67.50 per machine hour. What is the total cost of Machining?

$270,000

Elm uses the high-low method of estimating costs. Elm had total costs of $250,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $390,000. Elm would estimate variable cost per unit as:

$28.00

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours? TO CALCULATE: 1.35000/5000=Per direct labor hour 2. PDLH*40

$280

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

$280 Rationale: Predetermined overhead rate = $35,000/5,000 or $7 per direct labor hour × 40 hours = $280.

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

$280 = 35,000/5000 or 7$ per direct labor hours x 40 hours

Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be $113,400. $204,750. $261,450. $285,750.

$285,750

Boxwood Inc has forecast purchases on account to be $620,000 in March, $740,000 in April, $840,000 in May, and $980,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What is the budgeted Accounts Payable balance for June 30? $588,000 $686,000 $294,000 $252,000

$294,000

Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? $267,000 $296,000 $161,250 $241,500

$296,000

Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials quantity variance?

$3,250 unfavorable

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? $303,800 $231,000 $121,500 $161,000

$303,800

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? $24,675 $225,680 $303,800 $305,970

$305,970

Atlantic, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales of 1,000 units, and raw materials inventory will stay constant. Direct Materials $6.00 per unit Direct Labor $10.80 per unit Variable Manufacturing overhead $7.50 per unit Fixed Manufacturing Overhead $7,500 What is budgeted cost of goods sold for March? $16,800 $24,300 $31,800 $43,800

$31,800

Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?

$32

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July? $24,500 $39,500 $35,000 $30,500

$35,000

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses the number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?

$359,000

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Machining cost assigned to Product X?

$375,000

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. Direct Materials $6.00 per unit Direct Labor $10.80 per unit Variable Manufacturing overhead $7.50 per unit Fixed Manufacturing Overhead $7,500 What is budgeted cost of goods sold for March? $30,551 $31,800 $36,660 $38,160

$38160

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Machining cost assigned to Product Z?

$400,000

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be:

$420,000.

Hadley, Inc. manufactures a product that uses $15 in direct materials and $5 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $12. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $25. What is the total manufacturing cost per unit for Hadley under the ABC system?

$45

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: Product V3 Product G8 Total Machine hours 1,000 3,000 4,000 Number of batches 45 15 60 The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?

$45,000

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: product v3 . product g8 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 15 . 60 The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?

$45,000

Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July? $389,500 $267,000 $457,000 $415,000

$457,000

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? $29,400 $41,000 $46,400 $17,000

$46,400

Skybird has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: Fixed Manufacturing Costs-$17,000 Fixed Selling Costs-$10,000 Fixed Administrative Costs-$8300 Variable Manufacturing Costs-$6 per unit produced Variable Selling Costs-$3 per unit sold What is budgeted manufacturing overhead cost for July? $32,000 $41,000 $46,400 $17,000

$46,400

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? $29,400 $47,000 $46,400 $17,000

$46,400

Ivory Inc has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? $441,000 $469,000 $343,000 $294,000

$469,000

Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, and actual direct labor hours were 19,000. The amount of manufacturing overhead applied to production would be:

$475,000.

Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the direct labor efficiency variance?

$5,737.50 favorable

Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: Fixed Manufacturing Costs-$17,000 Fixed Selling Costs-$10,000 Fixed Administrative Costs-$8300 Variable Manufacturing Costs-$6 per unit produced Variable Selling Costs-$3 per unit sold What is budgeted manufacturing overhead cost for August? $50,000 $47,000 $33,000 $32,000

$50,000

Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. Direct Materials $8,000 Direct Labor $14,400 Manufacturing Overhead $20,000 Selling and administrative expense $16,000 What is budgeted cost of goods sold for March? $40,734 $42,400 $48,880 $50,880

$50,880

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $___ per setup.

$500

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September? $30,000 $67,500 $32,500 $52,500

$52,500

Manufacturing overhead was estimated to be $477,000 for the year along with 26,500 direct labor hours. Actual manufacturing overhead was $364,375, actual labor hours were 29,100. The amount of manufacturing overhead applied to production would be:

$523,800 Calculate the predetermined overhead rate of $18.00 by dividing total estimated manufacturing overhead by the estimated total cost driver for the year. ($477,000 / 26,500 = $18.00) Multiply the predetermined manufacturing overhead rate ($18.00) to the actual number of direct labor hours (29,100) to calculate applied manufacturing overhead. ($18.00 × 29,100 = $523,800).

Dane Inc has forecast purchases on account to be $465,000 in March, 555,000 in April, $630,000 in May, and $735,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for April? $528,000 $577,500 $388,500 $189,000

$528,000

Arbor Co. has forecast sales to be $400,000 in May, $475,000 in June, $575,000 in July and $700,000 in August. Forty percent of sales are cash, the remainder is on credit. Credit sales are collected 60% in the month of sale, the remaining the following month. What are budgeted cash collections for July? $230,000 $334,000 $459,000 $551,000

$551,000

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August?

$56,600

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? $56,600 $17,000 $53,000 $38,600

$56,600

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? $56,600 $17,000 $39,600 $62,000

$56,600

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $190 per machine hour, and the activity rate for Inspection is $530 per batch. The activity drivers are used as follows: Product A Product X Total Machine hours 1,300 3,100 4,400 Number of batches 55 24 79 What is the amount of Machining cost assigned to Product X?

$589,000 Multiply the number of machine hours for Product X by the activity rate per machine hour: 3,100 × $190 = $589,000

Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? $592,000 $620,000 $310,000 $483,334

$592,000

A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______

$6,000 $2 × 3,000 = $6,000

A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______.

$6,000 Rationale: $2 × 3,000 = $6,000

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September? $742,500 $643,500 $4,387,500 $292,500

$643500

A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)? TO CALCULATE 850-(850*20%)

$680

A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)?

$680 $850 - ($850 × 20%) = $680.

Linden, Inc. uses a 8,150 square foot factory space that it rents for $3,900 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 4,500 square feet of the factory are used for machining, while 1,450 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 750 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

$694 Divide the amount of square feet used by Preparation and Setup by the factory's total square feet, and multiply the result by the total cost of all manufacturing activities. (1,450 / 8,150) × $3,900 = $694

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Inspection cost assigned to Product Z?

$7,500

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Inspection cost assigned to Product X?

$7,500

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

$73,160 to Model XLT and $44,840 to Model TXT 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

$73,160 to Model XLT and $44,840 to Model TXT Rationale: 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product. TO CALCULATE: 1. 620/1000=x & 380/1000=y 2. x*118000 & y*118000

$73160 to Model XLT & $44840 to Model TXT

Killian Corp. has a residual income of $30,000 on invested assets of $450,000. If the hurdle rate is 10%, what is the operating income?

$75,000

Sherman, Inc. manufactures chainsaws that sell for $200. Each chainsaw uses $19 in direct materials and $5 in direct labor per unit. Sherman has two activities: Machining, which is applied at the rate of $5 per machine hour, and Finishing, which is applied at the rate of $28 per batch. This month, Sherman made 200 chainsaws, using 1,868 machine hours in 45 batches. What is the total manufacturing cost for one chainsaw?

$77 Total manufacturing costs include direct materials, direct labor, and overhead: $19 + $5 + [($5 × 1,868) / 200] + [($28 × 45) / 200] = $77.

Miami Corp. has an operating income of $120,000, average invested assets of $600,000, and a cost of capital of 7%. What is the residual income?

$78,000

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______.

$8 per customer call and $15 per development hour Rationale: $200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour.

Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What is Robin's total manufacturing cost?

$81,600

Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?

$85,000

Parsley Inc, a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be? $58,500 $142,500 $81,000 $85,500

$85,500

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much is total labor cost during the three months July through September? $69,300 $327,670 $846,300 $859,320

$859,320

Laredo, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?

$9,000

Largo, Inc., which uses a volume-based cost system, produces cat condos, and has a gross profit margin of 50%. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. How much does each cat condo sell for?

$90

The activity proportion method uses ___ to assign overhead costs to products

%

Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are used for machining, while 2,000 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

(2,000/5,000) × $2,500 = $1,000.

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

(30% × $500,000) + (70% × $30,000) = $171,000.

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?

(70% × $500,000) + (30% × $30,000) = $359,000.

Under the weighted average method of process costing, which of the following formulas is used to calculate the cost per equivalent unit? (Ending Inventory + Current Costs)/Physical Units (Beginning Inventory + Current Costs)/Physical Units (Ending Inventory + Current Costs)/Equivalent Units (Beginning Inventory + Current Costs)/Equivalent Units

(Beginning Inventory + Current Costs)/Equivalent Units

The formula for target units is:

(Total variable costs + Total fixed costs)/Unit contribution margin

The profit equation is:

(Unit price × Q) - (Unit variable costs × Q) - Total fixed costs = Profit

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. Usage of the activity drivers are as follows: What is the amount of Machining cost assigned to Product A?

1,000 × $125 = $125,000.

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Usage of the activity drivers are as follows: What proportion of Machining activity is used by Product 5?

1,200/6,000 = 20%.

Lea Company produces hand tools. Budgeted sales for March are 10,000 units. Beginning finished goods inventory in March is budgeted to be 1,300 units, and ending finished goods inventory is budgeted to be 1,400 units. How many units will be produced in March? 9,900 10,000 10,100 12,700

10100

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $ ___ in total overhead.

1200

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $______ in total overhead

1200

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $_______ in total overhead

1200

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to sell 16,000 units in May. What is budgeted ending inventory for March? 1,030 1,300 1,330 1,650

1300

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Meadow plans to sell 16,000 units in May. How many units will be sold in April? 12,380 13,000 13,570 13,620

13000

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in April? 13,300 15,900 12,700 13,000

13300

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July? 13,800 15,300 16,200 16,300

15300

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is

170

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $

2

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_________

2

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July?

2,550 square meters

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Machining activity is used by Product 5?

20%

Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What is Robin's total manufacturing overhead?

20,800

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted ending finished goods inventory for May? 1,000 1,300 1,600 2,100

2100

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500000, while the cost of Inspection is $30000. Standard is assigned $150000 in Machining cost, and $22500 in Inspection cost. What proportion of Inspection activity is used by Luxury?

25%

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Inspection activity is used by Product Z?

25%

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? 2,300 square meters 2,550 square meters 2,700 square meters 3,575 square meters

2550 square meters

Jillian Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September? 7,500 9,750 16,500 26,250

26250

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.

30

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ________ % of the total setup cost.

30 %

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 7,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.

30%

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Machining activity is used by Standard?

30%

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in August? 7,150 square meters 3,575 square meters 7,075 square meters 3,425 square meters

3575 square meters

Johnson Inc. produces leather handbags. Johnson Inc. estimates it will use 3,500 square meters of leather in production in August, and 3,750 square meters of leather in production in September. Johnson Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? 3,425 square meters 3,500 square meters 3,575 square meters 4,625 square meters

3575 square meters

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? 3,425 square meters 3,450 square meters 3,508 square meters 3,600 square meters

3600 square meters

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: What is the amount of Machining cost assigned to Product X? Product A: Machine hours 1,000 Number of batches 45 Product X: Machine hours 3,000 Number of batches 15

375,000

Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5-year life. If the salvage value of the equipment is estimated to be $75,000, what is the payback period? Ignore income taxes.

4.00 years

Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $90 each. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. What is the gross profit margin for the cat condos?

50.0%

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $ ___ per setup.

500

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $______ per setup

500

Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What are Robin's conversion costs?

57,600

Cooper Company has a direct material standard of 2 gallons of input at a cost of $7.50 per gallon. During July, Cooper Company purchased and used 13,000 gallons, paying $93,200. The direct materials quantity variance was $1,500 unfavorable. How many units were produced?

6,400 units

A large company that uses activity based costing would do which of the following?

Group activities together to simplify the number of activities.

Which of the following terms is generally not used to describe the forward-oriented nature of the budgeting process?

Hoped for

Managers who use activity-based management should begin by asking all of the following questions except:

How am I evaluated annually based on these activities?"

Which of the following are facility-level activities?

Human resource hiring fairs Paying factory insurance

Which of the following is the best example of a facility-level activity?

Human resources

Which of the following is the best example of a facility-level activity? Human resources Research and development Painting a final product Product testing

Human resources

Which of the following types of standards can be achieved only under perfect conditions?

Ideal standard

Which of the following is not a step in the managerial decision-making process?

Identify the activity cost drivers.

Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?

An instructor agrees to add an additional student to a class. A train company uses a last-minute app to fill empty seats and makes long-term pricing decisions based on average revenue. An accountant with no extra time agrees to do an extra client's tax return during busy season.

Which of the following types of reports is more characteristic of managerial accounting than financial accounting?

An internal report used by management

Which of the following cannot be an out-of-pocket cost?

An opportunity cost

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Which of the following is not relevant to the decision?

Apartment rent Your lodging will not change based on which Excel course you choose. Thus, the amount you pay in apartment rent is irrelevant to the decision.

Which of the following statements are true?

Appraisal costs identify defective products before they get to the customer. Appraisal costs are also known as inspection costs.

The final step in ABC is ___. -Assigning indirect costs to products or services -Selecting cost drivers for each activity cost pool -Identifying and classifying activities -Assigning indirect costs to each activity pool

Assigning indirect costs to products or services

A cost that has already been incurred is called a(n) a) Indirect cost. b) Sunk cost. c) Relevant cost. d) Opportunity cost.

B

A detailed plan that translates the companys objectives into financial terms, identifying the resources and expenditures that will be required over the planning horizon is a A) Strategic Plan B) Budget C) Tactic D) Long-Term Objective

B

A direct cost is one which a) involves an actual outlay of cash for a specific cost object. b) can be traced to a specific cost object. c) cannot be traced to a specific cost object. d) is not worth the effort of tracing to a specific cost object.

B

A relevant cost is A) The foregone benefit of choosing to do one thing instead of another B) A cost that differs across decision alternatives C) A cost that has already been incurred D) A cost that is the same regardless of the alternative the manager chooses

B

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. Ajax would estimate fixed costs as a) $28,000 b) $30,000 c) $64,000 d) $128,000

B

Budgeted cost of goods sold should include which of the following? A) Raw materials and direct labor B) Raw materials, direct labor, and manufacturing overhead C) Raw materials, direct labor, manufacturing overhead, and selling expenses D) Raw materials, direct labor, manufacturing overhead, Selling Expenses, and administrative expenses

B

Foster, which uses the high-low method, reported total costs of $24 per unit at its lowest activity level, when production equaled 10,000 units. When production doubled, at its highest activity level, the total cost per unit dropped to $15. Foster would estimate variable cost per unit as a) $9 b) $6 c) negative $9 d) negative $0.0009

B

Spahn, Inc., which uses a volume-based cost system, produces cat condos that sell for $90 each. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. What is the gross profit margin for the cat condos? a) 20.0% b) 50.0% c) 62.5% d) 80.0%

B

The basic form of the cash budget is A) Budgeted cash collections - budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance B) Beginning cash balance + Budgeted cash collections - budgeted cash payments +/- cash borrowed or repaid = ending cash balance C) Beginning cash balance - Budgeted cash collections + Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance D) Beginning cash balance + Budgeted cash collections - budgeted cash payments = cash borrowed or repaid

B

The starting point for preparing the master budget is the A) Inventory Policy B) Sales Budget C) Production Budget D) Budgeted balance sheet

B

Which of the following is the definition of "cost"? a) Cash paid for something. b) The value of what is given up in exchange for something else. c) The foregone benefit of the path not taken. d) The choice between one alternative and another.

