Cost Accounting Final

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the four-variance approach, what is the variable overhead spending variance? a. $6,562 U b. $4,375 U c. $4,375 F d. $8,750 U

d. $8,750 U

Stewart Company The following information relates to financial projections of Stewart Company: Projected sales 60,000 units Projected variable costs $2.00 per unit Projected fixed costs $50,000 per year Projected unit sales price $7.00 Refer to Stewart Company. How many units would Stewart Company need to sell to earn a profit before taxes of $10,000? a. 8,571 b. 25,714 c. 10,000 d. 12,000

d. 12,000

Given the following notation, what is the break-even sales level in units? SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit a. SP/(FC/VC) b. FC/(VC/SP) c. VC/(SP - FC) d. FC/(SP - VC)

d. FC/(SP - VC)

A managerial preference for a very low degree of operating leverage might indicate that a. the firm is very unprofitable. b. the firm has very high fixed costs. c. an increase in sales volume is expected. d. a decrease in sales volume is expected.

d. a decrease in sales volume is expected.

Which of the following factors is involved in studying cost-volume-profit relationships? a. product mix b. fixed costs c. variable costs d. all of the above

d. all of the above

A purpose of standard costing is to a. eliminate the need for actual costing for external reporting purposes. b. replace budgets and budgeting. c. eliminate the need to account for year-end underapplied or overapplied manufacturing overhead. d. simplify costing procedures.

d. simplify costing procedures.

The contribution margin ratio always increases when the a. break-even point increases. b. break-even point decreases. c. variable costs as a percentage of net sales increase. d. variable costs as a percentage of net sales decrease.

d. variable costs as a percentage of net sales decrease.

In analyzing manufacturing overhead variances, the volume variance is the difference between the a. budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period. b. actual amount spent for overhead items during the period and the overhead amount applied to production during the period. c. predetermined overhead application rate and the flexible budget application rate times actual hours worked. d. amount shown in the flexible budget and the amount shown in the debit side of the overhead control account.

a. budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period.

A company has a favorable variable overhead spending variance, an unfavorable variable overhead efficiency variance, and underapplied variable overhead at the end of a period. The journal entry to record these variances and close the variable overhead control account will show which of the following? VOH spending variance VOH efficiency variance VMOH a. credit debit credit b. debit credit debit c. debit credit credit d. credit debit debit

a. credit debit credit

The standard cost card contains quantities and costs for a. direct material, direct labor, and overhead. b. direct material only. c. direct labor only. d. direct material and direct labor only.

a. direct material, direct labor, and overhead.

Patterson Company The following information is for Patterson Company's July production: Standards: Material 3.0 feet per unit @ $4.20 per foot Labor 2.5 hours per unit @ $7.50 per hour Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) Refer to Patterson Company. What is the labor efficiency variance? a. $1,875 U b. $1,875 F c. $ 938 U d. $1,125 U

c. $ 938 U

Patterson Company The following information is for Patterson Company's July production: Standards: Material 3.0 feet per unit @ $4.20 per foot Labor 2.5 hours per unit @ $7.50 per hour Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) Refer to Patterson Company. What is the material quantity variance? a. $3,105 U b. $1,050 F c. $1,890 U d. $3,105 F

c. $1,890 U

Which of the following will decrease the break-even point? Decrease in fixed cost Increase in direct labor cost Increase in selling price a. yes yes yes b. yes no no c. yes no yes d. no yes no

c. yes no yes

A large labor efficiency variance is prorated to which of the following at year-end? WIP FG Cost of Goods Sold Inventory Inventory a. no no no b. no yes yes c. yes yes yes d. yes no no

c. yes yes yes

Information concerning Lynch Corporation's Product A follows: Sales $400,000 Variable costs 300,000 Fixed costs 50,000 Assuming that Lynch increased sales of Product A by 25 percent, what should the profit from Product A be? a. $ 62,500 b. $ 50,000 c. $170,000 d. $ 75,000

d. $ 75,000

Patterson Company The following information is for Patterson Company's July production: Standards: Material 3.0 feet per unit @ $4.20 per foot Labor 2.5 hours per unit @ $7.50 per hour Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) Refer to Patterson Company. What is the material price variance (calculated at point of purchase)? a. $2,610 F b. $2,610 U c. $2,700 F d. $2,700 U

d. $2,700 U

Tisdale Company reported the following results from sales of 5,000 units of Product A for June: Sales $200,000 Variable costs (120,000) Fixed costs (60,000) Operating income $ 20,000 Assume that Tisdale increases the selling price of Product A by 10 percent in July. How many units of Product A would have to be sold in July to generate an operating income of $20,000? a. 4,545 b. 5,000 c. 4,000 d. 4,300

a. 4,545

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the three-variance approach, what is the spending variance? a. $ 8,000 U b. $ 4,375 U c. $ 3,625 F d. $15,750 U

a. $ 8,000 U

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the four-variance approach, what is the variable overhead efficiency variance? a. $2,187 F b. $2,187 U c. $9,937 F d. $2,937 F

a. $2,187 F

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a a. price variance. b. combined price-quantity variance. c. mix variance. d. quantity variance.

a. price variance.

The margin of safety would be negative if a company('s) a. was presently operating at a volume that is below the break-even point. b. variable costs exceeded its fixed costs. c. present fixed costs were less than its contribution margin. d. degree of operating leverage is greater than 100.

a. was presently operating at a volume that is below the break-even point.

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the three-variance approach, what is the efficiency variance? a. $2,187 U b. $2,187 F c. $9,937 F d. $2,937 F

b. $2,187 F

To compute the break-even point in units, which of the following formulas is used? a. FC/CM ratio b. FC/CM per unit c. CM/CM ratio d. (FC+VC)/CM ratio

b. FC/CM per unit

In CVP analysis, linear functions are assumed for a. fixed cost per unit. b. contribution margin per unit. c. total costs per unit. d. all of the above.

b. contribution margin per unit.

t the break-even point, fixed costs are always a. less than the contribution margin. b. equal to the contribution margin. c. more than the variable cost. d. more than the contribution margin.

b. equal to the contribution margin.

On a break-even chart, the break-even point is located at the point where the total a. revenue line crosses the total fixed cost line. b. revenue line crosses the total cost line. c. revenue line crosses the total contribution margin line. d. fixed cost line intersects the total variable cost line.

b. revenue line crosses the total cost line.

A primary purpose of using a standard cost system is a. to make things easier for managers in the production facility. b. to provide a distinct measure of cost control. c. to minimize the cost per unit of production. d. b and c are correct.

b. to provide a distinct measure of cost control.

Patterson Company The following information is for Patterson Company's July production: Standards: Material 3.0 feet per unit @ $4.20 per foot Labor 2.5 hours per unit @ $7.50 per hour Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) Refer to Patterson Company. What is the labor rate variance? a. $2,800 F b. $3,480 F c. $2,800 U d. $3,480 U

c. $2,800 U

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the four-variance approach, what is the volume variance? a. $3,875 F b. $6,063 U c. $3,875 U d. $3,125 F

c. $3,875 U

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the one-variance approach, what is the total overhead variance? a. $6,562 U b. $3,625 U c. $9,687 U d. $6,062 U

c. $9,687 U

Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only a. fixed and mixed costs. b. relevant variable costs. c. a relevant range of volume. d. relevant fixed costs.

c. a relevant range of volume.

The term "standard hours allowed" measures a. budgeted output at standard hours. b. actual output at actual hours. c. actual output at standard hours. d. budgeted output at actual hours.

c. actual output at standard hours.

The variance least significant for purposes of controlling costs is the a. fixed overhead spending variance. b. material quantity variance. c. fixed overhead volume variance. d. variable overhead efficiency variance.

c. fixed overhead volume variance.

The variance most useful in evaluating plant utilization is the a. variable overhead efficiency variance. b. variable overhead spending variance. c. fixed overhead volume variance. d. fixed overhead spending variance.

c. fixed overhead volume variance.

