Cost Accounting Midterm
The Standards of Ethical Conduct for management accountants include concepts related to ________
. competence, confidentiality, integrity, and credibility
Gross margin is ________.
. sales revenue less cost of goods sold
Which of the following is true if the volume of sales increases (within a relevant range)
. total variable cost increases
The cost allocation base ________. Select one:
a systematic way to link an indirect cost or group of indirect costs to cost objects
Ralph Johnson is paid $30 an hour for straight-time and $40 an hour for overtime. One week he worked 39 hours, which included 9 hours of overtime, and 4 hours of idle time caused by material shortages. What is the direct labor cost incurred to the company?
a. $1,050
The following information pertains to the Ruby Corp: Beginning work-in-process inventory$74,000 Ending work-in-process inventory82,000 Beginning finished goods inventory172,000 Ending finished goods inventory209,000 Cost of goods manufactured1,202,000 What is cost of goods sold?
a. $1,165,000
Blistre Company operates on a contribution margin of 30% and currently has fixed costs of $550,000. Next year, sales are projected to be $3,100,000. An advertising campaign is being evaluated that costs an additional $120,000. How much would sales have to increase to justify the additional expenditure?
a. $400,000
Tally Corp. sells software during the recruiting seasons. During the current year, 10,000 software packages were sold resulting in $470,000 of sales revenue, $130,000 of variable costs, and $48,000 of fixed costs.If sales increase by $80,000, operating income will increase by ________. (Round interim calculations to two decimal places and the final answer to the nearest whole dollar.)
a. $57,872
Sales of Blistre Autos are 380,000, variable cost is 230,000, fixed cost is 90,000 tax rate is 40%. Calculate the operating leverage of the company.
a. 2.50 times
Place the five steps in the decision-making process in the correct order: A = Obtain information B = Make decisions by choosing among alternatives C = Identify the problem and uncertainties D = Implement the decision, evaluate performance, and learn E = Make predictions about the future
a. C A E B D
Which of the following formulas determine cost of goods sold in a manufacturing entity?
a. Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold
Which of the following statements is true?
a. Inventoriable costs are assigned to inventories under GAAP.
Which of the following is true of financial accounting information?
a. It focuses on the past-oriented financial performance of a company
Which of the following would be considered an actual cost of a current period?
a. The $25 of materials in a manufactured chair that is ready to be shipped to the custome
Which of the following is true of CVP analysis?
a. Total revenues and total costs are linear in relation to output units.
Production is the ________.
a. acquisition, coordination, and assembly of resources to produce a product or deliver a service
The determination of a cost as either direct or indirect depends upon the ________.
a. cost object chosen
One of the first steps to take when using CVP analysis to help make decisions is ________.
a. identifying the variable and fixed costs
All else being equal, a reduction in selling price will _______
a. reduce operating income
For merchandising companies, inventoriable costs include ________.
a. shipping (incoming) costs to acquire merchandise
In CVP analysis, focusing on target net income rather than operating income ________.
a. will not change the breakeven point
Which of the following is not reported on the income statement of a manufacturing firm?
a. work in progress
Family Furniture sells a table for $900. Its fixed costs are $30,000, while its variable costs are $600 per table. It currently plans to sell 175 tables this month.What is the budgeted revenue for the month assuming that Family Furniture sells 175 tables?
b. $157,500
When fixed costs are $70,000 and variable costs are 60% of the selling price, then breakeven sales are ________. (Round the final answer to the nearest dollar.)
b. $175,000
If the contribution margin ratio is 0.60, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________. (Round the final answer to the nearest dollar.)
b. $208,333
What is the cost of goods manufactured for 2018? Beginning finished good, 1/1/2018$84,000 Ending finished goods, 12/31/201879,000 Cost of goods sold306,000 Sales revenue450,000 Operating expenses98,000
b. $301,000
Ruben is a travel agent. He intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline for $140 each. The round-trip tickets will be sold for $230 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,500 in advertising costs. How many ticket packages will Ruben need to sell in order to achieve $60,000 of operating income?
b. 728 packages
The following information is for High Corp: Selling price$60 per unit Variable costs$40 per unit Total fixed costs$135,000 The number of units that High Corp must sell to reach targeted operating income of $25,000 is ________. (Round up to the nearest unit.)
b. 8,000 units
Which of the following actions should a management accountant take first in confronting a potential ethical conflict concerning your direct supervisor?
b. Follow the organization's procedures concerning resolution of such a conflict.