B

Which of the following is true of a firm that has reached the limit on its resources? A) It has idle capacity B) Opportunity costs are now relevant C) It has no relevant costs D) It has excess capacity

B

Which of the following types of decisions involves deciding whether to perform a particular activity in house or purchase it from an outside supplier? A) Special order B) Mak or Buy C) Continue or discontinue D) Sell or process further

B

Which of the following would be used to apply manufacturing overhead to production for the period? a) Raw Materials Inventory would be debited b) Work in Process Inventory would be debited c) Manufacturing Overhead would be debited d) Work in Process Inventory would be credited

B

______ are the specific goals that managers want to achieve over a 5 to 10 year horizon A) Strategic plans B) Long-Term objectives C) Short term objectives D) Tactics

B

The manufacturing overhead budget at Amrein Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in August. The variable overhead rate is $9.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $96,040 per month, which includes depreciation of $7,350. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: A) $88,690 B) $134,750 C) $46,060 D) $142,100

B) $134,750

The Gerald Company makes and sells a single product called a Clop. Each Clop requires the use of 1.1 hours of direct labor time. The planned cost of direct labor time is $8.20 per hour. The direct labor workforce is fully adjusted each month to the required workload. The company wishes to prepare a Direct Labor Budget for the first quarter of the year. If the company has budgeted to produce 20,000 Clops in January, then the budgeted direct labor cost for January is: A) $164,000 B) $180,400 C) $172,200 D) $195,600

B) $180,400

Davey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable factory overhead rate is $3.00 per direct labor-hour; the budgeted fixed factory overhead is $66,000 per month, of which $10,000 is factory depreciation. If the budgeted direct labor time for December is 4000 hours, then the predetermined overhead per direct labor-hour for December would be: A) $3.00 B) $19.50 C) $5.50 D) $17.00

B) $19.50

Sparks Company has a cash balance of $7,500 on April 1. The company must maintain a minimum cash balance of $6,000. During April, cash receipts of $48,000 are planned. Cash disbursements during the month are expected to total $52,000. Ignoring interest payments, during April the company will need to borrow: A) $3,500 B) $2,500 C) $6,000 D) $4,000

B) $2,500

Axsom Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 1,300 direct labor-hours will be required in March. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $20,020 per month, which includes depreciation of $2,600. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for March should be: A) $22.30 B) $24.30 C) $15.40 D) $8.90

B) $24.30

Razz Company is estimating the following sales: July: $45000 August: $50000 September: $65000 October: $80000 November: $75000 December $60000 Sales at Razz are normally collected as follows: 10% in the month of sale; 60% in the month following the sale; and the remaining 30% in the second month following the sale. In Razz's budgeted balance sheet at December 31, at what amount will accounts receivable be shown? A) $49,500 B) $76,500 C) $120,500 D) $135,500

B) $76,500

Davey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable factory overhead rate is $3.00 per direct labor-hour; the budgeted fixed factory overhead is $66,000 per month, of which $10,000 is factory depreciation. If the budgeted direct labor time for November is 9000 hours then the total budgeted cash disbursements for November must be: A) $56000 B) $83000 C) $37000 D) $93000

B) $83000

Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in January. The variable overhead rate is $1.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,950 per month, which includes depreciation of $19,880. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: A) $115,730 B) $95,850 C) $12,780 D) $83,070

B) $95,850

Villi Manufacturing Corporation's most recent sales budget indicates the following expected sales (in units): July: 230000 August: 275000 September: 310000 Villi wants to maintain a finished goods inventory of 20% of the next month's expected sales. How many units should Villi plan on producing for the month of August? A) 268,000 units B) 282,000 units C) 291,000 units D) 337,000 units

B) 282,000 units

Harris, Inc., has budgeted sales in units for the next five months as follows: June: 9400 units July: 7800 units August: 7300 units September 5400 units October 4100 units Past experience has shown that the ending inventory for each month should be equal to 20% of the next month's sales in units. The inventory on May 31 contained 1,880 units. The company needs to prepare a production budget for the next five months. The total number of units produced in July should be: A) 9260 units B) 7700 units C) 7800 units D) 7900 units

B) 7700 units

The following are budgeted data: April // May // June Sales in units: 26000 // 28000 // 32000 Budgeted production: 28000 // 32000 //36000 Desired ending inventory: 2100//2800//3000 How many yards of cloth should Rhett plan on purchasing in May? A) 84,700 yards B) 96,700 yards C) 98,100 yards D) 98,800 yards

B) 96,700 yards

When preparing a production budget, the required production equals: A) budgeted sales + beginning inventory + desired ending inventory. B) budgeted sales - beginning inventory + desired ending inventory. C) budgeted sales - beginning inventory - desired ending inventory. D) budgeted sales + beginning inventory - desired ending inventory.

B) budgeted sales - beginning inventory + desired ending inventory.

In preparing a master budget, top management is generally best able to: A) prepare detailed departmental-level budget figures. B) provide a perspective on the company as a whole. C) point out the particular persons who are to blame for inability to meet budget goals. D) responses a, b, and c are all correct.

B) provide a perspective on the company as a whole.

Santos Inc had the following information for the preceding year: Raw Materials: BE (1/1): $40,000 EE (12/31): $30,000 Work in Process Inventory: BE: $35,000 EE: $? Finished Goods Inventory: $30,000 $? Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the ending Finished Goods Inventory balance on 12/31? A. $20,000 B. $11,000 C. $50,000 D. $54,000

B. $11,000 $544,000 = $30,000 + $525,000 - ending Finished Goods Inventory. Ending Finished Goods Inventory = $30,000 + $525,000 - $544,000 = $11,000.

Audrey has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What is the budgeted Accounts Receivable balance on May 31? A. $155,000 B. $213,000 C. $127,800 D. $186,000

B. $213,000

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount debited to the Manufacturing Overhead account would be A. $200,000 B. $215,000 C. $210,000 D. $225,750

B. $215,000 Actual manufacturing overhead costs of $215,000 are accumulated on the debit side of the Manufacturing Overhead account.

Overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual overhead was $225,000, and actual direct labor hours were 19,000. The amount debited to the manufacturing overhead account would be A. $250,000 B. $225,000 C. $213,750 D. $237,500

B. $225,000 Actual manufacturing overhead costs of $225,000 are debited to the Manufacturing Overhead account.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the cost of goods manufactured. A. $248,000 B. $242,000 C. $265,000 D. $235,000

B. $242,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000. Cost of goods manufactured = $15,000 + $245,000 - $18,000 = $242,000.

Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, actual direct labor hours were 19,000. The predetermined overhead rate would be A. $22.50 B. $25.00 C. $23.68 D. $26.32

B. $25.00 $500,000/20,000 = $25.00

Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $267,000 B. $296,000 C. $161,250 D. $241,500

B. $296,000

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount debited to the Manufacturing Overhead account would be A. $400,000 B. $415,000 C. $420,000 D. $435,750

B. $415,000 Actual manufacturing overhead costs are debited to the Manufacturing Overhead account.

Ivory Inc has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? A. $441,000 B. $469,000 C. $343,000 D. $294,000

B. $469,000

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September? A. $742,500 B. $643,500 C. $4,387,500 D. $292,500

B. $643,500

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to sell 16,000 units in May. What is budgeted ending inventory for March? A. 1,030 B. 1,300 C. 1,330 D. 1,650

B. 1,300

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Meadow plans to sell 16,000 units in May. How many units will be sold in April? A. 12,380 B. 13,000 C. 13,570 D. 13,620

B. 13,000

34. Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? A. 2,300 square meters B. 2,550 square meters C. 2,700 square meters D. 3,575 square meters

B. 2,550 square meters

33. Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in August? A. 7,150 square meters B. 3,575 square meters C. 7,075 square meters D. 3,425 square meters

B. 3,575 square meters

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many unskilled labor hours will be budgeted for August? A. 7,000 B. 9,100 C. 15,400 D. 24,500

B. 9,100

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? A. 10,000 B. 9,900 C. 13,000 D. 10,100

B. 9,900

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $25,000 B. Cost of Goods Sold would be credited for $12,500 C. Cost of Goods Sold would be debited for $12,500 D. Cost of Goods Sold would be debited for $25,000

B. Cost of Goods Sold would be credited for $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500, which is credited to Cost of Goods Sold.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000 C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000

B. Cost of Goods Sold would be credited for $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000, which is credited to cost of goods sold.

Which of the following would be used to transfer the cost of completed goods during the period? A. Credit to Raw Materials Inventory B. Credit to Work in Process Inventory C. Debit to Manufacturing Overhead D. Credit to Manufacturing Overhead

B. Credit to Work in Process Inventory When a job is completed, its total manufacturing cost is transferred out of Work in Process Inventory with a credit and into Finished Goods Inventory with a debit.

Which of the following types of firms would most likely use job order costing? A. Happy-Oh Cereal Company B. Huey, Lewey & Dewie, Attorneys C. SoooSweet Beverage D. C-5 Cement Company

B. Huey, Lewey & Dewie, Attorneys Job order costing is used in companies that offer customized or unique products or services, such as a law firm.

All the costs assigned to an individual job are summarized on a A. Cost driver sheet. B. Job cost sheet. C. Materials requisition form. D. Labor time ticket.

B. Job cost sheet. The job cost sheet is a document that summarizes all of the costs incurred on a specific job.

The cost of materials used on a specific job is first captured on which source document? A. Cost driver sheet B. Materials requisition form C. Labor time ticket D. Process cost sheet

B. Materials requisition form The materials requisition form lists the quantity and cost of the direct materials used on a specific job.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. Which of the following would be correct? A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000 C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000

B. Overhead is underapplied by $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = $215,000 - $210,000 = $5,000.

When units are completed, the cost associated with the job is credited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

B. Work in Process Inventory When a job is completed, its cost is transferred from Work in Process Inventory (with a credit) to Finished Goods Inventory (with a debit).

When direct materials are used in production, which of the following accounts is debited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

B. Work in Process Inventory When direct materials are used in production, the cost is transferred from Raw Materials Inventory (with a credit) to Work in Process Inventory (with a debit).

Which of the following represents the accumulated costs of jobs as yet incomplete? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

B. Work in Process Inventory Work in Process Inventory represents the total cost of jobs that are still in process.

When materials are placed into production, A. Raw Materials Inventory is debited if the materials are traced directly to the job. B. Work in Process Inventory is debited if the materials are traced directly to the job. C. Manufacturing Overhead is debited if the materials are traced directly to the job. D. Raw Materials Inventory is credited only if the materials are traced directly to the job, otherwise manufacturing overhead is credited.

B. Work in Process Inventory is debited if the materials are traced directly to the job. When direct materials are placed into production, the cost is transferred from Raw Materials Inventory with a credit, and debited to Work in Process Inventory.

Which of the following would be used to record the labor cost that is traceable to a specific job? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

B. Work in Process Inventory would be debited As direct labor costs are incurred, they are debited to Work in Process Inventory.

Which of the following would be used to apply manufacturing overhead to production for the period? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Work in Process Inventory would be credited

B. Work in Process Inventory would be debited When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July? A.13,800 B.15,300 C.16,200 D.16,300

B.15,300

Which of the following statements is true about the use of managerial accounting information in nonprofit organizations?

Because managers of nonprofit organizations need timely and relevant information to make decisions, managerial accounting is vital to these organizations

Which of the following functions of management involves arranging the necessary resources to carry out the plan?

Implementing

Which of the following functions of management involves providing motivation to achieve results?

Implementing

Which of the following is not a characteristic of financial accounting?

Information is subjective, relevant and future-oriented

Which of the following is not a characteristic of managerial accounting?

Information is used by external parties

When cash flows are equal each year, the payback period is calculated as:

Initial investment/Annual net cash flow

Which of the following should a manager using activity-based management attempt to reduce or eliminate?

Insurance division to process liability insurance payments

The cost of scrap and rework is an example of what type of quality cost?

Internal failure costs

Product costs are sometimes called:

Inventorial costs

The approach to cost management that calls for setting cost reduction goals across numerous stages such as product introduction, growth, maturity, and decline is:

Life cycle cost management.

Which of the following statements are true?

Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Quality training is an example of a prevention cost.

If the total activity cost were unknown, it could be calculated by:

Multiplying the total activity driver by the activity rate.

If the total activity cost were unknown, it could be calculated by: Dividing the total activity driver by the activity rate. Multiplying the total activity driver by the activity rate. Adding the total activity driver to the activity rate. Subtracting the activity rate from the total activity driver.

Multiplying the total activity driver by the activity rate.

When are period costs counted as inventory?

Never

Which of the following would be considered a non-volume-based cost driver?

Number of batches

Which of the following statements are true?

Before implementing ABC, a company should weigh the benefits against the costs. The support of upper management is required for successful ABC implementation.

The basic form of the cash budget is: Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance Beginning cash balance - Budgeted cash collections + Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance Beginning cash balance + Budgeted cash collections - Budgeted cash payments = Cash borrowed or repaid

Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance

Which of the following relationships is correct? Beginning units in inventory + units started = units completed + ending units in inventory Units started = beginning units in inventory + units completed + ending units in inventory Units started - beginning units in inventory = units completed + ending units in inventory Ending units in inventory + beginning units in inventory = units started - units completed

Beginning units in inventory + units started = units completed + ending units in inventory

How is the cost of a batch-level activity similar to the cost of a unit-level activity?

Both increase as production volume increases.

A detailed plan that translates the company's objectives into financial terms, identifying the resources and expenditures that will be required over the planning horizon is a Strategic plan Budget Tactic Long-term objective

Budget

Which of the following is the primary tool used by cost centers to manage costs?

Budgetary control system The budget is a primary tool used by cost centers to manage costs.

Which of the following is correct about budgetary slack?

Budgetary slack is a bit of cushion built into a budget, making it more likely budgetary goals will be met.

Which of the following is not included in the operating budget? Budgeted balance sheet Sales budget Selling and administrative budget Raw materials purchases budget

Budgeted Balance Sheet

Budgeted direct labor hours are calculated as Budgeted production units × Direct labor requirements per unit + Ending inventory - Beginning inventory. Budgeted production units × Direct labor requirements per unit + Beginning inventory - Ending inventory. Budgeted production units × Direct labor requirements per unit. Budgeted sales units × Direct labor requirements per unit.

Budgeted production units x Direct Labor requirements per unit

Budgeted direct labor hours are calculated as:

Budgeted production units × Direct labor requirements per unit

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. Ajax would estimate variable cost per unit as a) $10.00 b) $6.50 c) $4.00 d) $7.53

C

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. What would Ajax estimate its total cost to be if sales equaled 8,000 units? a) $32,000 b) $52,000 c) $62,000 d) $80,000

C

Budgeted direct labor hours are calculated as A) Budgeted production units x Direct labor requirements per unit + ending inventory - beginning inventory B) Budgeted production units x Direct labor requirements per unit + beginning inventory -ending inventory C) Budgeted Production units x Direct labor requirements per unit D) Budgeted sales units x Direct labor requirements per unit

C

Budgeted production is calculated by A) Adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory B) Adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted ending work in process inventory. C) Adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory. D) Adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted beginning work in process inventory.

C

If a company uses a predetermined overhead rate, which of the following statements is correct? a) Manufacturing Overhead will be debited for estimated overhead b) Manufacturing Overhead will be credited for estimated overhead c) Manufacturing Overhead will be debited for actual overhead d) Manufacturing Overhead will be credited for actual overhead

C

Logan, Inc. manufactures chainsaws that sell for $60. Each chainsaw uses $10 in direct materials and $3 in direct labor per unit. Logan has two activities: Machining, which is applied at the rate of $2 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Logan made 200 chainsaws, using 1,000 machine hours in 40 batches. What is the gross profit for 200 chainsaw? a) $2,600 b) $5,400 c) $6,600 d) $9,400

C

Mantilla Inc. estimated manufacturing overhead to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The journal entry to close the balance in the Manufacturing Overhead account would include which of the following? a) Cost of Goods Sold would be credited for $15,000 b) Cost of Goods Sold would be credited for $5,000 c) Cost of Goods Sold would be debited for $5,000 d) Cost of Goods Sold would be debited for $15,000

C

Mathews Woodworking manufactures baseball bats and wooden tops. Currently, Mathews makes 5,000 baseball bats each month. Each bat uses $1.00 in direct materials and $0.50 in direct labor. There are two activities in manufacturing the baseball bats: Cutting and Finishing. The cost associated with Cutting is $7,500 a month, allocated on the basis of direct labor hours. The cost associated with Finishing is $12,000 a month, allocated on the basis of batches. Usage of the activity drivers are as follows: Bats Tops Direct labor hours 100 200 Batches 4 6 What is the total manufacturing cost for one baseball bat? a) $1.46 b) $1.50 c) $2.96 d) $19,501.50

C

Product costs are reported a) only on the balance sheet. b) only on the income statement. c) on the balance sheet before goods are sold, and on the income statement after goods are sold. d) on the income statement before goods are sold, and on the balance sheet after goods are sold.