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals a. the material yield variance. b. the material mix variance. c. no meaningful number. d. the total cost variance.

c. no meaningful number.

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan. If the change is adopted, the company's a. margin of safety must decrease. b. profit must increase. c. operating leverage must increase. d. break-even point must increase.

c. operating leverage must increase.

In a CVP graph, the area between the total cost line and the total revenue line represents total a. variable costs. b. contribution margin. c. profit. d. fixed costs.

c. profit.

With respect to fixed costs, CVP analysis assumes total fixed costs a. remain constant from one period to the next. b. per unit remain constant as volume changes. c. remain constant across changes in volume. d. vary directly with volume.

c. remain constant across changes in volume.

If a firm's net income does not change as its volume changes, the firm('s) a. must have no fixed costs. b. sales price must equal $0. c. sales price must equal its variable costs. d. must be in the service industry.

c. sales price must equal its variable costs.

After the level of volume exceeds the break-even point a. total fixed costs per unit will remain constant. b. the total contribution margin will turn from negative to positive. c. the total contribution margin exceeds the total fixed costs. d. the contribution margin ratio increases.

c. the total contribution margin exceeds the total fixed costs.

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the two-variance approach, what is the noncontrollable variance? a. $3,125 F b. $6,062 U c. $3,875 F d. $3,875 U

d. $3,875 U

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the two-variance approach, what is the controllable variance? a. $4,375 U b. $5,813 F c. $4,375 F d. $5,813 U

d. $5,813 U

Standard costs may be used for a. planning. b. product costing. c. controlling. d. all of the above.

d. all of the above.

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable. Consistent with these assumptions, as volume decreases total a. variable costs remain constant. b. fixed costs decrease. c. costs remain constant. d. costs decrease.

d. costs decrease.

CVP analysis requires costs to be categorized as a. standard or actual. b. product or period. c. direct or indirect. d. either fixed or variable.

d. either fixed or variable.

Parker Company Below is an income statement for Parker Company: Sales $400,000 Variable costs (125,000) Contribution margin $275,000 Fixed costs (200,000) Profit before taxes $ 75,000 Refer to Parker Company. Based on the cost and revenue structure on the income statement, what was Parker's break-even point in dollars? a. $290,909 b. $300,000 c. $325,000 d. $200,000

a. $290,909

Refer to Jean Simmons Company. If the unit sales price for Jean Simmons's sole product was $10, how many units would it have needed to sell to produce a profit of $40,000? a. 28,000 b. 29,000 c. can't be determined from the information given d. 27,500

a. 28,000

Parker Company Below is an income statement for Parker Company: Sales $400,000 Variable costs (125,000) Contribution margin $275,000 Fixed costs (200,000) Profit before taxes $ 75,000 Refer to Parker Company. What is Parker's degree of operating leverage? a. 3.67 b. 5.33 c. 1.45 d. 2.67

a. 3.67

At the end of a period, a significant material quantity variance should be a. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold. b. allocated among Work in Process, Finished Goods, and Cost of Goods Sold. c. closed to Cost of Goods Sold. d. carried forward as a balance sheet account to the next period.

b. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.

If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) a. favorable variable overhead spending variance exists. b. favorable variable overhead efficiency variance exists. c. unfavorable volume variance exists. d. favorable volume variance exists.

b. favorable variable overhead efficiency variance exists.

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the four-variance approach, what is the fixed overhead spending variance? a. $ 750 U b. $3,125 F c. $ 750 F d. $7,000 U

c. $ 750 F

Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Buckingham produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Buckingham Company. Using the three-variance approach, what is the volume variance? a. $6,062 U b. $3,875 F c. $3,125 F d. $3,875 U

d. $3,875 U

Parker Company Below is an income statement for Parker Company: Sales $400,000 Variable costs (125,000) Contribution margin $275,000 Fixed costs (200,000) Profit before taxes $ 75,000 Refer to Parker Company. What was Parker's margin of safety? a. $109,091 b. $100,000 c. $75,000 d. $200,000

a. $109,091