ASP Chapter 3

The following data relates to Mandarin Company. Units in beginning inventory— Units produced15,000 Units sold ($250 per unit)11,000 Variable costs per unit: Direct materials$80 Direct labor160 Variable overhead60 Fixed costs: Fixed overhead per unit produced$40 Fixed selling and administrative expenses150,000 Determine the value of ending inventory under absorption costing. a.$1,360,000 b.$1,120,000 c.$960,000 d.$1,200,000

a.$1,360,000

Mahogany Company manufactures computer keyboards. The total cost of producing 15,000 keyboards is $410,000. The total fixed cost amounts to $140,000. Determine the total cost of manufacturing 26,000 keyboards. a.$608,000 b.$680,000 c.$468,000 d.$666,000

a.$608,000 Variable Rate = Total Variable Cost ÷ Units of Output = ($410,000 - $140,000) ÷ 15,000 = $18 per keyboardTotal cost of manufacturing 26,000 keyboards = Fixed Cost + Variable Cost= $140,000 + ($18 × 26,000) = $608,000

The closer the coefficient of determination (R2) is to _____, the better. a.1 b.0 c.0.5 d.-1

a.1

Which of the following costs is classified as a period cost under absorption costing? a.Administrative expenses b.The cost of direct materials c.The cost of direct labor d.Fixed manufacturing overhead

a.Administrative expenses

Which of the following is an example of a variable cost for a manufacturing unit? a.Direct materials cost b.Advertising cost c.Plant supervisor's salary d.Lease payment

a.Direct materials cost

Food Service Corp. offers a meal service for commuting college students. In the month of January, 1,800 meals were served at a total cost of $5,100. In February, 1,450 meals were served at a total cost of $4,500, and the total number of meals served for March were 1,200 at a total cost of $3,900. Using the high-low method, the variable cost per unit is $2.00. What is the total fixed cost and the total variable cost for January? a.The total fixed cost is $3,600, and the variable cost is $1,500. b.The total fixed cost is $1,500, and the variable cost is $3,600. c.The total fixed cost is $3,000, and the variable cost is $2,100. d.The total fixed cost is $2,100, and the variable cost is $3,000.

Total Variable Cost = Variable Rate × Units of Output = $2.00 × 1,800 = $3,600 Total Fixed Cost = Total Cost - Total Variable Cost = $5,100 - $3,600 = $1,500

The difference between variable costing and absorption costing hinges on the treatment of: a.fixed manufacturing overhead. b.variable manufacturing overhead. c.fixed selling overhead. d.variable selling overhead.

a.fixed manufacturing overhead.

A cost that is variable in nature but whose rate of change is not constant is called a: a.semi-variable cost. b.discretionary variable cost. c.relevant variable cost. d.committed variable cost.

a.semi-variable cost.

A cost that remains constant for a range of output and then increases to a higher level of total cost at some point, where it remains for a similar range of output is called a: a.step cost. b.mixed cost. c.fixed cost. d.variable cost.

a.step cost.

The following data relates to Alpha Company.Units in beginning inventory— Units produced24,000 Units sold ($250 per unit)21,000 Variable costs per unit: Direct materials$35 Direct labor60 Variable overhead25 Fixed costs: Fixed overhead per unit produced$45 Fixed selling and administrative expenses160,000 Determine the value of ending inventory under variable costing. a.$495,000 b.$360,000 c.$315,000 d.$285,000

b.$360,000

Which of the following methods identifies the regression line that minimizes the differences between predicted costs and actual costs? a.The managerial judgment method b.The method of least squares c.The scattergraph method d.The high-low method

b.The method of least squares

Which of the following is true about the scattergraph method of separating a mixed cost into its fixed and variable components? a.It generates the smallest possible cost prediction errors. b.The quality of the cost formula depends on the quality of the subjective judgment of the analyst. c.It is a statistical way to find the best-fitting line through a set of data points. d.The occurrence of outliners is the biggest disadvantage of this method.

b.The quality of the cost formula depends on the quality of the subjective judgment of the analyst.

If the cost equation yields a coefficient of determination of 85%, it means that the: a.dependent variable explains 15% of the variability in cost. b.independent variable explains 85% of the variability in cost. c.dependent variable explains 85% of the variability in cost. d.independent variable explains 15% of the variability in cost.

b.independent variable explains 85% of the variability in cost.

Step costs are also called: a.scattered costs. b.semi-fixed costs. c.discretionary fixed costs. d.committed fixed costs.

b.semi-fixed costs.

The following information relates to Diamond Inc.Units sold ($400 per unit)2,000Variable costs per unit:Direct materials$80Direct labor50Variable overhead20Fixed costs:Fixed overhead per unit produced$30Fixed selling and administrative expenses200,000Determine the cost of goods sold under absorption costing. a.$500,000 b.$400,000 c.$360,000 d.$540,000

c.$360,000 Correct. Absorption-costing unit cost = $80 + $50 +$20 + $30 = $180Cost of Goods Sold = Units Sold × Absorption Unit Product Cost = 2,000 units × $180 = $360,000

Turquoise Company manufactures travel bags. The high output occurred in May, with 1,000 units produced at a total cost of $8,400. The low output was in January, with 200 units produced at a total cost of $3,000. Determine the variable rate by using the high and low points. a.$15.00 b.$5.40 c.$6.75 d.$8.40

c.$6.75 Variable Rate = ($8,400 − $3,000) ÷ (1,000 - 200) = $5,400 ÷ 800 = $6.75

The value of coefficient of determination always lies between _____. a.1 and 100 b.0 and 10 c.0 and 1 d.1 and 10

c.0 and 1

Identify the true statement about variable costing. a.It is the most acceptable product-costing method for external reporting. b.It assigns all manufacturing costs to the product. c.It treats fixed manufacturing overhead as a period cost. d.It treats fixed selling overhead as a product cost.

c.It treats fixed manufacturing overhead as a period cost.

The purpose of creating a cost formula is to provide: a.a quantitative estimate of only the total fixed costs of the cost drivers. b.a qualitative estimate of both total fixed costs and the variable cost per unit of the cost drivers. c.a quantitative estimate of both total fixed costs and the variable cost per unit of the cost drivers. d.a qualitative estimate of only the variable cost per unit of the cost drivers.

c.a quantitative estimate of both total fixed costs and the variable cost per unit of the cost drivers.

Gamma Company manufactures power transmission grids. It has 3 sales representatives, each earning a salary of $43,000 plus a commission of $190 per grid sold. The total cost associated with the sales representatives is an example of a: a.step cost. b.fixed cost. c.mixed cost. d.variable cost.

c.mixed cost.

The higher the percentage of cost variability explained by the coefficient of determination, _____. a.the lesser is the accuracy with which the independent variable explains the dependent variable b.the better job the dependent variable does of explaining the independent variable c.the lesser is the accuracy with which the dependent variable explains the independent variable d.the better job the independent variable does of explaining the dependent variable

d.the better job the independent variable does of explaining the dependent variable