C

The Formula for budgeted raw materials purchases is A) Budgeted production units + Ending raw materials inventory - beginning raw materials inventory B) Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory C) Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory D) Materials needed for production + beginning raw materials inventory - Ending raw materials inventory

C

The purpose of the cash budget is to A) Be used as a basis for the operating budgets B) Provide external users with an estimate of future cash flows C) help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs D) Summarize the cash flowing into and out of the business during the past period

C

What are the decision alternatives in a special order decision? A) To make or buy the product B) To continue or discontinue the product C) To accept or reject the offer D) To sell-or-process further

C

When calculating raw materials purchases, the starting point should be A) Actual materials purchases from the previous year B) Budgeted sales C) Budgeted Production D) Budgeted cost of raw materials

C

When calculating the direct labor budget, the starting point should be A) Actual direct labor hours from the previous year B) Budgeted sales C) Budgeted Production D) Budgeted cost of direct labor

C

When units are completed, the cost associated with the job is debited to which account? a) Raw Materials Inventory b) Work in Process Inventory c) Finished Goods Inventory d) Cost of Goods Sold

C

When units are sold, the cost associated with the units is credited to which account? a) Raw Materials Inventory b) Work in Process Inventory c) Finished Goods Inventory d) Cost of Goods Sold

C

Which of the following best defines a unit-level activity? a) An activity that is performed for a specific customer b) An activity that is performed to support a specific product line c) An activity that is performed for each individual unit d) An activity that is performed for a group of units all at once

C

Which of the following budgets would not exist for a merchandising firm? A) Sale budget B) Purchases budget C) Production Budget D) Selling and administrative expense budget

C

Which of the following is not a component of the cash budget? A) Budgeted cash collections B) Budgeted cash payments C) Depreciation Expense D) Cash borrowed or repaid

C

Which of the following statements about employee motivation is true? A) A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable B) A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable C) A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve D) Budgets are difficult to use for motivation

C

The manufacturing overhead budget at Pendley Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 8,900 direct labor-hours will be required in August. The variable overhead rate is $5.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $133,500 per month, which includes depreciation of $30,260. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for August should be: A) $5.50 B) $17.10 C) $20.50 D) $15.00

C) $20.50

The Ellis Company has budgeted its activity for September according to the following information: Sales are budgeted at $392,000 and all sales are for cash. All purchases of merchandise inventory are for cash. Merchandise inventory was $150,000 on August 31 and the planned merchandise inventory on September 30 is $140,000. All merchandise is sold at 40% above cost. The selling and administrative expenses are budgeted at $92,000 for the month. All of these expenses are paid for in cash except for depreciation of $12,000. The budgeted cash disbursements for September are: A) $140,000 B) $270,000 C) $350,000 D) $362,000

C) $350,000

Milano Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.50 direct labor-hours. The direct labor rate is $9.80 per direct labor-hour. The production budget calls for producing 6,400 units in October and 6,300 units in November. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? A) $30,870 B) $31,360 C) $62,230 D) $31,115

C) $62,230

The Gerald Company makes and sells a single product called a Clop. Each Clop requires the use of 1.1 hours of direct labor time. The planned cost of direct labor time is $8.20 per hour. The direct labor workforce is fully adjusted each month to the required workload. The company wishes to prepare a Direct Labor Budget for the first quarter of the year. The budgeted direct labor cost per Clop is: A) $7.45 B) $8.20 C) $9.02 D) $9.76

C) $9.02

The following are budgeted data: January // February // March Sales in units: 16000 // 21000 // 20000 Production in units: 17000 //19000//18000 One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be: A) 19000 pounds B) 19200 pounds C) 18800 pounds D) 23000 pounds

C) 18800 pounds

Which of the following is an advantage of implementing a self-imposed budgeting system? A) Budgeting is quick and easy because only a few individuals are involved in the budgeting process. B) Upper level management does not have to review budget estimates. C) Motivation to meet budget estimates is usually enhanced. D) All of the above.

C) Motivation to meet budget estimates is usually enhanced.

Which of the following represents the normal sequence in which the below budgets are prepared? A) Sales, Balance Sheet, Income Statement B) Balance Sheet, Sales, Income Statement C) Sales, Income Statement, Balance Sheet D) Income Statement, Sales, Balance Sheet

C) Sales, Income Statement, Balance Sheet

Which of the following is NOT an objective of the budgeting process? A) To communicate management's plans throughout the entire organization. B) To provide a means of allocating resources to those parts of the organization where they can be used most effectively. C) To ensure that the company continues to grow. D) To uncover potential bottlenecks before they occur.

C) To ensure that the company continues to grow.

All the following are considered to be benefits of participative budgeting, except for: A) Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization. B) The budget estimates are prepared by those in directly involved in activities. C) When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations. D) Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.

C) When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.

The budget method that maintains a constant twelve month planning horizon by adding a new month on the end as the current month is completed is called: A) an operating budget. B) a capital budget. C) a continuous budget. D) a master budget.

C) a continuous budget.

Which of the following might be included as a disbursement on a cash budget? Depreciation on factory equipment//income taxes to be paid A) yes // yes B) yes // no C) no // yes D) no // no

C) no // yes

The direct labor budget is based on: A) the desired ending inventory of finished goods. B) the beginning inventory of finished goods. C) the required production for the period. D) the required materials purchases for the period.

C) the required production for the period.

Orchard has forecast sales to be $250,000 in February, $270,000 in March, $300,000 in April, and $280,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31? A. $196,000 B. $117,600 C. $112,000 D. $168,000

C. $112,000

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount credited to the Manufacturing Overhead account would be A. $200,000 B. $215,000 C. $210,000 D. $225,750

C. $210,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000, which would be credited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be A. $200,000 B. $215,000 C. $210,000 D. $225,750

C. $210,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000.

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $20,367 B. $21,200 C. $25,440 D. $35,040

C. $25,440

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the unadjusted cost of goods sold. A. $133,000 B. $242,000 C. $252,000 D. $255,000

C. $252,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000. Cost of goods manufactured = $15,000 + $245,000 - $18,000 = $242,000. Cost of goods sold = $30,000 + $242,000 - $20,000 = $252,000.

Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $14,560 B. $24,960 C. $27,560 D. $37,960

C. $27,560

Sawyer Company had the following information for the year: Direct materials used: $190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $9,000. How much overhead was applied during the year? A. $245,000 B. $273,000 C. $280,000 D. $320,000

C. $280,000 Predetermined overhead rate = $320,000/8,000 = $40.00. Applied manufacturing overhead = $40.00 x 7,000 = $280,000.

Boxwood Inc has forecast purchases on account to be $620,000 in March, $740,000 in April, $840,000 in May, and $980,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What is the budgeted Accounts Payable balance for June 30? A. $588,000 B. $686,000 C. $294,000 D. $252,000

C. $294,000

Atlantic, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales of 1,000 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $16,800 B. $24,300 C. $31,800 D. $43,800

C. $31,800

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July? A. $24,500 B. $39,500 C. $35,000 D. $30,500

C. $35,000

Jackson Company had the following information for the year: Direct materials used: $295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jackson Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $19,000. How much overhead was applied during the year? A. $245,000 B. $343,000 C. $360,000 D. $320,000

C. $360,000 Predetermined overhead rate = $320,000/8,000 = $40.00. Applied manufacturing overhead = $40.00 x 9,000 = $360,000.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount credited to the Manufacturing Overhead account would be A. $400,000 B. $415,000 C. $420,000 D. $435,750

C. $420,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000, which is credited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be A. $400,000 B. $415,000 C. $420,000 D. $435,750

C. $420,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000.

Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July? A. $389,500 B. $267,000 C. $457,000 D. $415,000

C. $457,000

49. Skybird has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for July? A. $32,000 B. $41,000 C. $46,400 D. $17,000

C. $46,400

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $41,000 C. $46,400 D. $17,000

C. $46,400

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $47,000 C. $46,400 D. $17,000

C. $46,400

Mendez Inc had the following information for the preceding year: Work in Process Inventory: BE: $? EE: $30,000 Finished Goods Inventory: $? $30,000 Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the beginning Work in Process Inventory balance on 1/1? A. $49,000 B. $65,000 C. $50,000 D. $69,000

C. $50,000 Current manufacturing costs = $200,000 + $150,000 + $160,000 = $510,000. Cost of goods manufactured = $525,000 = Beginning Work in Process Inventory + $510,000 - $35,000, so ending Work in Process Inventory = $525,000 + $35,000 - $510,000 = $50,000.

Lea Company produces hand tools. Budgeted sales for March are 10,000 units. Beginning finished goods inventory in March is budgeted to be 1,300 units, and ending finished goods inventory is budgeted to be 1,400 units. How many units will be produced in March? A. 9,900 B. 10,000 C. 10,100 D. 12,700

C. 10,100

Johnson Inc. produces leather handbags. Johnson Inc. estimates it will use 3,500 square meters of leather in production in August, and 3,750 square meters of leather in production in September. Johnson Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,500 square meters C. 3,575 square meters D. 4,625 square meters

C. 3,575 square meters

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000 C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000

C. Cost of Goods Sold would be debited for $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = 215,000 - $210,000 = $5,000, which is debited to Cost of Goods Sold.

Which of the following represents the cost of jobs completed but not yet sold? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

C. Finished Goods Inventory Once goods are finished, their costs are transferred out of Work in Process Inventory and into Finished Goods Inventory until they are sold.

When units are completed, the cost associated with the job is debited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

C. Finished Goods Inventory When a job is completed, its cost is transferred from Work in Process Inventory (with a credit) to Finished Goods Inventory (with a debit).

When units are sold, the cost associated with the units is credited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

C. Finished Goods Inventory When units are sold, their cost is transferred from Finished Goods Inventory (with a credit) to Cost of Goods Sold (with a debit).

The source document that captures how much time a worker has spent on various jobs during the period is a A. Cost driver sheet. B. Materials requisition form. C. Labor time ticket. D. Job cost sheet.

C. Labor time ticket. A direct labor time ticket shows how much time a worker has spent on various jobs each week, as well as the cost of that time.

If a company uses a predetermined overhead rate, which of the following statements is correct? A. Manufacturing Overhead will be debited for estimated overhead B. Manufacturing Overhead will be credited for estimated overhead C. Manufacturing Overhead will be debited for actual overhead D. Manufacturing Overhead will be credited for actual overhead

C. Manufacturing Overhead will be debited for actual overhead Actual manufacturing overhead costs are accumulated on the debit side of the Manufacturing Overhead account.

Which of the following would be used to record the labor cost that is not traceable to a specific job? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect labor costs are accumulated on the debit side of the Manufacturing Overhead account.

Which of the following would be used to record the depreciation of manufacturing equipment? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Which of the following would be used to record the factory supervisor's salary? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Which of the following would be used to record the property taxes on a factory building? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Which of the following would be used to record the usage of indirect manufacturing resources? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited All actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $12,500 B. Manufacturing Overhead would be credited for $25,000 C. Manufacturing Overhead would be debited for $12,500 D. Manufacturing Overhead would be debited for $25,000

C. Manufacturing Overhead would be debited for $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500, which is debited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $5,000 B. Manufacturing Overhead would be credited for $20,000 C. Manufacturing Overhead would be debited for $5,000 D. Manufacturing Overhead would be debited for $20,000

C. Manufacturing Overhead would be debited for $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000, which is debited to Manufacturing Overhead.

If materials being placed into production are not traced to a specific job, A. Raw Materials Inventory would be debited. B. Work in Process Inventory would be debited. C. Manufacturing Overhead would be debited. D. Manufacturing Overhead would be credited.

C. Manufacturing Overhead would be debited. When indirect materials are placed into production, the cost is transferred from Raw Materials Inventory with a credit, and debited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. Which of the following would be correct? A. Overhead is underapplied by $25,000 B. Overhead is underapplied by $12,500 C. Overhead is overapplied by $12,500 D. Overhead is overapplied by $25,000

C. Overhead is overapplied by $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. Which of the following would be correct? A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000 C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000

C. Overhead is overapplied by $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000.

Which of the following types of firms would most likely use process costing? A. Superior Auto Body & Repair B. Crammond Custom Cabinets C. Sunshine Soft Drinks D. Jackson & Taylor Tax Service

C. Sunshine Soft Drinks Process costing is used by companies that make standardized or homogeneous products or services, such as a soft drink company.

Service firms: A. tend to use a lot of direct materials in addition to billable hours. B. tend to incur few indirect costs that cannot be traced to specific clients or accounts. C. assign indirect costs to individual clients or accounts based on an allocation base such as billable hours. D. use process costing to assign costs to individual clients or accounts.

C. assign indirect costs to individual clients or accounts based on an allocation base such as billable hours. Most service firms do not use a lot direct materials, tend to incur many indirect costs that cannot be traced to specific clients or accounts, and use job costing to assign costs to individual clients or accounts. Indirect costs are treated much like manufacturing overhead in a factory and are assigned using an allocation base such as billable hours.

When disposed of, overapplied manufacturing overhead will A. increase Cost of Goods Sold. B. increase Finished Goods. C. decrease Cost of Goods Sold. D. decrease Finished Goods.

C. decrease Cost of Goods Sold. If manufacturing overhead is overapplied, Cost of Goods sold should be adjusted downward since too much overhead was put in during the period.

Overhead costs are overapplied if the amount applied to Work in Process is A. greater than estimated overhead. B. less than estimated overhead. C. greater than actual overhead incurred. D. less than actual overhead incurred.

C. greater than actual overhead incurred. Overhead cost is overapplied if the amount applied is more than the actual overhead cost.

Which of the following budgets are prepared before the production budget? Direct Materials budget // Sales budget A. yes//yes B. yes//no C. no//yes D. no//no

C. no//yes

Which of the following is not a step in the managerial decision-making process?

Calculate the payback period.

A primary financial budget is the Production budget. Cash budget. Inventory budget. Selling and administrative budget.

Cash Budget

Which of the following is not a step in the managerial decision-making process?

Choose the appropriate hurdle rate.

Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to reduce opportunities for error and fraud?

Code of Ethics

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration If you earn a scholarship that covers 95% of your tuition costs at the college (but cannot be applied to other learning opportunities), which option would you choose (based on net enrollment cost)?

College course The net cost of the college course is $150 [$3,000 × (1 - 0.95) = $150], making it considerably less expensive than the community course.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration If you enroll in the community class, you will be unable to work at your regular job on weekends for the eight weekend days when the class meets. If you typically earn $500 per weekend shift, which option would you choose (considering enrollment cost and opportunity cost)?

College course The opportunity cost (lost wages) is $4,000 ($500 × 8). The sum of opportunity cost and actual cost is $5,000 ($4,000 + $1,000), making the community course more expensive than the college course. The college course is the preferred alternative based on cost.

Which of the following is irrelevant to the decision to eliminate an unprofitable segment?

Common fixed costs Common fixed costs will be incurred even if a segment is eliminated, therefore they are irrelevant to the decision.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Considering solely the enrollment cost of each alternative, which would you choose?

Community course If you consider only the cost of the two alternatives, you would choose the less expensive option. In this case, it is the community college.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Pretend transportation (gas, mileage, and parking) cost $200 per class session at the library. If you consider solely the cost - including transportation - of each alternative, which would you choose?

Community course The cost of the community course including transportation is $2,600, the sum of the tuition ($1,000) and the per-class transportation cost ($200 × 8 = $1,600). $2,600 is still less than the cost of the college course, making it the preferred alternative based solely on cost.

Which of the following statements is correct?

Companies often provide products and services that have both common and unique characteristics, so they may use a blend of job order and process costing.

Which of the following statements is correct?

Companies often provide products and services that have both common and unique characteristics, so they may use a blend of job order and process costing. Companies always use job order costing unless it is prohibitively expensive. Companies always use process costing unless it is prohibitively expensive.

Which of the following types of decisions involves deciding whether to eliminate a particular division or segment of the business?

Continue-or-discontinue

Which of the following functions of management involves providing feedback for future plans?

Control

Which of the following is the backward-looking phase of the planning and control cycle? Planning Directing/Leading Organizing Control

Control

Which of the following is a mixed cost?

Correct A cost that is $32.00 per unit when production is 80,000, and $26.00 per unit when production is 128,000.

Which of the following statements is correct about the connection between cost centers and revenue?

Cost centers do not directly generate revenue from customers, but they may have an impact on revenue through customer satisfaction and overall quality.

Cost of goods completed is the same as: Cost of Goods Sold. Work in Process Inventory. Cost of Goods Manufactured. Finished Goods Inventory.

Cost of Goods Manufactured.

When units are sold, the cost associated with the units increases which account?

Cost of Goods Sold

Manufacturing overhead was estimated to be $397,100 for the year along with 20,900 direct labor hours. Actual manufacturing overhead was $418,600, and actual labor hours were 23,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct?

Cost of Goods Sold would be credited for $18,400 Calculate the predetermined overhead rate by dividing total estimated manufacturing overhead by total estimated direct labor hours. ($397,100 / 20,900 = $19.00). Apply manufacturing overhead by multiplying the predetermined overhead rate by the actual number of direct labor hours. ($19.00 × 23,000 = $437,000). The amount of overhead applied ($437,000) on the credit side of the manufacturing overhead account exceeded the actual overhead costs ($418,600) on the debit side of the manufacturing overhead account, so the overhead was overapplied with a credit balance of $18,400. ($437,000 - $$418,600 = $18,400) The most common way of correcting this is with a direct charge, in this case a debit to the manufacturing overhead account to close it out and an offsetting credit to cost of goods sold.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct?

Cost of Goods Sold would be decreased by $5,000.

Which of the following is not a category used to reconcile the number of physical units using the weighted average method of process costing? Units started Ending units in inventory Cost of goods sold Units completed

Cost of goods sold

Which of the following is not a key assumption of cost-volume-profit?

Costs must be fixed.

Which of the following is not a way to reduce the dysfunctional behaviors associated with budgeting? Create budget slack. Use different budgets for planning and for performance evaluation. Use a continuous or rolling budget approach. Use a zero-based budgeting approach.

Create Budget Slack

Which of the following would be used to apply manufacturing overhead to production for the period? Credit to Raw Materials Inventory. Credit to Work in Process Inventory. Debit to Manufacturing Overhead. Credit to Manufacturing Overhead.

Credit to Manufacturing Overhead.

Alcatraz Corp has the following information: Beginning balance Ending balance Raw materials 20,000 30,000 Work in process 15,000 18,000 Finished goods 30,000 20,000 The following additional information is available for the year: Raw materials purchases 100,000 Direct labor 75,000 Manufacturing overhead applied 80,000 Indirect materials 0 Compute the direct materials used in production. a) $20,000 Revised Fall 2012 Page 16 of 29 b) $30,000 c) $110,000 d) $90,000

D

Arthur Company provided the following information for the year: Direct materials used 110,000 Direct labor used (5,000 hours) 150,000 Manufacturing overhead incurred 166,000 The predetermined overhead rate was $35 per direct labor hour for the year.Assuming the ending balance in Work in Process Inventory is $17,000, what was cost of goods manufactured? a) $260,000 b) $426,000 c) $435,000 d) $418,000

D

Buhl manufactures a product that uses $15 in direct materials and $5 in direct labor per unit. Under the traditional costing system Buhl uses, manufacturing overhead applied to each unit is $12. Buhl is considering switching to an ABC system, under which the total activity cost would be $25. What is the total manufacturing cost per unit for Buhl under the ABC system? a) $20 b) $25 c) $32 d) $45

D

Fixed costs are a) Costs that are not worth the effort to trace to a specific cost object. b) Costs that change, in total, in direct proportion to changes in activity levels. c) Always irrelevant. d) Costs that remain constant, in total, no matter the activity level.

D

Jackson Company had the following information for the year: Direct materials used 190,000 Direct labor used (5,000 hours) 245,000 Manufacturing overhead incurred 273,000 Jackson Company calculated a predetermined overhead rate using estimated overhead of $320,000 and 8000 estimated direct labor hours. Finished Goods Inventory had a balance of $9,000 at the end of the year. What was adjusted cost of goods sold? a) $715,000 b) $708,000 c) $706,000 d) $699,000

D

Meadow Company produces hand tools. A sales budget for the next four months is as follows. March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Companys ending finished goods inventory policy is 10% of the following months sales. What is budgeted ending finished goods inventory for May? A) 1,000 B) 1,300 C) 1,600 D) 2,100

D

The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision. A) Direct labor cost involved in making the component B) The purchase price of the component of it is a bought C) Variable manufacturing overhead involved in making the component D) The selling price of the product

D

What determines the difference between a product and period cost? a) Whether it changes when activity levels change. b) Whether it is relevant to a particular decision. c) Whether it can be traced to a specific cost object. d) When the cost will be matched against revenue.

D

Which of the following budgets shows how many units will be produced each period? A) Direct Materials budget B) Direct labor budget C) Sales Budget D) Production Budget

D

Which of the following costs is not relevant in a special-order decision? A) Direct Labor B) Direct Materials C) Variable Overhead D) Fixed Overhead

D

Which of the following is not a characteristic of managerial accounting? a) Information is used by internal parties b) Information is subjective, relevant, future-oriented c) Reports are prepared as needed d) Reports are prepared according to GAAP

D

For May, Young Company has budgeted its cash receipts at $125,000 and its cash disbursements at $138,000. The company's cash balance on May 1 is $17,000. If the desired May 31 cash balance is $20,000, then how much cash must the company borrow during the month (before considering any interest payments)? A) $4,000 B) $8,000 C) $12,000 D) $16,000

D) $16,000

Vandel Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 6,600 units are planned to be sold in April. The variable selling and administrative expense is $9.70 per unit. The budgeted fixed selling and administrative expense is $127,380 per month, which includes depreciation of $8,580 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the April selling and administrative expense budget should be: A) $191,400 B) $118,800 C) $64,020 D) $182,820

D) $182,820

Thirty percent of Sharp Company's sales are for cash and 70% are on account. Sixty percent of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following are budgeted sales data for the company: January: $50000 February: $60000 March: $40000 April: $30000 Total cash receipts in April are expected to be: A) $24,640 B) $35,200 C) $31,560 D) $33,640

D) $33,640

Cashan Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 1.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August: 24500 units September: 24700 units October: 26400 units November: 26400 units December: 24500 units The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs. On July 31, this requirement was not met since only 10,400 kilograms of Jurislon were on hand. The cost of Jurislon is $4.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The desired ending inventory of Jurislon for the month of September is: A) $29,640 B) $29,520 C) $44,460 D) $44,280

D) $44,280

Davey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable factory overhead rate is $3.00 per direct labor-hour; the budgeted fixed factory overhead is $66,000 per month, of which $10,000 is factory depreciation. If the budgeted direct labor time for October is 6,000 hours, then the total budgeted factory overhead for October is: A) $28,000 B) $56,000 C) $74,000 D) $84,000

D) $84,000

Acmal Manufacturing Company is estimating the following raw material purchases for the last four months of the year: September: $850000 October: $900000 November: $810000 December: $780000 At Acmal, 25% of raw materials purchases are normally paid for in the month of purchase. The remaining 75% is paid for in the month following the purchase. How much cash should Acmal expect to pay out for raw material purchases during the month of November? A) $202,500 B) $832,500 C) $862,500 D) $877,500

D) $877,500

Harris, Inc., has budgeted sales in units for the next five months as follows: June: 9400 units July: 7800 units August: 7300 units September 5400 units October 4100 units Past experience has shown that the ending inventory for each month should be equal to 20% of the next month's sales in units. The inventory on May 31 contained 1,880 units. The company needs to prepare a production budget for the next five months. The beginning inventory for September should be: A) 820 units B) 1,880 units C) 1,460 units D) 1,080 units

D) 1,080 units

The Gerald Company makes and sells a single product called a Clop. Each Clop requires the use of 1.1 hours of direct labor time. The planned cost of direct labor time is $8.20 per hour. The direct labor workforce is fully adjusted each month to the required workload. The company wishes to prepare a Direct Labor Budget for the first quarter of the year. If the budgeted direct labor cost for February is $162,360, then the budeted production of Clops for February is: A) 23200 units B) 21000 units C) 19800 units D) 18000 units

D) 18000 units

Hamway Products, Inc. makes and sells a single product called a Wob. It takes two yards of material A to make one Wob. Budgeted production of Wobs for the next four months is as follows: April: 12000 units May: 13500 units June: 12400 units July: 11200 units The company wants to maintain monthly ending inventories of material A equal to 10% of the following month's production needs. On March 31 this target had not been met since only 1,500 yards of material A were on hand. The cost of material A is $.90 per yard. The desired ending inventory of material A for the month of June is A) 2480 yards B) 1120 yards C) 1870 yards D) 2240 yards

D) 2240 yards

Douglas Company plans to sell 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met. Based on these data, how many units of Product A must be produced during the month of July? A) 28,800 B) 22,200 C) 24,000 D) 25,800

D) 25,800

Parker Corp expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter? A. $32,000 B. $96,000 C. $115,200 D. $116,480

D. $116,480

Grover has forecast sales to be of sale, and 40% the month following. What are budgeted cash receipts in April? A. $105,000 B. $141,000 C. $150,000 D. $144,000

D. $144,000

Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. During the year, Optimum provided 64 hours of consulting services to Robert Howard for which Optimum pays an average of $18 per hour. What is the total cost of providing services to Robert? A. $2,707. B. $2,822. C. $1,924. D. $2,880.

D. $2,880. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost. Consultant labor cost for providing services to Robert is $1,152 (64 x $18). Overhead is applied at $1.50 per dollar of consultant labor cost = $1,152 x $1.50 = $1,728. Total cost of providing services to Robert = $1,152 + $1,728 = $2,880.

Kilt Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Kilt Company used a predetermined overhead rate of $42 per direct labor hour for the year and estimated that direct labor hours would total 5,500 hours. Assume the only inventory balance is an ending Work in Process balance of $17,000. How much overhead was applied during the year? A. $231,000 B. $150,000 C. $166,000 D. $210,000

D. $210,000 $42.00 x 5,000 = $210,000.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. The amount credited to the Manufacturing Overhead account would be A. $250,000 B. $225,000 C. $213,750 D. $237,500

D. $237,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500, which is credited to Manufacturing Overhead.

Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be A. $113,400. B. $204,750. C. $261,450. D. $285,750.

D. $285,750.

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $24,675 B. $225,680 C. $303,800 D. $305,970

D. $305,970

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. What is budgeted cost of goods sold for March? A. $30,551 B. $31,800 C. $36,660 D. $38,160

D. $38,160

Ragtime Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Ragtime Company used a predetermined overhead rate of $35 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,000. What was adjusted cost of goods sold? A. $435,000 B. $426,000 C. $418,000 D. $409,000

D. $409,000 Applied manufacturing overhead = $35 x 5,000 = $175,000. Cost of goods manufactured = $110,000 + $150,000 + $175,000 + $0 - $17,000 = $418,000. Overapplied overhead = $175,000 - $166,000 = $9,000. Unadjusted cost of goods sold = $0 + $418,000 - $0 = $418,000. Adjusted cost of goods sold = $418,000 - $9,000 = $409,000.

Ragtime Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Ragtime Company used a predetermined overhead rate of $35 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,000. What was cost of goods manufactured? A. $260,000 B. $426,000 C. $435,000 D. $418,000

D. $418,000 Applied manufacturing overhead = $35 x 5,000 = $175,000. Cost of goods manufactured = $110,000 + $150,000 + $175,000 + $0 - $17,000 = $418,000.

Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, actual direct labor hours were 19,000. The amount of manufacturing overhead applied to production would be A. $500,000 B. $450,000 C. $427,500 D. $475,000

D. $475,000 Predetermined overhead rate = $500,000/20,000 = $25.00. Applied manufacturing overhead = $25.00 x 19,000 = $475,000.

Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. What is budgeted cost of goods sold for March? A. $40,734 B. $42,400 C. $48,880 D. $50,880

D. $50,880

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September? A. $30,000 B. $67,500 C. $32,500 D. $52,500

D. $52,500

Arbor Co. has forecast sales to be $400,000 in May, $475,000 in June, $575,000 in July and $700,000 in August. Forty percent of sales are cash, the remainder is on credit. Credit sales are collected 60% in the month of sale, the remaining the following month. What are budgeted cash collections for July? A. $230,000 B. $334,000 C. $459,000 D. $551,000

D. $551,000

Sawyer Company had the following information for the year: Direct materials used:$190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $9,000. What was adjusted cost of goods sold? A. $715,000 B. $708,000 C. $706,000 D. $699,000

D. $699,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 7,000 = $280,000. Cost of goods manufactured = $190,000 + $245,000 + $280,000 + $0 - $0 = $715,000. Overapplied overhead = $280,000 - $273,000 = $7,000. Unadjusted cost of goods sold = $0 + $715,000 - $9,000 = $706,000. Adjusted cost of goods sold = $706,000 - $7,000 = $699,000.

Parsley Inc, a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be? A. $58,500 B. $142,500 C. $81,000 D. $85,500

D. $85,500

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much is total labor cost during the three months July through September? A. $69,300 B. $327,670 C. $846,300 D. $859,320

D. $859,320

Jenkins Company had the following information for the year: Direct materials used:$295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $320,000 and 8000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,000. What was adjusted cost of goods sold? A. $900,000 B. $883,000 C. $881,000 D. $864,000

D. $864,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 9,000 = $360,000. Cost of goods manufactured = $295,000 + $245,000 + $360,000 + $0 - $0 = $900,000. Unadjusted cost of goods sold = $0 + $900,000 - $19,000 = $881,000. Overapplied overhead = $360,000 - $343,000 = $17,000. Adjusted cost of goods sold = $881,000 - $17,000 = $864,000.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the direct materials used in production. A. $20,000 B. $30,000 C. $110,000 D. $90,000

D. $90,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000.

Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What are Robin's prime costs?

60,800

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.

625,000/ (8,000x4) = 19.53

Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August? 6,600 units 10,400 units 5,400 units 600 units

6600 units

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Machining activity is used by Product Z?

80%

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 beginning inventory is projected to be 1,400 units. How many units will be produced in March?

9,900

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many unskilled labor hours will be budgeted for August? 7,000 9,100 15,400 24,500

9100

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? 10,000 9,900 13,000 10,100

9900

Cost of goods sold is the amount of cost transferred a) From of Finished Goods Inventory and into Cost of Goods Sold. b) From of Work in Process Inventory and into Cost of Goods Sold. c) From of Work in Process Inventory and into Manufacturing Overhead. d) From of Work in Process Inventory and into Finished Goods Inventory.

A

Homer Inc. had the following information for the preceding year: Beginning balance Ending balance Raw materials 0 0 Work in process ?? 35,000 Finished goods ?? 30,000 The following additional information is available for the year: Direct materials used 200,000 Direct labor 150,000 Manufacturing overhead applied 160,000 Cost of goods manufactured 525,000 Cost of goods sold (unadjusted) 544,000 What was the beginning Finished Goods Inventory balance on 1/1? a) $49,000 b) $65,000 c) $50,000 d) $69,000

A

If a company is planning to build inventory A) Production should exceed sales B) Sales should exceed production C) Production should equal sales D) Production should equal inventory

A

Indirect costs are a) Costs that are not worth the effort to trace to a specific cost object. b) Costs that change, in total, in direct proportion to changes in activity levels. c) Always irrelevant. d) Costs that remain constant no matter the activity level.

A

Martin Company has the following balances for the current month: Direct materials used 15,000 Direct labor 23,000 Sales salaries 12,000 Indirect labor 3,000 Production manager's salary 6,000 Marketing costs 9,000 Factory lease 4,000 What are Martin's prime costs? a) $38,000 b) $35,000 c) $47,000 d) $41,000

A

The foregone benefit of choosing one alternative over another is measured by A) Opportunity costs B) Activity based costs C) Differential costs D) Capital Costs

A

What determines the difference between a variable and a fixed cost? a) Whether it changes when activity levels change. b) Whether it is relevant to a particular decision. c) Whether it can be traced to a specific cost object. d) Whether it is related to manufacturing or nonmanufacturing activities.

A

Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity? a) An ABC system will assign more manufacturing overhead costs to the product than a volume-based system. b) A volume-based system will assign more manufacturing overhead costs to the product than an ABC system. c) An ABC system will assign the same manufacturing overhead costs to the product as a volume-based system. d) An ABC system will assign manufacturing overhead costs to the product, while a volume-based system will not.

A

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales A) Special order B) Make or Buy C) Continue or discontinue D) Sell or process further

A

Which of the following statements about employee motivation is true?

A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.

Which of the following statements about employee motivation is true? A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable. A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable. A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve. Budgets are difficult to use for motivation.

A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.

Which of the following is a variable cost?

A cost that is $26,000 when production is 65,000, and $36,400 when production is 91,000.

Which of the following is a mixed cost?

A cost that is $32.00 per unit when production is 80,000, and $26.00 per unit when production is 128,000.

Which of the following statements is correct?

A direct cost can be traced to a specific cost object, while an indirect cost cannot.

When a traditional, volume-based costing system is used, which of the following products is most likely to suffer from cost distortion?

A low-volume, high-complexity product

Which of the following statements is true? A process costing system will have a single Work in Process Inventory account. A process costing system will have a separate Work in Process Inventory account for each of the major processes. A job costing system will have a separate Work in Process Inventory account for each of the major processes. A process costing system will have a separate Raw Materials Inventory account for each of the major processes.

A process costing system will have a separate Work in Process Inventory account for each of the major processes.

Which of the following statements best represents the controllability principle?

A profit center manager should be evaluated based on segment margin, not profit margin.

Which of the following statement is correct about the functions that fall within various responsibility centers?

A revenue center manager is responsible for fewer functions than a profit center manager is.

Which of the following statement is correct about the functions that fall within various responsibility centers?

A revenue center manager is responsible for more functions than a profit center manager is. A revenue center manager is responsible for fewer functions than a profit center manager is. A revenue center manager is not responsible for any functions; only the profit center manager is responsible for functions.

Axsom Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 1,300 direct labor-hours will be required in March. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $20,020 per month, which includes depreciation of $2,600. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for March should be: A) $24.30 B) $22.30 C) $8.90 D) $15.40

A) $24.30

Morie Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.75 direct labor-hours. The direct labor rate is $8.10 per direct labor-hour. The production budget calls for producing 2,000 units in March and 2,300 units in April. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 1,760 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months? A) $28,512.00 B) $26,406.00 C) $28,228.50 D) $26,122.50

A) $28,512.00

Acmal Manufacturing Company is estimating the following raw material purchases for the last four months of the year: September: $850000 October: $900000 November: $810000 December: $780000 At Acmal, 25% of raw materials purchases are normally paid for in the month of purchase. The remaining 75% is paid for in the month following the purchase. In Acmal's budgeted balance sheet at December 31, at what amount will accounts payable be shown? A) $585,000 B) $607,500 C) $780,000 D) $802,500

A) $585,000

he Gerald Corporation makes and sells a single product called a Clop. Each Clop requires 1.1 direct labor-hours at $8.20 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. The company is preparing a Direct Labor Budget for the first quarter of the year. The budgeted direct labor cost per Clop is closest to: A) $9.02 B) $7.45 C) $9.76 D) $8.20

A) $9.02

On January 1, Colver Company has 6,500 units of Product A on hand. During the year, the company plans to sell 15,000 units of Product A, and plans to have 5,000 units on hand at year end. How many units of Product A must be produced during the year? A) 13,500 B) 16,500 C) 15,000 D) 20,000

A) 13,500

Sharp Company, a retailer, plans to sell 15,000 units of Product X during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units of Product X must be purchased from the supplier during the month? A) 14,500 B) 15,500 C) 15,000 D) 17,000

A) 14,500

Parsons Corporation plans to sell 18,000 units during August. If the company has 5,500 units on hand at the start of the month, and plans to have 6,000 units on hand at the end of the month, how many units must be produced during the month? A) 18500 B) 17500 C) 24000 D) 19500

A) 18500

Which of the following is the cornerstone of the master budget? A) The Sales Budget B) The Production Budget C) The Budgeted Balance Sheet D) The Selling and Administrative Budget

A) The Sales Budget

Which of the following benefits could an organization reasonably expect from an effective budget program? Increased employee motivation // exposure of bottlenecks A) yes // yes B) yes // no C) no // yes D) no // no

A) yes // yes

Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. What is the predetermined overhead rate that Optimum will use for the current year? A. $1.50 per dollar of consultant labor cost. B. $1.35 per dollar of consultant labor cost. C. $0.67 per dollar of consultant labor cost. D. $1.45 per dollar of consultant labor cost.

A. $1.50 per dollar of consultant labor cost. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours were 21,000. The predetermined overhead rate would be A. $10.00 B. $1.05 C. $10.75 D. $10.24

A. $10.00 $200,000/20,000 = $10.00

Grover has forecast sales to be $and 40% the month following. What are budgeted cash receipts in March? A. $131,000 B. $135,000 C. $94,500 D. $91,700

A. $131,000

Jenkins Company had the following information for the year: Direct materials used:$295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,000. What was cost of goods manufactured? A. $841,000 B. $860,000 C. $883,000 D. $900,000

D. $900,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 9,000 = $360,000. Cost of goods manufactured = $295,000 + $245,000 + $360,000 + $0 - $0 = $900,000.

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted ending finished goods inventory for May? A. 1,000 B. 1,300 C. 1,600 D. 2,100

D. 2,100

40. Jillian Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September? A. 7,500 B. 9,750 C. 16,500 D. 26,250

D. 26,250

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,450 square meters C. 3,508 square meters D. 3,600 square meters

D. 3,600 square meters

Which of the following represents the cost of the jobs sold during the period? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

D. Cost of Goods Sold Once a job is sold, its total cost is transferred out of Finished Goods Inventory and into Cost of Goods Sold.

When units are sold, the cost associated with the units is debited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

D. Cost of Goods Sold When units are sold, their cost is transferred from Finished Goods Inventory (with a credit) to Cost of Goods Sold (with a debit).

Which of the following would be used to apply manufacturing overhead to production for the period? A. Credit to Raw Materials Inventory B. Credit to Work in Process Inventory C. Debit to Manufacturing Overhead D. Credit to Manufacturing Overhead

D. Credit to Manufacturing Overhead When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.

Which of the following is a characteristic of a manufacturing environment that would use job order costing? A. Standardized production process B. Continuous manufacturing C. Homogenous products D. Differentiated products

D. Differentiated products Job order costing is used in companies that offer customized or unique products or services.

A predetermined overhead rate is calculated using which formula? A. Actual manufacturing overhead cost/estimated units in the allocation base B. Estimated units in the allocation base/estimated manufacturing overhead cost C. Estimated manufacturing overhead cost/actual units in the allocation base D. Estimated manufacturing overhead cost/estimated units in the allocation base

D. Estimated manufacturing overhead cost/estimated units in the allocation base This is the formula for the predetermined overhead rate.

When manufacturing overhead is applied to production, which of the following accounts is credited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Manufacturing Overhead

D. Manufacturing Overhead When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.

Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. During the year, Optimum provided 42 hours of consulting services to Joan Clair for which Optimum pays an average of $20 per hour. What is the total cost of providing services to Joan? A. $2,100. B. $1,974. C. $2,058. D. $1,403.

A. $2,100. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost. Consultant labor cost for providing services to Joan is $840 (42 x $20). Overhead is applied at $1.50 per dollar of consultant labor cost = $840 x $1.50 = $1,260. Total cost of providing services to Joan = $840 + $1,260 = $2,100.

Santos Inc had the following information for the preceding year: Raw Materials: BE (1/1): $40,000 EE (12/31): $30,000 Work in Process Inventory: BE: $35,000 EE: $? Finished Goods Inventory: $30,000 $? Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the ending Work in Process Inventory balance on 12/31? A. $20,000 B. $11,000 C. $50,000 D. $54,000

A. $20,000 Current manufacturing costs = $200,000 + $150,000 + $160,000 = $510,000. Cost of goods manufactured = 525,000 = $35,000 + $510,000 - ending Work in Process Inventory, so ending Work in Process Inventory = $35,000 + $510,000 - $525,000 = $20,000.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The predetermined manufacturing overhead rate would be A. $20.00 B. $0.05 C. $20.75 D. $19.05

A. $20.00 $400,000/20,000 = $20.00.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the current manufacturing costs. A. $245,000 B. $255,000 C. $65,000 D. $68,000

A. $245,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000.

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $303,800 B. $231,000 C. $121,500 D. $161,000

A. $303,800

Mendez Inc had the following information for the preceding year: Work in Process Inventory: BE: $? EE: $35,000 Finished Goods Inventory: $? $30,000 Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the beginning Finished Goods Inventory balance on 1/1? A. $49,000 B. $65,000 C. $50,000 D. $69,000

A. $49,000 $544,000 = Beginning Finished Goods Inventory + $525,000 - $30,000. Beginning Finished Goods Inventory = $544,000 + $30,000 - $525,000 = $49,000.

50. Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for August? A. $50,000 B. $47,000 C. $33,000 D. $32,000

A. $50,000

Dane Inc has forecast purchases on account to be $465,000 in March, 555,000 in April, $630,000 in May, and $735,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for April? A. $528,000 B. $577,500 C. $388,500 D. $189,000

A. $528,000

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $53,000 D. $38,600

A. $56,600

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $39,600 D. $62,000

A. $56,600

Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $592,000 B. $620,000 C. 310,000 D. $483,334

A. $592,000

Sawyer Company had the following information for the year: Direct materials used:$190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $9,000. What was cost of goods manufactured? A. $715,000 B. $708,000 C. $755,000 D. $706,000

A. $715,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 7,000 = $280,000. Cost of goods manufactured = $190,000 + $245,000 + $280,000 + $0 - $0 = $715,000.

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in April? A. 13,300 B. 15,900 C. 12,700 D. 13,000

A. 13,300

Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August? A. 6,600 units B. 10,400 units C. 5,400 units D. 600 units

A. 6,600 units

Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? A. 750 square meters B. 1,050 square meters C. 1,825 square meters D. 300 square meters

A. 750 square meters

Which of the following is incorrect regarding service firms? A. Each client or account is equivalent to a process in a process costing firm. B. The accounting system will track the time and resources spent serving a specific client or account. C. Managers of service firms need cost information to price their services, to budget and control costs, and to determine the profitability of different types of clients. D. The primary driver used to assign costs is billable hours.

A. Each client or account is equivalent to a process in a process costing firm. In service firms, each client or account is equivalent to a job in a manufacturing setting. All the other choices regarding service firms are correct.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $5,000 B. Manufacturing Overhead would be credited for $15,000 C. Manufacturing Overhead would be debited for $5,000 D. Manufacturing Overhead would be debited for $15,000

A. Manufacturing Overhead would be credited for $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = $215,000 - $210,000 = $5,000, which is credited to Manufacturing Overhead.

Manufacturing overhead is applied to each job using which formula? A. Predetermined overhead rate x actual value of the allocation base for the job B. Predetermined overhead rate x estimated value of the allocation base for the job C. Actual overhead rate x estimated value of the allocation base for the job D. Predetermined overhead rate/actual value of the allocation base for the job

A. Predetermined overhead rate x actual value of the allocation base for the job This is the formula for applied manufacturing overhead.

Which of the following accounts is not affected by applied manufacturing overhead? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory Manufacturing overhead is applied to Work in Process inventory; the cost moves to Finished Goods when goods are completed, and Cost of Goods Sold when they are sold.

Which of the following represents the cost of materials purchased but not yet issued to production? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory Raw Materials Inventory represents the cost of materials purchased from suppliers but not yet used in production.

When direct materials are used in production, which of the following accounts is credited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory When direct materials are used in production, the cost is transferred from Raw Materials Inventory (with a credit) to Work in Process Inventory (with a debit).

When materials are purchased, which of the following accounts is debited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory When materials are purchased, they are initially recorded in Raw Materials Inventory with a debit to the account.

In recording the purchase of materials that are not traced to any specific job, which of the following is correct? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

A. Raw Materials Inventory would be debited When indirect materials are purchased, they are debited to raw materials inventory.

When disposed of, underapplied manufacturing overhead will A. increase Cost of Goods Sold. B. increase Finished Goods. C. decrease Cost of Goods Sold. D. decrease Finished Goods.

A. increase Cost of Goods Sold. If manufacturing overhead is underapplied, Cost of Goods sold should be adjusted upward since not enough overhead was put in during the period.

Cost of goods sold is the amount of cost transferred A. out of Finished Goods Inventory and into Cost of Goods Sold. B. out of Work in Process Inventory and into Cost of Goods Sold. C. out of Work in Process Inventory and into Manufacturing Overhead. D. out of Work in Process Inventory and into Finished Goods Inventory.

A. out of Finished Goods Inventory and into Cost of Goods Sold. When goods are sold, their cost is transferred out of Finished Goods Inventory and into Cost of Goods Sold.

Overhead costs are underapplied if the amount applied to Work in Process is A. greater than estimated overhead. B. less than estimated overhead. C. greater than actual overhead incurred. D. less than actual overhead incurred.

D. less than actual overhead incurred. Overhead cost is underapplied if the amount applied is less than the actual overhead cost.

The most common method for disposing of over- or underapplied overhead is to A. recalculate the overhead rate for the period. B. recalculate the overhead rate for the next period. C. make a direct adjustment to Work in Process Inventory. D. make a direct adjustment to Cost of Goods Sold.

D. make a direct adjustment to Cost of Goods Sold. The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold.

Cost of goods manufactured is the amount of cost transferred A. out of Finished Goods Inventory and into Cost of Goods Sold. B. out of Finished Goods Inventory and into Work in Process Inventory. C. out of Work in Process Inventory and into Manufacturing Overhead. D. out of Work in Process Inventory and into Finished Goods Inventory.

D. out of Work in Process Inventory and into Finished Goods Inventory. The total cost that is transferred out of Work in Process Inventory and into Finished Goods Inventory is called the cost of goods manufactured.

Underapplied overhead means A. too little overhead was applied to raw materials. B. actual overhead is greater than estimated overhead. C. finished goods will need to be credited. D. there is a debit balance remaining in the overhead account.

D. there is a debit balance remaining in the overhead account. If overhead is underapplied, there is a debit balance in the account.

In what type of organization is decision-making authority spread throughout the organization?

Decentralized organization In a decentralized organization, decision-making authority is spread throughout the organization, and managers are given a great deal of autonomy to decide how to manage their individual units.

Which of the following is not a component of the cash budget? Budgeted cash collections Budgeted cash payments Depreciation expense Cash borrowed or repaid

Depreciation Expense

Which of the following is not a component of the cash budget?

Depreciation expense

Which of the following is not a type of quality cost?

Development costs

Which of the following is a characteristic of a manufacturing environment that would use job order costing?

Differentiated products

Which of the following is a characteristic of a manufacturing environment that would use job order costing? Standardized production process Continuous manufacturing Homogenous products Differentiated products

Differentiated products

Equivalent units are tracked separately for which two categories of costs? Direct labor and manufacturing overhead. Direct materials and conversion cost. Direct materials and indirect materials. Finished goods and cost of goods sold.

Direct materials and conversion cost.

Total manufacturing costs includes

Direct materials and direct labor

Manufacturing costs are generally classified into which of the following categories?

Direct materials, direct labor, and manufacturing overhead

Which of the following is the correct formula to compute an activity rate?

Divide the total activity cost by the total activity driver

Which of the following statements is not correct about the methods managers use to model the relationship between revenues, costs, profit, and volume?

Each method provides a different way to express the CVP relationships, yet answers the same basic question. Each method yields a different final answer to be used in analysis. Choice of method depends, in part, on the available information.

Which type of quality cost would a firm most want to eliminate or reduce as much as possible?

External failure costs

Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget. T/F

FALSE

Budgeting is a trade-off between planning and control in that increased use of budgeting will usually improve planning but will weaken control. T/F

FALSE

In zero-base budgeting, only changes from the prior budget must be justified. T/F

FALSE

One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks in an organization. T/F

FALSE

The basic idea behind responsibility accounting is that top management is responsible for preparing detailed budgets by which the performance of middle and lower management will be evaluated. T/F

FALSE

The budgeted income statement is not one of the key schedules in the budget process. T/F

FALSE

The cash budget is the starting point in preparing the master budget. T/F

FALSE

The first budget a company prepares in a master budget is the production budget. T/F

FALSE

Uncollectible amounts on credit sales to customers will be listed as cash outflows on the schedule of expected cash collections. T/F

FALSE

When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased. T/F

FALSE

he first step in the budgeting process is the preparation of the cash budget, which is a detailed schedule showing the expected sales for the budget period. T/F

FALSE

An activity that is performed to benefit the organization as a whole is a(n)

Facility or companywide activities are performed to benefit the organization as a whole.

What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced?

Facility-level

Firms that use JIT often rely on:

Fewer suppliers that must adhere to very strict quality standards.

Which of the following balanced scorecard perspectives measures how an organization satisfies its stakeholders?

Financial

Managerial Accounting Information includes all of the following except:

Financial statements prepared in accordance with generally accepted accounting principles

Managerial accounting information includes all of the following except:

Financial statements prepared in accordance with generally accepted accounting principles.

When units are sold, the cost associated with the units decreases which account?

Finished Goods Inventory

Which of the following would not be an example of a cost to include in a selling and administrative expense budget? Legal expenses Accounting services Fixed manufacturing overhead Franchise fees

Fixed Manufacturing Overhead

Which of the following costs is not relevant in a special-order decision?

Fixed Overhead Fixed overhead costs will be incurred whether or not the order is accepted so they are not relevant to the special-order decision.

Which of the following would not be an example of a cost to include in a selling and administrative expense budget?

Fixed manufacturing overhead

Which of the following costs is not relevant in a special-order decision?

Fixed overhead

___________ is/are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.

Fixed overhead costs

___________ is/are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.

Fixed overhead costs Fixed overhead costs are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.

Which of the following is not a step in the managerial decision-making process?

Forecast the potential sales.

A volume-based cost system is likely to assign more manufacturing overhead costs to products:

that sell more units than others.

When making screening decisions using the net present value method, a project is acceptable if:

the NPV is positive

One side benefit of JIT is that:

the accounting system is simplified.

Indirect costs can be assigned to products or services using ______

the activity proportion method the activity rate method

Indirect costs can be assigned to products or services using ______.

the activity rate method the activity proportion method

Which of the following statements is correct about relevant range?

The relevant range helps managers make decisions based on normal operations, but the relevant range is not prescriptive beyond the range.

What are the decision alternatives in a special-order decision?

To accept or reject the offer.

What are the decision alternatives in a special-order decision?

To accept or reject the offer. Special-order decisions involve an offer outside the scope of normal sales; managers must decide whether to accept or reject the offer.

Which of the following statements is false?

To be relevant, a cost must be an opportunity cost.

Which of the following statements is false?

To be relevant, a cost must be an opportunity cost. It is not true that to be relevant a cost must be an opportunity cost. Cash costs can also be relevant.

The linearity assumption is:

the assumption that the relationship between fixed costs and variable costs can be approximated by a straight line.

If production volume does not equal sales volume:

the conclusions we draw from a CVP analysis will not be as sound as they would be if we assumed production equaled sales.

budgeted income statement is a combination of

the direct materials budget, direct labor budget, manufacturing overhead budget

An opportunity cost is:

the foregone benefit of the path not taken.

When a firm has limited direct labor hours, it should prioritize the product with

the highest contribution margin per direct labor hour.

A volume-based allocation measure would vary proportionately with:

the number of units produced.

The break-even point is:

the point where zero profit is earned.

The relevant range is:

the range of activity over which we expect our assumptions about cost behavior to hold true.

Investment turnover is defined as:

the ratio of sales revenue to average invested assets

Investment turnover is defined as:

the ratio of sales revenue to average invested assets.

Investment turnover is defined as:

the ratio of sales revenue to average invested assets. he formula for investment turnover is sales revenue divided by average invested assets. Net operating income divided by average invested assets is return on investment; net operating income divided by sales revenue is profit margin; and profit margin divided by return on investment is the inverse of investment turnover.

Using the activity-proportion method results in:

the same cost allocations as the activity rate method.

Using the activity-proportion method results in: higher cost allocations than the activity rate method. lower cost allocations than the activity rate method. the same cost allocations as the activity rate method. higher or lower cost allocations than the activity rate method, depending on the circumstances.

the same cost allocations as the activity rate method.

What is the primary goal of accounting?

To provide information for decision making.

Cost behavior is:

the way in which costs change when the activity level changes.

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job?

Total cost associated with the job = Direct material + Direct labor + Manufacturing overhead applied Total cost associated with the job = $4,000 + $1,200 + ($10 × 100 DLHs) = $6,200

The formula for break-even point in terms of sales dollars is:

Total fixed costs/Contribution margin ratio

Which costing system assigns overhead using volume-based cost drivers?

Traditional

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Consider the transportation cost. At what point would you be indifferent between alternatives?

Transportation cost of $250 per class for the community course Solve for the transportation cost per class to determine the point of indifference. Subtract the cost of the community course ($1,000) from the college course ($3,000). Divide that result ($2,000) by the number of classes (8) to get the transportation cost per class that would make you indifferent between alternatives ($250). ($3,000 - $1,000 = $2,000/8 = $250)

A value-added activity is one that enhances the perceived value of the product or service to the customer

True

A volume-based allocation measure is directly related to the number of units produced or the number of customers served

True

Contribution margin is calculated as sales revenue less variable costs

True

Fixed costs stay the same, in total, as activity level changes

True

If there is a debit balance in the Manufacturing Overhead account at the end of the period, overhead was underapplied

True

Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources.

True

The appeal of using multiple departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs.

True

The control function is comparing actual with budgeted results and taking corrective action when needed

True

The costs attached to products that have not been sold are included in ending inventory on the balance sheet.

True

The equation for a mixed cost is total fixed costs + variable cost per unit × units of activity

True

The only difference between a volume-based cost system and an ABC system is how the methods assign indirect costs to products

True

To eliminate underapplied overhead at the end of the year, Manufacturing Overhead would be credited and Cost of Goods Sold would be debited

True

When forming activity cost pools, the goal is to create as few cost pools as possible, while still capturing major activities

True

When goods are completed, a debit is made to Finished Goods Inventory and a credit is made to Work in Process Inventory

True

Whether a cost is treated as direct or indirect depends on whether tracing the cost is either possible or feasible

True

A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated total cost driver.

True A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated total cost driver.

Activity-based costing systems include non-volume-based cost drivers.

True ABC systems include both volume-based and non-volume-based measures that capture factors other than volume.

The cost measurement system can impact how indirect costs are spread among product lines, which may affect decisions managers make.

True The cost measurement system can impact how indirect costs are spread among product lines and thus the information that managers have about the profitability of those products.

The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold.

True The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold. Doing so makes sense as long as most of the jobs worked on during the period were completed and sold.

The total manufacturing cost for a job is based on the amount of applied overhead using the predetermined overhead rate.

True The total manufacturing cost is based on the amount of overhead applied using the predetermined overhead rate.

The first step in ABC is:

to identify and classify activities.

The activity rate is computed by dividing the ______ by the ______.

total activity cost; total cost driver

The y-intercept of the cost line on a scattergraph represents:

total fixed cost.

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.

total fixed manufacturing overhead cost The cost formula used to estimate the total manufacturing overhead cost for a given period is: Y = a + bX where, Y = the estimated total manufacturing overhead cost, a = the estimated total fixed manufacturing cost, b = the estimated variable manufacturing overhead cost per unit of the allocation base, and X = the estimated total amount of the allocation base.

An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called _______ _______ management

total quality

A management system that focuses on continually improving production processes is called ______

total quality management

Traditional costing systems tend to overcost high-volume products because ______

traditional costing systems don't allow for complex activities required by lower-volume products high-volume products use more labor and machine hours

A ________________ is the amount that one division charges when it sells goods or services to another division within the same company.

transfer price The definition of a transfer price is the price one division charges when it sells goods or services to another division within the same company.

True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.

true

An activity that is performed for each individual unit is a ________ level activity.

unit

An activity that is performed for each individual unit is a ___________ level activity.

unit

Installing parts on an automobile is a(n) ______ -level activity.

unit

An activity that is performed for a specific customer is a(n):

unit-level activity.

The perceived value of a product or service to the customer is enhanced by ______ - ______ activities

value added

The concept of the _____ _______ begins with the customer and works backward to ensure that activities deliver what matters to customers.

value chain

The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the _________ ____________

value chain

Analyzing products to determine which functions add value and finding ways to deliver those functions while meeting the target cost is called ____

value engineering

Direct labor hours and machine hours are both examples of ___ -based cost drivers.

volume

Direct labor hours and machine hours are both examples of _____-based cost drivers.

volume

Comparing the master budget with the flexible budget creates a:

volume variance

When an activity must be performed for each individual unit, an appropriate cost driver is ______

volume-based

Which of the following statements is correct about the way managers set standards for employees?

When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training

When direct materials are used in production, which of the following accounts is increased?

Work in Process Inventory

When materials are placed into production: Raw Materials Inventory is debited if the materials are traced directly to the job. Work in Process Inventory is debited if the materials are traced directly to the job. Manufacturing Overhead is debited if the materials are traced directly to the job. Raw Materials Inventory is credited only if the materials are traced directly to the job, otherwise manufacturing overhead is credited.

Work in Process Inventory is debited if the materials are traced directly to the job.

Which of the following would be used to apply manufacturing overhead to production for the period? Raw Materials Inventory would be debited. Work in Process Inventory would be debited. Manufacturing Overhead would be debited. Work in Process Inventory would be credited.

Work in Process Inventory would be debited.

Which of the following would be used to record the labor cost that is traceable to a specific job? Raw Materials Inventory would be debited. Work in Process Inventory would be debited. Manufacturing Overhead would be debited. Manufacturing Overhead would be credited.

Work in Process Inventory would be debited.

Which of the following would be used to transfer the cost of completed goods during the period to the Finished Goods account?

Work in Process Inventory would be decreased.

Which of the following would be used to record the labor cost that is traceable to a specific job?

Work in Process Inventory.

When units are completed, the cost associated with the job is credited to which account? Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Cost of Goods Sold

Work in proces

which is true about employee motivation

a budget that is tight but attainable is more likely to motivate

The responsibility center in which the manager does not have responsibility and authority over revenues is:

a cost center.

A relevant cost is:

a cost that differs across decision alternatives.

A relevant cost is:

a cost that differs across decision alternatives. A relevant cost is one that will change depending on which alternative a manager selects.

An activity cost driver is:

a measure of the underlying activity that occurs in each activity cost pool.

ABC works best in service industries ______.

when different customers require different levels of services

An irrelevant cost:

will not influence a decision

At the break-even point, the margin of safety will be:

zero

The first step in implementing an ABC system is to identify the organization's major ___

activities

A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.

activity based

A technique that attempts to assign overhead costs to products based on the actions they require is called

activity based costing

A predetermined overhead rate in an activity-based costing system is called a(n)

activity rate

A predetermined overhead rate in an activity-based costing system is called a(n) ______ _______

activity rate

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

activity rate

The formula to apply overhead to products is ______

activity rate times activity

The formula to apply overhead to products is ______.

activity rate times activity

A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.

activity-based

Improving operations and reducing costs is the focus of ________ - _______ management

activity-based

The decision-making approach that focuses on factors that will change between alternatives is sometimes called all of the following except:

actual costing.

The Cost of Goods Manufactured Report includes all of the following except:

actual manufacturing overhead.

The Cost of Goods Manufactured Report includes all of the following except: direct materials used. direct labor. actual manufacturing overhead. applied manufacturing overhead.

actual manufacturing overhead.

The margin of safety is the difference between:

actual sales and break-even sales

The current manufacturing costs include ______ direct labor, ______ direct materials, and _______ manufacturing overhead.

actual; actual; applied

Budgeted production is calculated by adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory. adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted ending work in process inventory. adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted beginning work in process inventory.

adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory

In a traditional volume-based cost system, total manufacturing costs are calculated by:

adding manufacturing overhead cost, direct materials cost, and direct labor cost.

External failure costs occur _________ a defective product makes its way to the customer, while internal failure costs occur ______ a defective product makes its way to the customer.

after, before

Budgeted cost of goods manufactured reflects:

all the costs required to manufacture the product, but not to sell it

Portland, Inc. has formed four activity cost pools: Product Design, Machining and Production, Machine Setup, and Inspection. Gina Taylor, Production Manager at Portland, oversees processes that are considered part of Machining and Production, Machine Setup, and Inspection. Taylor's salary should be:

allocated among Machining and Production, Machine Setup, and Inspection.

Non-volume-based cost drivers ______

allow more indirect costs to be allocated to products are used in ABC systems

A predetermined overhead rate in an activity-based costing system is called ______.

an activity rate

An out-of-pocket costs is:

an actual outlay of cash

A cost object is:

an item for which managers are trying to determine the cost

A make-or-buy decision is the same as:

an outsourcing decision Both terms—make-or-buy and outsourcing—are used to describe decisions about whether to perform an activity in-house or purchase it from an outside supplier.

A make-or-buy decision is the same as:

an outsourcing decision.

The accounting rate of return is calculated as:

annual net income divided by initial investment

Costs incurred to identify defective products before they get to the customer are called ______ costs.

appraisal

Appraisal or inspection costs are costs that:

are incurred to identify defective products before products are shipped to the custome

Prevention costs are costs that:

are incurred to prevent quality problems from occurring in the first place.

Life cycle cost management takes into consideration the fact that costs and revenues:

are not constant across different stages of the product's life cycle.

Indirect costs ______.

are not easily traced to products or services

indirect costs _______

are not easily traced to products or services

Non-volume-based cost drivers ______.

are used in ABC systems allow more indirect costs to be allocated to products

The purpose of Stage 1 allocations is to:

assign indirect manufacturing costs to activity cost pools.

Using non-volume-based activity drivers allows activity-based costing to:

assign more indirect costs to products whose complexity is higher.

The final step in activity-based costing is ______

assigning indirect costs to products or services

The final step in activity-based costing is ______.

assigning indirect costs to products or services

At a minimum, an ABC system should have ______

at least one non-unit-level activity cost pool

At a minimum, an ABC system should have ______.

at least one non-unit-level activity cost pool

A group-level activity for a service company is the same as a(n)______ -level activity for a manufacturing company.

batch

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ___-level activities.

batch

What types of activities are performed each time a group of units is processed, regardless of how many units are in the group?

batch

An activity that is performed for a group of units all at once is a(n):

batch-level activity.

Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:

batch-level activity.

Costs at the batch level depend on the number of ______

batches processed

Costs at the batch level depend on the number of ______.

batches processed

In target costing, the target cost should be determined:

before manufacturing ever starts.

basic form of the cash budget

beg cash balance+budgeted cash collections-budgeted cash payments+/-cash borrowed or repaid= ending cash balance

Comparing the performance within an organization to that of other similar organizations is called _____

benchmarking

The direct materials required to manufacture each unit of product are listed on a ________.

bill of materials The direct materials required to manufacture each unit of product are listed on a bill of materials. A materials requisition form identifies the materials drawn from the storeroom that must then be charged to each job. Each employee who works on the job uses a time ticket to record the time spent. A job cost sheet is used to keep track of the materials, labor, and manufacturing overhead costs charged to each job.

To reconcile the total cost of Work in Process Inventory, account for: both beginning Work in Process Inventory and any costs that were added during the current period. only beginning Work in Process Inventory. only costs that were added during the period. beginning Work in Process Inventory, any costs that were added during the current period, and completed costs.

both beginning Work in Process Inventory and any costs that were added during the current period.

ABC can be used in _______

both service and manufacturing companies

A budget depends upon:

both the level of output as well as the input standards

Activity-based costing systems typically include ___ cost drivers

both volume and non-volume based

Activity-based costing systems typically include ______ cost drivers

both volume- and non-volume-based

Activity-based costing systems typically include ______ cost drivers.

both volume- and non-volume-based

a detailed plan that translates the company's objectives into financial terms, identifying the resources and expenditures that will be requires over the planning horizon is a

budget

NOT included in operating budget

budgeted balance sheet

When calculating raw materials purchases, the starting point should be actual materials purchases from the previous year. budgeted sales. budgeted production. budgeted cost of raw materials.

budgeted production

When calculating the direct labor budget, the starting point should be actual direct labor hours from the previous year. budgeted sales. budgeted production. budgeted cost of direct labor.

budgeted production

when calculating raw materials purchases, the starting point should be

budgeted production

A normal cost system applies overhead to jobs ________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

Degree of operating leverage is used to:

calculate change in profit given change in sales.

The activity-rate method involves:

calculating an activity rate that is similar to the predetermined overhead rate.

a primary financial budget

cash budget

When comparing mutually exclusive capital investments, managers should:

choose the option with the lowest cost on a net present value basis

To reconcile the number of physical units using the weighted average method of process costing, one must determine whether the units were: completed or still in process at the end of the period. sold or still in inventory at the end of the period. in the next production process or sold at the end of the period. using direct materials or conversion costs at the end of the period.

completed or still in process at the end of the period.

backward-looking phase of the planning and control cycle

control

One of the most important concepts in responsibility accounting is the:

controllability principle.

One of the most important concepts in responsibility accounting is the:

controllability principle. The controllability principle forms the basis of responsibility accounting, holding that managers should only be held responsible for what they control.

The formula to compute activity proportion is ______

cost driver for product / cost driver for all products

The formula to compute activity proportion is ______.

cost driver for product / cost driver for all products

An important part of TQM is a(n) ______ report that summarizes the costs incurred to prevent, deduct, and correct problems.

cost of quality

Target costing is in stark contrast to _______-______ pricing, in which the company adds a markup to expenses required to produce the product.

cost plus

A group of similar activities that have been combined together is an activity ______

cost pool

A group of similar activities that have been combined together is an activity ______.

cost pool

A group of similar activities that have been combined together is called an activity

cost pool

The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the:

cost-based method.

Determining what a product costs and adding a markup is called ______

cost-plus pricing

NOT a way to reduce the dysfunctional behaviors associated with budgeting

create budget slack

A unit-level activity to a manufacturer is the same as a(n) _______ -level activity to a service company.

customer

Making a single sale at a department store is an example of a ______-level activity.

customer

Residual income can be calculated as:

Operating income - (hurdle rate × average invested assets) The formula for residual income is operating income minus the result of the hurdle rate multiplied by average invested assets.

Which of the following is true of a firm that has reached the limit on its resources?

Opportunity costs are now relevant. A firm that has reached the limit on its resources must give up regular production to fill special orders, and therefore opportunity costs become relevant.

Which of the following is not a true statement about capacity?

Opportunity costs are relevant when capacity of a critical resource is unlimited.

Creating a budget is an important part of which phase of the planning and control process? Planning Organizing Directing/Leading Control

Organizing

Total manufacturing overhead under activity-based costing consists of all ___

Overhead assigned during Stage 2 allocations

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. Which of the following would be correct?

Overhead is overapplied by $5,000.

Manufacturing overhead was estimated to be $406,000 for the year along with 20,300 direct labor hours. Actual manufacturing overhead was $423,400, and actual labor hours were 21,500. Which of the following would be correct?

Overhead is overapplied by $6,600 Calculate the predetermined overhead rate by dividing the estimated total manufacturing overhead by the estimated total direct labor hours. ($406,000 / 20,300 = $20.00). Apply manufacturing overhead by multiplying the predetermined rate by the actual total direct labor hours. ($20.00 × 21,500 = $430,000). Since the applied overhead ($430,000) on the credit side of the manufacturing overhead account is greater than the actual overhead ($423,400) on the debit side of the manufacturing overhead account, the $6,600 credit balance represents overapplied overhead.

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Machining activity is used by Standard?

P × $500,000 = $150,000; P = 30%.

Which of the following is the best example of a unit-level activity?

Painting a final product

Which of the following is the best example of a unit-level activity? Human resources Research and development Painting a final product Product testing

Painting a final product

Which of the following are facility-level activities?

Paying factory insurance Human resource hiring fairs

Which of the following is the correct sequencing of the functions within the managerial cycle?

Plan - Implement - Control

Creating a budget is an important part of which phase of the planning and control process?

Planning

Which of the following functions of management involves setting short and long-term objectives and the tactics to achieve them?

Planning

Which of the following is the forward-looking phase of the planning and control cycle? Planning Directing/Leading Organizing Control

Planning

Creating a budget is an important part of which phase of the planning and control process?

Planning Controlling Executing

Which of the following statements is true about variances?

Positive variances (i.e., those with a positive sign) are always unfavorable. Negative variances (i.e., those with a negative sign) are always favorable. There is not necessarily any correlation between the sign of the result (positive or negative) and whether the variance is positive or negative.

Which of the following is a disadvantage of decentralization?

Potential duplication of resources

Which of the following is not an advantage of decentralization?