Which of the following companies is part of the service sector of our economy?
b. KPMG
Which of the following statements about net income (NI) is true?
b. NI = operating income less income taxes.
Which of the following statements concerning an organization's strategy is true?
b. Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.
Financial accounting is concerned primarily with ________.
b. allocates all product costs, including materials, and labor
Process costing ________.
b. allocates all product costs, including materials, and labor
Which of the following companies will use a process costing system?
b. an oil refining company
Which of the tools shown below would be the most effective planning tool?
b. budget
A ________ is a grouping of individual indirect cost items.
b. cost pool
Assigning direct costs to a cost object is called ________.
b. cost tracing
Processing orders and shipping products or providing services to customers is known as ________.
b. distribution
Rules for measurement and reporting for management accounting ________.
b. do not need to follow GAAP but must meet the cost-benefit test.
Which one of the following is a variable cost for an insurance company?
b. electricity expenses
Work-in-process inventory would normally include ________.
b. goods partially worked on but not yet fully completed
Which of the following is a fixed cost with respect to units produced in a factory?
b. monthly rent payment for the building
If a company is planning to reduce the selling price, they must believe that ________.
b. more units will be sold
The most likely cost driver of direct labor costs is the ________.
b. number of production hours
Which of the following might explain why one manager might assign certain costs to a cost object while a different manager might assign some different costs to that same cost object?
b. one manager might be pricing a cost object while the other manager might be seeking the inventoriable cos
The income statement of a service-sector firm reports ________.
b. period costs only
Contribution margin equals ________.
b. revenues minus variable costs
Managers and accountants collect most of the cost information that goes into their systems through ________.
b. source documents
Franklin Inc. manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $18 per direct labor-hour. The following data are obtained from the accounting records for June 2018: Direct materials$170,000 Direct labor (4,600 hours @ $10/hour)46,000 Indirect labor17,000 Plant facility rent34,000 Depreciation on plant machinery and equipment24,500 Sales commissions33,000 Administrative expenses28,000 For June 2018, manufacturing overhead is ________.
b. underallocated by $7,300
Andy worked 60 hours last week for Bread Works Manufacturing. Of the 60 hours 10 hours were considered overtime, and also Tony was idle for 8 of the 60 hours due to an equipment malfunction. Andy makes $90 per hour and is paid $135 an hour (time and a half) for overtime. Andy's total compensation for that week would be ________, and assuming Bread Works charges overtime premium and idle time to indirect labor, the amount of this compensation credited to indirect labor would be ________.
c. $5,850; $1,170
Zirconia Fantasy sells only necklaces. 11,000 units were sold resulting in $270,000 of sales revenue, $80,000 of variable costs, and $40,000 of fixed costs. The breakeven point in total sales dollars is ________.
c. $56,843
Sparkle Jewelry sells 800 units resulting in $85,000 of sales revenue, $32,000 of variable costs, and $26,000 of fixed costs.The number of units that must be sold to achieve $41,000 of operating income is ________.
c. 1,012 units
________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors.
c. Customer relationship management
Place the four business functions in the order they appear along the value chain: Customer service Design Marketing Production
c. Design, Customer Service, Production, Marketing
Which of the following is true of line management?
c. It is directly responsible for achieving the goals of the organization.
Which item is an indication of competence under the Standards of Ethical Conduct
c. Maintain an appropriate level of professional expertise by continually developing knowledge and skills.
Which one of the following items is a direct cost?
c. Printing costs incurred for payroll check processing; payroll check processing is the cost object.
Which item is an indication of integrity under the Standards of Ethical Conduct?
c. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
________ describes the flow of goods, services, and information from the purchase of materials to the delivery of products to consumers, regardless of whether those activities occur in the same organization or with other organizations.
c. Supply chain
Which of the following statements is true of performance reports?
c. The performance report shows actual performance as compared to the budget.