Potential duplication of resources

Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?

Predetermined overhead rate = $200,000 ÷ 10,000 DLHs = $20 per DLH For 200 DLHs, the manufacturing overhead that would be applied is = $20 per DLH × 200 DLHs = $4,000

Manufacturing overhead is applied to each job using which formula?

Predetermined overhead rate × actual value of the cost driver for the job

The cost of quality training is an example of what type of quality cost?

Prevention costs

Which of the following is true about product and period costs?

Product costs are usually manufacturing costs, and period costs are usually nonmanufacturing costs.

Which of the following budgets shows how many units will be produced each period? Direct materials budget Direct labor budget Sales budget Production budget

Production Budget

Which of the following budgets shows how many units will be produced each period?

Production budget

Which of the following budgets would not exist for a merchandising firm?

Production budget

Which of the following budgets would not exist for a merchandising firm? Sales budget Purchases budget Production budget Selling and administrative expense budget

Production budget

It costs Camp, Inc. $35 per unit to manufacture 1,000 units per month of a product that it can sell for $50 each. Alternatively, Camp could process the units further into a more complex product, which would cost an additional $30 per unit. Camp could sell the more complex product for $75 each. How would processing the product further affect Camp's profit?

Profit would decrease by $5,000

Standard cost systems depend on which two types of standards?

Quantity and price standards

Which of the following is not a limitation of return on investment?

ROI is a commonly used measure for financial performance.

Which of the following statements contrasting residual income with return on investment is correct?

ROI may lead to goal incongruence while residual income does not.

When materials are purchased, which of the following accounts is increased?

Raw Materials Inventory

Which of the following represents the cost of materials purchased but not yet issued to production?

Raw Materials Inventory

Which of the following represents the cost of the jobs sold during the period?

Raw Materials Inventory Work in Process Inventory Cost of Goods Sold

Budgeted cost of goods sold should include which of the following?

Raw materials, direct labor, and manufacturing overhead

Budgeted cost of goods sold should include which of the following? Raw materials and direct labor. Raw materials, direct labor, and manufacturing overhead. Raw materials, direct labor, manufacturing overhead, and selling expenses. Raw materials, direct labor, manufacturing overhead, selling expenses, and administrative expenses.

Raw materials, direct labor, and manufacturing overhead

The starting point for preparing the master budget is the inventory policy. sales budget. production budget. budgeted balance sheet.

Sales Budget

Which of the following sequences is correct? Sales budget - production budget - direct materials budget - budgeted income statement Budgeted income statement - direct materials budget - production budget - sales budget Cash receipts budget - sales budget - production budget - budgeted income statement Inventory budget - production budget - sales budget - selling and administrative budget

Sales budget - production budget - direct materials budget - budgeted income statement

Which of the following is NOT part of the manufacturing cost per unit?

Sales commission

Which of the following types of decisions involves deciding whether to sell a product as is or continue to refine it so that it can be sold at a higher price?

Sell-or-process further

Which of the following budgets do not provide information needed for the budgeted balance sheet? Materials purchases budget Production budget Selling and administrative expense budget Cash budget

Selling and Administrative expense budget

Hair salons and law firms are examples of which of the following type of organization?

Service companies

Which of the following does not describe the Implementing function within the management cycle?

Setting short- and long-term objectives

Which of the following is not a perspective used by the balanced scorecard?

Short-term

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

Special-order

Which of the following is not a component of the master budget? Operating budget Budgeted income statement Budgeted balance sheet Statement of return on investment

Statement of return on ivestment

A____ is the vision of what management wants the organization to achieve over the long term. Strategic plan Long-term objective Short-term objective Tactic

Strategic Plan

A _____________ is the vision of what management wants the organization to achieve over the long term.

Strategic plan

Which of the following is not something that should be compiled for each dimension of the balanced scorecard?

Strategic vision

Which of the following types of firms would most likely use process costing?

Superior Auto Body & Repair Jackson & Taylor Tax Service Sunshine Soft Drinks

A master budget consists of a number of seperate but independent budgets that formally lay out the company's sales, production, and financial goals. T/F

TRUE

Budgets are used to plan and to control operations. T/F

TRUE

In large organizations, the selling and administrative expense budget would be a compilation of many smaller, individual budgets submitted by department heads and other persons responsible for selling and administrative expenses. T/F

TRUE

On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment. T/F

TRUE

One of the advantages of a self-imposed budget is that the person directly involved in an activity is more likely to be in a position to make good budget estimates. T/F

TRUE

The manufacturing overhead budget provides a schedule of all costs of production other than direct materials and direct labor. T/F

TRUE

The number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory. T/F

TRUE

The sales budget is usually prepared before the production budget. T/F

TRUE

The sales budget often includes a schedule of expected cash collections. T/F

TRUE

_________are the specific actions managers use to achieve their objectives. Strategic plans Long-term objectives Short-term objectives Tactics

Tactics

What is the term for the most constrained resource?

The Bottleneck

When disposed of, overapplied manufacturing overhead will:

decrease Cost of Goods Sold.

When disposed of, overapplied manufacturing overhead will: increase Cost of Goods Sold. increase Finished Goods. decrease Cost of Goods Sold. decrease Finished Goods.

decrease Cost of Goods Sold.

When disposed of, overapplied manufacturing overhead will:

decrease Cost of Goods Sold. decrease Finished Goods. increase Finished Goods.

The adjustment for overapplied overhead ________.

decreases cost of goods sold and increases net operating income.

NOT a component of the cash budget

depreciation expense

Costs that change across decision alternatives are:

differential costs.

Costs that change across decision alternatives are:

differential costs. Differential costs is another term for relevant costs, which change depending on the alternative selected by the manager.

Costs that can be traced to a specific cost object are:

direct costs.

A ______________ is one that can be attributed to a specific segment of the business.

direct fixed cost

Conversion costs consist of: all costs of production. raw materials and direct labor. direct labor and manufacturing overhead. raw materials and manufacturing overhead.

direct labor and manufacturing overhead.

Prime costs are defined as:

direct labor plus direct materials

The price variance for direct labor is called the:

direct labor rate variance

The formula AH × (SR - AR) is the:

direct labor rate variance.

The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased is the:

direct materials price variance

The difference between the actual quantity and the standard quantity, multiplied by the standard price is the:

direct materials quantity variance

The formula SP × (SQ - AQ) is the:

direct materials quantity variance

The difference between the actual quantity and the standard quantity, multiplied by the standard price is the:

direct materials quantity variance.

Total quality management aims to improve quality by doing all of the following except:

eliminating non-value-added costs.

which component of the cash budget is shown as a line item on the budgeted balance sheet

ending cash balance

A predetermined overhead rate is calculated by dividing:

estimated manufacturing overhead cost by estimated total cost driver.

A predetermined overhead rate is calculated by dividing: actual manufacturing overhead cost by estimated total cost driver. estimated total cost driver by estimated manufacturing overhead cost. estimated manufacturing overhead cost by actual total cost driver. estimated manufacturing overhead cost by estimated total cost driver.

estimated manufacturing overhead cost by estimated total cost driver.

The worst type of quality costs for a firm are ______ costs.

external failure

Warranty and recall costs and product replacement are ______ costs.

external failure

Activities that occur regardless of how many products are produced or how many batches are run or units made are ___ - ___ activities

facility Level

Activities that occur regardless of how many products are produced or how many batches are run or units made are_____ - ______ activities

facility level

An activity that is performed to benefit the organization as a whole is a(n):

facility-level activity.

True or false: ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information.

false

True or false: Activity-based costing is appropriate for every company.

false

True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.

false

When target costing is used, the target cost is determined by:

finding the difference between the market price and the amount of profit needed to satisfy stakeholders.

NOT an example of a cost to include in a selling and administrative expense budget

fixed MOH

A cost is $50,000 when 25,000 units are produced, and $50,000 when 50,000 units are produced. This is an example of a(n):

fixed cost.

A cost that remains the same, in total, regardless of changes in activity level is a:

fixed cost.

Be cautious of __________ expressed on a per-unit basis when weighing make-or-buy decisions. The total value (instead of the per unit value) is relevant to the decision.

fixed costs Total fixed costs (and whether or not they change based on the decision) are relevant, not necessarily fixed costs per unit.

All of the following are non-value-added activities except ______, which is a value-added activity.

free delivery service to customers

Overhead costs are overapplied if the amount applied to Work in Process is:

greater than actual overhead incurred.

If the ROI of a project is greater than the hurdle rate, the residual income will be:

greater than zero

If the ROI of a project is greater than the hurdle rate, the residual income will be:

greater than zero.

Sales price per unit - manufacturing cost per unit = ______ per unit.

gross profit per unit

A local tour company offers charter buses to corporations who have conventions or meetings in the city. Under activity-based costing, renting a bus to a corporation is a(n)________ -level activity.

group

A relevant cost is a cost that:

has the potential to influence a decision

The purpose of the cash budget is to be used as a basis for the operating budgets. provide external users with an estimate of future cash flows. help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs. summarize the cash flowing into and out of the business during the past period.

help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs

the purpose of a cash budget

help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs

The cost estimating approach that uses the two most extreme activity observations is the:

high-low method.

When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.

high; low

When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.

high;low

Cost structure refers to:

how a company uses variable versus fixed costs to perform operations

The first step in the managerial decision making process is to:

identify the decision problem.

A top-down approach to budgeting is one that is participative. motivational. imposed. tight.

imposed

a top-down approach to budgeting is one that is

imposed

Activity-based management focuses on ______.

improving operations increasing efficiency

When disposed of, underapplied manufacturing overhead will: increase Cost of Goods Sold. increase Finished Goods. decrease Cost of Goods Sold. decrease Finished Goods.

increase Cost of Goods Sold.

To foster continuous improvement, standards should ________________ over time.

increase in difficulty

Product costs are sometimes called:

inventoriable costs.

Product costs are:

inventoried until the units are sold

The responsibility center in which the manager has responsibility and authority over revenues, costs and assets is the:

investment center.

A just-in-time (JIT) system ______

is a demand-pull system is used to help reduce costs

If cash flows are not equal each year, the payback period:

is calculated by subtracting each year's cash flows from the initial investment until zero is reached

A step cost:

is fixed over some range of activity.

participative budgeting is an approach to budgeting that

is more likely to motivate people

Participative budgeting is an approach to budgeting that is top-down in nature. allows top management to set the budget. discourages budget slack. is more likely to motivate people to work towards the organization's goals than a top-down approach.

is more likely to motivate people to work towards the organization's goals than a top-down approach

which is NOT a benefit of budgeting

it build organizational slack

All the costs assigned to an individual job are summarized on a:

job cost sheet.

A system that pulls materials and products through the manufacturing system based on customer demand is called _____

just-in-time

Managerial decision makers must often consider non-economic factors as well. For example, when considering whether to eliminate a product line, managerial accountants with an emphasis on sustainability should consider the employee job loss implications as well. This represents sustainability within a:

keep-or-drop decision.

Overhead costs are underapplied if the amount applied to Work in Process is:

less than actual overhead incurred.

Overhead costs are underapplied if the amount applied to Work in Process is: greater than estimated overhead. less than estimated overhead. greater than actual overhead incurred. less than actual overhead incurred.

less than actual overhead incurred.

In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate ______

life cycle costs

specific goals that managers want to achieve over a 5-10 year horizon

long-term objectives

All of the following are non-volume-based cost drivers except number of ______

machine hours

Which of the following is NOT a volume-based cost driver?

machine setups

The most common method for disposing of over or underapplied overhead is to:

make a direct adjustment to Cost of Goods Sold.

The most common method for disposing of over or underapplied overhead is to: recalculate the overhead rate for the period. recalculate the overhead rate for the next period. make a direct adjustment to Work in Process Inventory. make a direct adjustment to Cost of Goods Sold.

make a direct adjustment to Cost of Goods Sold.

Managerial decision makers must often consider non-economic factors as well. For example, when considering whether to outsource to another country, in addition to considering the cost of that decision, managerial accountants with an emphasis on sustainability should consider the human capital impact as well. This represents sustainability within a:

make-or-buy decision.

Under activity based management, cost management is achieved by:

managing the underlying activities.

Under activity based management, cost management is achieved by:

managing the underlying activities. reducing production volume. eliminating value-added activities.

Conversion costs can be defined as

manufacturing costs minus direct materials

Conversion costs can be defined as:

manufacturing costs minus direct materials.

Prime costs are the same as:

manufacturing costs minus manufacturing overhead

To compute the per-unit manufacturing cost, add ___ ___to direct materials and direct labor.

manufacturing overhead

To compute the per-unit manufacturing cost, add ______ _______ to direct materials and direct labor.

manufacturing overhead

To calculate manufacturing overhead cost per unit using ABC, divide the total ______

manufacturing overhead cost by the number of units produced

To calculate manufacturing overhead cost per unit using ABC, divide the total ______.

manufacturing overhead cost by the number of units produced

Once Stage 2 allocation has been completed it is possible to compute total ______.

manufacturing overhead per product

The transfer pricing method that uses the price the company would charge external customers is the:

market price method. The market price is the price that a company would charge to external customers; using that price for internal sales is the market price method of transfer pricing

When negotiating a transfer price, the highest price the buyer will be willing to pay is the _____________, while the lowest price the seller will be willing to accept is the _______________.

market price; variable cost

The number of units included in the production budget:

may differ from the number of units in the sales budget, depending on ending inventory goals.

Inspection costs ______.

may lead to internal failure costs

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

If the total activity cost were unknown, it could be calculated by:

multiplying the total activity driver by the activity rate.

Residual income is the difference between:

net operating income and the minimum acceptable profit.

The method that compares the present value of a project's future cash flows to the initial investment is:

net present value

The gross margin does not take into account:

non-manufacturing cost.

A ______ cost driver is not strictly related to the number of units produced or customers served

non-volume based

The gross margin does not take into account:

nonmanufacturing cost.

External failure costs are costs that:

occur when a defective product makes its way into the hands of the customer.

Activity-based costing ______

offers some advantages over costing systems

The high-low method is a cost estimating approach that uses _______________ to find the cost line.

only two data points

Return on investment can be calculated as:

operating income/average invested assets

Return on investment can be calculated as:

operating income/average invested assets.

Profit margin can be calculated as:

operating income/sales revenue.

The cost of not doing something is a(n):

opportunity cost.

Which of the following is not another term for relevant costs?

opportunity costs

Which of the following is not another term for relevant costs?

opportunity costs Opportunity costs may be relevant, but the two are not synonymous. Differential, incremental, and avoidable costs are all synonymous to relevant costs.

The foregone benefit of choosing one alternative over another is measured by:

opportunity costs. An opportunity cost is the foregone benefit of choosing one alternative over another.

creating a budget is an important part of which phase of the planning and control process?

organizing

Cost of goods sold is the amount of cost transferred:

out of Finished Goods Inventory and into Cost of Goods Sold.

Cost of goods manufactured is the amount of cost transferred:

out of Work in Process Inventory and into Finished Goods Inventory.

The overall difference between the actual and applied manufacturing overhead is the:

over- or underapplied overhead.

Indirect costs are also referred to as ___ costs

overhead

Total manufacturing overhead under activity-based costing consists of all ______

overhead assigned during Stage 2 allocations

Total manufacturing overhead under activity-based costing consists of all ______.

overhead assigned during Stage 2 allocations

The total time to recover an original investment is the:

payback period

The activity proportion method uses ______ to assign overhead costs to products.

percentages, %, or proportions

Comparing ______ is the basis of benchmarking

performance within the same industry

forward-looking phase of planning and control cycle

planning

To keep quality problems from happening, companies incur _____ costs

prevention

A spending variance is made up of:

price variance and quantity variance

Activities incurred for each product produced and not dependent on the number of units or batches are ________ -level activities.

product

Activities performed to design a new type of service to be offered are ______-level activities.

product

Research and development is a(n) ________ -level activity

product

Activities incurred for each product produced and not dependent on the number of units or batches are

product level activities

The duration of a product from its infancy through its eventual decline is represented by the _____ _______ ________

product life cycle

Research and development is a(n)

product-level activity

An activity that is performed to support a specific product line is a(n):

product-level activity.

how many units will be produced each period

production budget

which budget would NOT exist for a merchandising firm

production budget

NOT a source that can be used in preparing the sales budget

production buudget

If a company is planning to build inventory, production should exceed sales. sales should exceed production. production should equal sales. production should equal inventory.

production should exceed sales

if a company is planning to build inventory

production should exceed sales

The responsibility center in which the manager has responsibility and authority over revenues and costs, but not assets, is the:

profit center. A profit center manager has responsibility only for revenues and costs. Investment center managers have responsibility for revenues, costs, and the investment of assets.

Unit-level activities are ______

proportional to the number of units produced performed for specific customers

Implementing an ABC system ______

provides information for cost management

Implementing an ABC system ______.

provides information for cost management

Which of the following statements is correct about the high-low method?

The high-low method is complicated to apply. Generally, managers use the high-low method because it has no drawbacks or limitations. Generally, managers can obtain more accurate information from other methods of cost analysis that use a larger number of data points.

Which of the following would not be directly related to a volume-based allocation measure?

The number of activities.

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

The only difference is how the methods assign indirect costs to products.

budgeted COGS includes

raw materials, direct labor, manufacturing overhead

Non-volume-based cost drivers may be more appropriate for activities ______

related to the entire facility that are performed for each batch related to individual products

The part of the organization for which managers are responsible is called a:

responsibility center

The part of the organization for which managers are responsible is called a:

responsibility center.

internal failure costs

result from defects discovered during inspection are preferred over external failures

Internal failure costs are costs that:

result from defects that are caught before the product is shipped to the customer.

The responsibility center in which the manager does not have responsibility and authority over costs is the:

revenue center.

The final step in the decision making process is to:

review the results of the decision.

Gross profit margin calculates gross margin as a percentage of

sales

Gross profit margin calculates gross margin as a percentage of ______

sales

starting point for the master budget

sales budget

sequence of budgets

sales budget->production budget->DM budget->budgeted income statement

The starting point for preparing the master budget is the:

sales budget.

Investment turnover can be calculated as:

sales revenue/average invested assets

Investment turnover can be calculated as:

sales revenue/average invested assets.

A graph of that provides a visual representation of the relationship between total cost and activity level is called a:

scattergraph

The most common method of evaluating a profit center manager is the:

segmented income statement.

which budget does NOT provide info for the budgeted balance sheet

selling and administrative expense budget

A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a ______-level activity

service

Under activity-based costing, a degree program at a university is considered a(n)_______ -level activity.

service

Garfield Personal Training Services is owned by Gina Garfield. Gina provides personal training and coaching to individuals or small groups using the local fitness facility and pool. Gina rents the group training room at the local fitness facility or the pool for scheduled classes. For one-on-one training, she meets clients at the fitness facility where she is a member. Gina is currently learning Zumba and plans to offer a Zumba class in the group training room on Wednesday mornings starting next month. The first scheduled Zumba class is considered a ___________ activity for Garfield.

service-level

Non-value-added activities ______.

should be eliminated whenever possible do not enhance the product or service

Which of the following is not a source that can be used in preparing the sales budget? Prior sales. The production budget. Industry trends. Marketing activities.

The production Budget

Who would typically be responsible for the direct material quantity variance?

The production manager

Which of the following responsibility centers will use a segmented income statement as an evaluation tool?

The profit center

In a standard cost system, overhead is applied per unit by multiplying the ___________ overhead rate times the ____________ quantity of the cost driver.

standard, standard

NOT a component of the master budget

statement of return on investment

A budget that is based on a single estimate of sales volume is called a:

static budget

A budget that is based on a single estimate of sales volume is called a:

static budget.

Which of the following is NOT a value-added activity?

storing inventory

the vision of what managment wants the organization to achieve over the long term

strategic plan

When all of a company's job cost sheets are viewed collectively they form what is known as a ________.

subsidiary ledger

You are to receive five gold coins from your great uncle as an incentive to study hard. The coins were originally purchased in 1982. Your great uncle will deliver the coins the week after finals (assuming your grades are "acceptable"). The amount your great uncle paid for the coins is a(n):

sunk cost.

A network of organizations and activities that move goods and services from suppliers to customers is a(n) ______

supply chain

The network of organizations and activities needed to move goods and services from suppliers to customers is called a(n) _____

supply chain

specific actions managers use to achieve their objectives

tactics

A proactive approach managers use to determine what costs should be is called ______

target costing

The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called ______ _______ or cost planning

target costing

Which of the following sets just-in-time systems apart from traditional manufacturing systems?

Materials are purchased only as they are needed to manufacture goods.

Manufacturing overhead includes all costs of producing a product except for indirect materials and indirect labor

False - because manufacturing overhead includes all manufacturing costs except direct materials and direct labor

Step costs are fixed over some range of activity and then increase like a variable cost

False - because step costs are fixed over a certain range of activity and increase in a step-like manner when the next range of activity is reached

The relevant range is the range in which costs remain variable

False - because the relevant range is the range of activity over which assumptions about cost behavior hold true

Activity based management is a method of assigning indirect costs to products or services based on the activities they require

False - because this describes activity based costing, not activity based management

Variable costs are always direct costs

False - because variable costs are not always direct costs, which can be traced to a specific cost object

The formula for budgeted raw materials purchases is Budgeted production units + Ending raw materials inventory - Beginning raw materials inventory. Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory. Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory. Materials needed for production + Beginning raw materials inventory - Ending raw materials inventory.

Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory.

The cost of materials used on a specific job is first captured on which source document?

Materials requisition form

Non-Volume based cost drivers ___ -are used in traditional costing systems -are related to the number of units products or customers served -are used in ABC systems -allow more indirect costs to be allocated to products

-are used in ABC systems -allow more indirect costs to be allocated to products

Non-volume-based cost drivers may be more appropriate for activities ___ -that are performed for each unit -that are performed for each batch -related to individual products -related to the entire facility

-that are performed for each batch -related to individual products

Indirect costs can be assigned to products or services using ______. -activity-based management -total quality management -the activity rate method -the activity proportion method -target costing

-the activity rate method -the activity proportion method

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses P × $500,000 = $150,000; P = 30%. a number of batches as an activity driver. The cost of Machining is $500000, while the cost of Inspection is $30000. Standard is assigned $150,000 in Machining cost and $22,500 in Inspection cost. What proportion of Machining activity is used by Luxury?

70%

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Inspection activity is used by Standard?

75%

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Inspection activity is used by Product 5?

75%

Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? 750 square meters 1,050 square meters 1,825 square meters 300 square meters

750 square meters

Which of the following companies would most likely use process costing? A soft drink company A law firm A custom garden equipment manufacturer A home remodeling company

A soft drink company

When is a volume-based cost system appropriate for a service company?

A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources

When is a volume-based cost system appropriate for a service company?

A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources.

Cashan Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 1.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August: 24500 units September: 24700 units October: 26400 units November: 26400 units December: 24500 units The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs. On July 31, this requirement was not met since only 10,400 kilograms of Jurislon were on hand. The cost of Jurislon is $4.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is: A) $149,860 B) $252,400 C) $191,460 D) $147,000

A) $149,860

The Ellis Company has budgeted its activity for September according to the following information: Sales are budgeted at $392,000 and all sales are for cash. All purchases of merchandise inventory are for cash. Merchandise inventory was $150,000 on August 31 and the planned merchandise inventory on September 30 is $140,000. All merchandise is sold at 40% above cost. The selling and administrative expenses are budgeted at $92,000 for the month. All of these expenses are paid for in cash except for depreciation of $12,000. The budgeted net income for September is: A) $20,000 B) $143,200 C) $112,000 D) $64,800

A) $20,000

Hamway Products, Inc. makes and sells a single product called a Wob. It takes two yards of material A to make one Wob. Budgeted production of Wobs for the next four months is as follows: April: 12000 units May: 13500 units June: 12400 units July: 11200 units The company wants to maintain monthly ending inventories of material A equal to 10% of the following month's production needs. On March 31 this target had not been met since only 1,500 yards of material A were on hand. The cost of material A is $.90 per yard. The total cost of material A to be purchased in April is: A) $22,680 B) $24,750 C) $26,750 D) $26,780

A) $22,680

Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?

An instructor agrees to add an additional student to a class.

The formula to apply overhead to products is

Activity Rate x Activity

How is activity-based management related to activity-based costing?

Activity based management bases improvements to operations and reductions in costs on activity based costing data.

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

Activity rate

The budgeted income statement is a combination of All the operating budgets. All the operating budgets plus the budgeted balance sheet. The direct materials budget, the direct labor budget, and the manufacturing overhead budget. The production budget, the cost of goods sold budget, and the selling and administrative expense budget.

All the operating budgets

The budgeted income statement is a combination of:

All the operating budgets.

Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?

An ABC system will assign more manufacturing overhead costs to the product than a volume-based system.

Which of the following best defines a batch-level activity?

An activity that is performed for a group of units all at once

Which of the following best defines a product-level activity?

An activity that is performed to support a specific product line

Which of the following best defines a facility-level activity?

An activity that is performed to support the entire company

Which of the following statements is true?

An existing ABC system can report sustainability-related information.

Which component of the cash budget is shown as a line item on the budgeted balance sheet? Budgeted cash collections Budgeted cash payments Cash repaid Ending cash balance

Ending Cash Balance

Which component of the cash budget is shown as a line item on the budgeted balance sheet?

Ending cash balance

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 40,000 Total fixed manufacturing overhead cost $ 96,000 Variable manufacturing overhead per direct labor-hour $ 3.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $ 755 Direct labor cost $ 4,000 The predetermined overhead rate is closest to:

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours) = $96,000 + $120,000 = $216,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $216,000 ÷ 40,000 direct labor-hours = $5.40 per direct labor-hour

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 40,000 Total fixed manufacturing overhead cost $ 96,000 Variable manufacturing overhead per direct labor-hour $ 3.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $ 755 Direct labor cost $ 4,000 The amount of overhead applied to Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours) = $96,000 + $120,000 = $216,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $216,000 ÷ 40,000 direct labor-hours = $5.40 per direct labor-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $5.40 per direct labor-hour × 100 direct labor-hours = $540

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 40,000 Total fixed manufacturing overhead cost $ 96,000 Variable manufacturing overhead per direct labor-hour $ 3.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $ 755 Direct labor cost $ 4,000 The total job cost for Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours) = $96,000 + $120,000 = $216,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $216,000 ÷ 40,000 direct labor-hours = $5.40 per direct labor-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $5.40 per direct labor-hour × 100 direct labor-hours = $540 Direct materials $ 755 Direct labor 4,000 Manufacturing overhead applied 540 Total cost of Job P951 $ 5,295

Which of the following steps in the managerial decision-making process involves differential analysis?

Evaluate the costs and benefits of the alternatives.

You wish to take an Excel course. (Step 1 of the decision-making process.) You may enroll at one within your school or you may take a community class at the local library. (Step 2 of the decision-making process.) You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration This information illustrates which step in the decision-making process?

Evaluate the costs and benefits of the alternatives.

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used.

False

In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours. T/F

False

Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job.

False

True or false: When a manufacturing overhead cost relates to multiple activities, the cost should be allocated to the activity that has the highest total overhead cost.

False

A job cost sheet will record the direct materials and direct labor used by the job but not the manufacturing overhead applied.

False A job cost sheet summarizes all of the costs incurred on a specific job, not just direct materials and direct labor.

Activity Based Costing divides activities into two categories: unit-level activities and facility level activities.

False Activity Based Costing divides activities into four categories: facility-level, product-level, batch-level, and unit-level activities.

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.

False Although service providers do not have manufacturing overhead, they incur many indirect costs, such as rent, supplies, supervision, advertising, and administrative expenses. ABC can be used to assign these costs to different services and customers.

When manufacturing overhead is applied to a job, a credit is made to the Work in Process account.

False Applied manufacturing overhead is debited (not credited) to Work in Process inventory. The credit is to the Manufacturing Overhead account.

To eliminate underapplied overhead at the end of the year, Manufacturing Overhead would be debited and Cost of Goods Sold would be credited.

False If manufacturing overhead is underapplied during the year, Manufacturing Overhead will need to be credited to bring the account balance to zero, while Cost of Goods Sold would be debited.

Each individual indirect cost should be assigned to one activity when forming activity cost pools.

False Some costs will need to be allocated among several activities (not one activity).

The total amount of cost assigned to jobs that were completed during the year is the cost of goods sold.

False The total amount of cost assigned to jobs that were completed during the year is the cost of goods manufactured, not the cost of goods sold.

To assign activity costs using the activity proportion method, multiply the activity rate by the activity requirements of each individual product.

False To assign activity costs using the activity proportion method, multiply the total activity cost by the activity proportion for each product.

A job cost sheet will record the direct materials and direct labor used by the job but not the manufacturing overhead applied

False - because a job cost sheet summarizes all of the costs incurred on a specific job

A manufacturing firm reports only manufacturing costs

False - because a manufacturing firm reports both manufacturing and nonmanufacturing costs

A fixed cost will stay constant on a per unit basis as the volume increases

False - because fixed costs remain constant in total and decrease per unit as volume increases

Which of the following is not a benefit of budgeting? It forces managers to look to the future It plays an important role in communication within the organization It serves an important role in motivating and rewarding employees It builds organizational slack

It builds organizational slack

Which of the following is not a benefit of budgeting?

It builds organizational slack.

Which of the following statements is true about the strategic plan?

It is management's vision of what they desire the organization to achieve over the long term.

For a cost to be relevant, it must meet which of the following criteria?

It must differ between the decision alternatives and it must be incurred in the future rather than in the past.

Which of the following balanced scorecard perspectives measures an organization's ability to change?

Learning and growth

The balanced scorecard includes both leading and lagging indicators. Which of the following correctly places each indicator on the spectrum of most leading to most lagging?

Learning and growth → Internal business process → Customer → Financial

______are the specific goals that managers want to achieve over a 5 to 10 year horizon. Strategic plans Long-term objectives Short-term objectives Tactics

Long-Term Objectives

_____________ are the specific goals that managers want to achieve over a 5- to 10-year horizon.

Long-term objectives

Which of the following is considered a disadvantage of decentralization?

Lower-level managers may have an opportunity to make decisions in their own best interest without considering the overall health of the company.

All of the following are non-volume-based cost drivers except number of ___. -inspections -machine hours -design changes -setups

Machine Hours

Which of the following is NOT a volume-based cost driver? -Machine setups -Sales Revenue -Direct Material Costs -Direct Labor Dollars

Machine Setups

Which of the following is an ABC cost driver? -Direct Material Costs -Sales Revenue -Direct Labor Dollars -Machine Setups

Machine Setups

Which of the following is NOT a volume-based cost driver?

Machine setups

Which of the following types of decisions involves deciding whether to perform a particular activity in-house or purchase it from an outside supplier?

Make-or-buy

Which of the following is a requirement under the Sarbanes-Oxley Act?

Management must conduct a review of the company's internal control system.

Of the following groups, which is the primary user of managerial accounting information?

Managers

Which of the following statements are true?

Managing and reducing costs is the true benefit of ABC. Implementing an ABC system is not a trivial task.

When manufacturing overhead is applied to production, which of the following accounts is credited? Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Manufacturing Overhead

Manufacturing Overhead

Which of the following would be used to record the labor cost that is not traceable to a specific job?

Manufacturing Overhead

Which of the following would be used to record the labor cost that is not traceable to a specific job? Raw Materials Inventory would be debited. Work in Process Inventory would be debited. Manufacturing Overhead would be debited. Manufacturing Overhead would be credited.

Manufacturing Overhead would be debited.

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

Manufacturing overhead is incurred only to support some jobs.

Which of the following might you find in a job description for a managerial accountant in a manufacturing company?

The Managerial Accountant will conduct internal analysis on the health of the company, suggest variances to emphasize in evaluations, and review unusual results.

Which of the following is not a method used to determine transfer prices?

The balanced scorecard method There are three different ways to determine transfer prices: the market price method, the cost-based method, and negotiation.

Which of the following statements is correct about the break-even point?

The break-even point quantifies the number of units that must be sold to cover total costs with zero profit.

Which of the following statements is not correct about using the balanced scorecard for sustainability accounting?

The company could focus exclusively on short-term metrics, creating sustainability in its operations.

Which of the following is not relevant to a sell-or-process further decision?

The cost of processing the product "as is."

Which of the following is an example of a variable cost for a manufacturing firm?

The cost of raw materials

Which of the following is an indirect cost of manufacturing a table made of wood and glass for a firm that manufactures furniture?

The cost of rent on the factory where the table is manufactured.

Which of the following costs is not relevant to the decision whether to replace an old computer with a new one?

The cost of the old computer.

Which of the following is a direct cost of manufacturing a table made of wood and glass, for a firm that manufactures furniture?

The cost of the wood in the table

The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision?

The selling price of the product

The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision?

The selling price of the product The price Hampton charges for the product will not change across decision alternatives, so it is not relevant.

Which of the following statements is not correct about how an ABC system might be adapted to provide managers with sustainability-related information that would affect the triple bottom line?

The system can only capture and report cost information, so it only affects the "profit" part of the triple bottom line.

Which of the following statements is true about variances?

There is not necessarily any correlation between the sign of the result (positive or negative) and whether the variance is positive or negative

Which of the following is not true of activity cost drivers?

They are strictly volume-based allocation measures.

Volume-based cost systems tend to:

Under-cost low-volume products and over-cost high-volume products.

What is the term used when a company applies less overhead to production than it actually incurs?

Underapplied

What level of activity is performed each time a single item is produced?

Unit

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?

Unit product cost = Total product cost ÷ Number of units Unit product cost = $6,200 ÷ 50 Units = $124

Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

Value engineering

When an activity must be performed for each individual unit, an appropriate cost driver is ___

Volume-Based