The ________ function supports the six functions of value-chain analysis.
c. administration
Direct costs ________.
c. are costs related to a particular cost object that can be traced to that cost object in an economically feasible manner
The budgeted indirect-cost rate for each cost pool is computed as ________.
c. budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
The ________ is primarily responsible for management accounting and financial accounting.
c. controller
Answer the following questions using the information below:The following information is for Alex Corp:If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.
c. decrease
When costs can be traced to a particular cost object in an economically feasible way, the cost is a:
c. direct cost
Wages paid to machine operators on an assembly line are classified as a ________.
c. direct manufacturing labor cost
Total manufacturing costs are comprised of ________.
c. direct materials costs, direct manufacturing labor costs, and manufacturing overhead costs
An increase in direct labor cost per unit ________.
c. increases the variable cost
Which of the following will increase a company's breakeven point?
c. increasing variable cost per unit
Costs that are initially recorded as assets and expensed when goods sold are called ________.
c. inventoriable costs
Staff management includes ________.
c. management accountants
Which of the following is a manufacturing overhead cost?
c. overtime premiums paid to plant workers
Which of the following is a cost driver for a company's human resource costs?
c. the number of employees in the company
Actual costing is a costing system that traces direct costs to a cost object by ________.
c. using the actual direct cost rates times the actual quantities of the direct-cost inputs
Buildz Manufacturing currently produces 2,000 tables per month. The following per unit data for 2,000 tables apply for sales to regular customers: Direct materials $75 Direct manufacturing labor 20 Variable manufacturing overhead 20 Fixed manufacturing overhead 40 Total manufacturing costs $155 What is the per unit cost when producing 4,000 tables?
d. $135.00
Bell Company sells several products. Information of average revenue and costs is as follows: Selling price per unit$33.00 Variable costs per unit: Direct material$6.00 Direct manufacturing labor$1.50 Manufacturing overhead$0.30 Selling costs$2.25 Annual fixed costs$113,000 The company sells 10,000 units.The contribution margin per unit is ________.
d. $22.95
Manton Manufacturing applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Bear product. Estimates for this order include: Direct materials of $79,000; 680 direct manufacturing labor-hours at $25 per hour; and a 25% markup rate on total manufacturing costs. Manufacturing overhead cost estimates for this special-order total ________.
d. $40,800
Stella Company sells only two products, Product A and Product B. Product AProduct BTotal Selling price$50$30Variable cost per unit$20$10Total fixed costs $2,110,000 Stella sells two units of Product A for each unit it sells of Product B. Stella faces a tax rate of 40%. Stella desires a net after-tax income of $54,000. The breakeven point in units would be ________.
d. 55,000 units of Product A and 27,500 units of Product B
Which of the following is the mathematical expression of contribution margin ratio?
d. Contribution margin ratio = Contribution margin percentage × Revenues (in dollars)
________ is the process of assigning indirect costs to products.
d. Cost allocation
Which of the following statements about the direct/indirect cost classification is true?
d. Indirect costs are always allocated.
Which of the following is true of staff management?
d. It provides advice, support, and assistance to line management.
Which of the following companies is part of the manufacturing sector of our economy?
d. Nike
Which of the following differentiates job costing from process costing?
d. Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches
Which of the following companies is part of the merchandising sector of our economy?
d. Whole Foods Market
When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.
d. budgeted; actual
Product costs used for government contracts generally include ________.
d. design costs and production costs
A job-cost sheet details the ________.
d. direct labor costs incurred
Which of the following is true if the production volume decreases?
d. fixed cost per unit increases
When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore, when 20,000 units are produced, fixed costs will ________.
d. increase to $26.25 per unit
Cost accounting ________.
d. measures the costs of acquiring or using resources in an organization
Financial accounting ________.
d. must comply with GAAP (generally accepted accounting principles)
Job costing ________.
d. records the flow of costs for each product or service
Which of the following reports to the CFO?
d. treasurer
The formula for the predetermined indirect cost rate is:
t d. Budgeted annual indirect costs divided by actual quantity of cost-allocation base
An example of a numerator reason for calculating annual indirect-cost rates includes ________.
the number of units produced
Inventoriable costs are expensed on the income statement ________.
when the products are sold
Which of the following is true of net income?
Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes.