FINAL EXAM ACCTNG
In a job-order costing system, indirect labor cost is usually recorded as a debit to:
Manufacturing Overhead.
In a job-order costing system, manufacturing overhead applied is recorded as a debit to:
Work in Process inventory.
If the contribution margin is not sufficient to cover fixed expenses:
a loss occurs.
Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:
avoidable costs.
Some investment projects require that a company increase its working capital. Under the net present value method, the investment and eventual recovery of working capital should be treated as:
both an initial cash outflow and a future cash inflow.
Product costs that have become expenses can be found in:
cost of goods sold.
When computing the cost per equivalent unit, the weighted-average method of process costing considers:
costs incurred during the current period plus cost of beginning work in process inventory.
In the cost reconciliation report under the weighted-average method, the "Costs to be accounted for" section contains which of the following items?
Cost of beginning work in process inventory
Almendarez Corporation is considering the purchase of a machine that would cost $160,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $36,000. The company requires a minimum pretax return of 8% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to
$(3,313)
Almendarez Corporation is considering the purchase of a machine that would cost $160,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $36,000. The company requires a minimum pretax return of 8% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to:
$(3,313)
The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below: Sales $ 980,000 Variable expenses $ 402,000 Fixed manufacturing expenses $ 384,000 Fixed selling and administrative expenses $ 264,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $261,000 of the fixed manufacturing expenses and $222,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: 980,000-402,000 -(261,000+222,000) =95,000
$(95,000)
Chhom Corporation makes a product whose direct labor standards are 0.9 hours per unit and $24 per hour. In November the company produced 7,150 units using 5,935 direct labor-hours. The actual direct labor cost was $124,635. The labor efficiency variance for November is: SH = 7,150 units × 0.9 hours per unit = 6,435 hours Labor efficiency variance = (AH - SH) × SR = (5,935 hours − 6,435 hours) × $24 per hour = (−500 hours) × $24 per hour = $12,000 F
$12,000. F
The West Division of Cecchetti Corporation had average operating assets of $673,000 and net operating income of $132,000 in August. The minimum required rate of return for performance evaluation purposes is 21%. What was the West Division's minimum required return in August? Minimum required return = Average operating assets × Minimum required rate of return = $673,000 × 21% = $141,330
$141,330
Agustin Industries is a division of a major corporation. Data concerning the most recent year appears below: Sales $ 17,560,000 Net operating income $ 1,071,160 Average operating assets $ 4,300,000 The division's turnover is closest to: Turnover = Sales ÷ Average operating assets = $17,560,000 ÷ $4,300,000 = 4.08
4.08
If net operating income is $46,000, average operating assets are $230,000, and the minimum required rate of return is 11%, what is the residual income? Net operating income-Minimum required return ($230,000 × 11%) =Residual income $ 20,700
$20,700
The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.4 hours Standard labor rate $ 12.20 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 6,200 hours Actual total labor cost $ 73,160 Actual output 950 units What is the labor efficiency variance for the month? SH = 950 units × 8.4 hours per unit = 7,980 hours Labor efficiency variance = (AH - SH) × SR = (6,200 hours - 7,980 hours) × $12.20 per hour = (-1,780 hours) × $12.20 per hour = $21,716 F
$21,716 F
Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below: Budgeted number of patient-visits 9,300 Budgeted variable overhead costs: Supplies (@$5.40 per patient-visit) $ 50,220 Laundry (@$8.40 per patient-visit) 78,120 Total variable overhead cost 128,340 Budgeted fixed overhead costs: Wages and salaries 53,400 Occupancy costs 86,100 Total fixed overhead cost 139,500 Total budgeted overhead cost $ 267,840 The total overhead cost at an activity level of 10,000 patient-visits per month should be: Supplies ($5.40q) $ 54,000 Laundry ($8.40q) 84,000 Wages and salaries ($53,400) 53,400 Occupancy costs ($86,100) 86,100 add everything === Total budgeted overhead cost $ 277,500
$277,500
Herrod Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $400 per month plus $100 per job plus $20 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in December to be 10 jobs and 120 meals, but the actual activity was 4 jobs and 103 meals. The actual cost for catering supplies in December was $3,140. The spending variance for catering supplies in December would be closest to: Actual results $ 3,140 - Flexible budget [$400 + ($100 × 4) + ($20 × 103)] 2,860 =spending variance
$280 U
Two alternatives, code-named X and Y, are under consideration at Guyer Corporation. Costs associated with the alternatives are listed below. What is the financial advantage (disadvantage) of Alternative Y over Alternative X? add everything then compare (subtract)
$33,400
The following data pertain to an investment proposal (Ignore income taxes.): Cost of the investment $ 46,000 Annual cost savings $ 14,000 Estimated salvage value $ 5,000 Life of the project 5 years Discount rate 12 % Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed investment is closest to:
$7,305
The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: Sales $ 942,000 Variable expenses $ 415,000 Fixed manufacturing expenses $ 356,000 Fixed selling and administrative expenses $ 263,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $217,000 of the fixed manufacturing expenses and $128,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued. What would be the financial advantage (disadvantage) from dropping product D74F? 942,000-415,000 -(217,000+128,000) =($182,000)
($182,000)
Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time 12.3 Process time 1.4 Inspection time 0.6 Move time 4.0 Queue time 5.7 The delivery cycle time was: add everything
24.0 hours
Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year. Beginning Inventory Ending Inventory Finished goods (units) 28,000 38,000 Raw material (grams) 58,000 48,000 Each unit of finished goods requires 3 grams of raw material. The company plans to sell 230,000 units during the year. The number of units the company would have to manufacture during the year would be: Budgeted unit sales+ desired ending finished goods inventory- beginning finished goods inventory= beginning finished goods inventory 230,000+38000-28000=240,000
240,000 units
Cabell Products is a division of a major corporation. Last year the division had total sales of $24,240,000, net operating income of $2,278,560, and average operating assets of $6,302,400. The company's minimum required rate of return is 16%. The division's return on investment (ROI) is closest to: ROI = Net operating income ÷ Average operating assets = $2,278,560 ÷ $6,302,400 = 36.2%
36.2%
The following data are for the Akron Division of Consolidated Rubber, Inc.: Sales $ 790,000 Net operating income $ 49,000 Average operating assets $ 290,000 Stockholders' equity $ 79,000 Residual income $ 19,000 For the past year, the margin used in ROI calculations was: Margin = Net operating income ÷ Sales
6.20%
Which of the following would be considered an operating asset in return on investment computations?
Accounts receivable.
Which of the following would usually be found on a job cost sheet under a normal cost system?
Actual direct material cost: Yes Actual manufacturing overhead cost: No
Which of the following budgets are prepared before the sales budget?
Budgeted Income Statement: No Direct Labor Budget: No
Direct labor cost is classified as:
Conversion cost: Yes Prime Cost: Yes
Eddie Corporation is considering the following three investment projects (Ignore income taxes.): Present value of cash inflows-Investment required (a)=(b) Project profitability index= (b) ÷ (a)
D, C, E
Eddie Corporation is considering the following three investment projects (Ignore income taxes.): Project C Project D Project E Investment required $ 68,400 $ 77,900 $ 161,500 Present value of cash inflows $ 75,924 $ 90,364 $ 176,035 Rank the projects according to the profitability index, from most profitable to least profitable. Investment required-Present value of cash inflows =Net present value --> Net present value / Investment required =Project profitability index
D, C, E (D)0.11 (C)0.16 (E)0.09
Which of the following statements is NOT correct concerning the Cash Budget?
It is not necessary to prepare any other budgets before preparing the Cash Budget.
Some investment projects require that a company increase its working capital. Under the net present value method, the investment and eventual recovery of working capital should be treated as:
Some investment projects require that a company increase its working capital. Under the net present value method, the investment and eventual recovery of working capital should be treated as:
CIn a variable overhead efficiency budget, what will happen to fixed costs as the activity level increase
The fixed cost per unit will decrease.
In a flexible budget, what will happen to fixed costs as the activity level increases?
The fixed cost per unit will decrease.
Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets?
residual income
Which of the following costs are always irrelevant in decision making?
sunk costs
Lagle Corporation has provided the following information:
$12,750
Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,671 $ 28,340 April 11,467 $ 28,295 May 11,999 $ 28,412 June 14,400 $ 28,940 July 11,731 $ 28,353 August 11,217 $ 28,240 September 12,011 $ 28,414 October 11,702 $ 28,346 November 11,850 $ 28,379 Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to:
$0.22 per client-visit; $25,772 per month
Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: The amount of overhead applied in the Customizing Department to Job T138 is closest to:
$1,360.00
For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a:
variable cost.
A process costing system is employed in those situations where:
where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.
The following labor standards have been established for a particular product: Standard labor-hours per unit of output 7.7 hours Standard labor rate $15.35 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 9,800 hours Actual total labor cost $148,960 Actual output 1,100 units What is the labor rate variance for the month? AH × AR = $148,960 Labor rate variance = (AH × AR) − (AH × SR) = ($148,960) − (9,800 hours × $15.35 per hour) = $148,960 − $150,430 = $1,470 F
$1,470 F
Hirons Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $57,590 per month plus $2,984 per flight plus $16 per passenger. The company expected its activity in November to be 84 flights and 256 passengers, but the actual activity was 87 flights and 258 passengers. The actual cost for plane operating costs in November was $310,690. The spending variance for plane operating costs in November would be closest to:
$10,636 F
Kogler Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows If the selling price is $23.00 per unit, the contribution margin per unit sold is closest to:
$11.45
The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 7.2 hours Standard variable overhead rate $ 13.60 per hour The following data pertain to operations for the last month: Actual hours 2,750 hours Actual total variable manufacturing overhead cost $ 38,090 Actual output 250 units What is the variable overhead efficiency variance for the month?
$12,920 U
At a sales volume of 39,500 units, Choice Corporation's sales commissions (a cost that is variable with respect to sales volume) total $505,600. To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 41,900 units? (Assume that this sales volume is within the relevant range.) Sales commission per unit = Total sales commissions ÷ Unit sales = $505,600 ÷ 39,500 = $12.80 The average sales commission per unit is constant within the relevant range.
$12.80
Moates Corporation has provided the following data concerning an investment project that it is considering: Initial investment $ 370,000 Annual cash flow $ 121,000 per year Expected life of the project 4 years Discount rate 10 % Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
$13,449
At a sales volume of 37,000 units, Choice Corporation's sales commissions (a cost that is variable with respect to sales volume) total $514,300. To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 43,100 units? (Assume that this sales volume is within the relevant range.) Sales commission per unit = Total sales commissions ÷ Unit sales = $514,300 ÷ 37,000 = $13.90 The average sales commission per unit is constant within the relevant range.
$13.90
The BRS Corporation makes collections on sales according to the following schedule: 30% in month of sale 64% in month following sale 6% in second month following sale The following sales have been budgeted: Sales April $ 130,000 May $ 140,000 June $ 130,000 Budgeted cash collections in June would be:
$136,400
Paolucci Corporation's relevant range of activity is 6,900 units to 14,500 units. When it produces and sells 10,700 units, its average costs per unit are as follows: Direct materials $ 6.85 Direct labor $ 3.75 Variable manufacturing overhead $ 1.75 Fixed manufacturing overhead $ 3.30 Fixed selling expense $ 1.05 Fixed administrative expense $ 0.75 Sales commissions $ 1.00 Variable administrative expense $ 0.65 If 9,700 units are sold, the variable cost per unit sold is closest to: Explanation Direct materials $ 6.85 Direct labor 3.75 Variable manufacturing overhead 1.75 Sales commissions 1.00 Variable administrative expense 0.65 ============================================== Variable cost per unit sold $ 14.00
$14.00
The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,600 direct labor-hours will be required in February. The variable overhead rate is $8.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $110,960 per month, which includes depreciation of $18,100. All other fixed manufacturing overhead costs represent current cash flows. The February cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: Budgeted direct labor-hours (a) 7,600 Variable manufacturing overhead rate (b) $8.30 (a)x(b) ================================================= Variable manufacturing overhead $ 63,080 Fixed manufacturing overhead (+)110,960 ================================================ Total manufacturing overhead 174,040 Less depreciation (-) 18,100 ================================================ Cash disbursement for manufacturing overhead $ 155,940
$155,940
Acheson Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated manufacturing overhead $157,150 Estimated machine-hours 4,520 Actual manufacturing overhead $156,200 Actual machine-hours 4,620 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The applied manufacturing overhead for the year is closest to:
$160,637
Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance is $42,000. Budgeted cash receipts total $123,000 and budgeted cash disbursements total $117,000. The desired ending cash balance is $65,500. To attain its desired ending cash balance for March, the company needs to borrow:
$17,500
Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance is $42,000. Budgeted cash receipts total $123,000 and budgeted cash disbursements total $117,000. The desired ending cash balance is $65,500. To attain its desired ending cash balance for March, the company needs to borrow: Beginning cash balance $ 42,000 Add cash receipts (all sales are for cash) 123,000 Total cash available 165,000 Less cash disbursements 117,000 Excess (deficiency) of cash available over disbursements 48,000 Financing ($65,500 - $48,000) 17,500 Ending cash balance $ 65,500
$17,500
The Puyer Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available: Sales commissions $ 1.01 Shipping $ 1.51 Advertising $ 51,100 $ 0.31 Executive salaries $ 61,100 Depreciation on office equipment $ 21,100 Other $ 41,100
$174,400
Fabri Corporation is considering eliminating a department that has an annual contribution margin of $29,000 and $71,000 in annual fixed costs. Of the fixed costs, $13,500 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be: Avoidable fixed costs = $71,000 − $13,500 = $57,500 Contribution margin $29,000-$57,500 = $28,500
$28,500
A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 3.90 DLHs Standard variable overhead rate $ 11.25 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 8,800 DLHs Actual total variable manufacturing overhead cost $ 95,850 Actual output 2,200 units What is the variable overhead efficiency variance for the month?
$2,475 U
The Consumer Products Division of Goich Corporation had average operating assets of $1,450,000 and net operating income of $133,100 in May. The minimum required rate of return for performance evaluation purposes is 9%. What was the Consumer Products Division's residual income in May? Net operating income $ 133,100 Minimum required return ($1,450,000 × 9%) 130,500 (net operating income-min. req return) ======================================== Residual income $ 2,600
$2,600
The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $576,000. If these calculators are upgraded at a total cost of $130,000, they can be sold for a total of $190,000. As an alternative, the calculators can be sold in their present condition for $40,000. What is the financial advantage (disadvantage) to the company from upgrading the calculators? Final sales value after upgrading $ 190,000 Less sales value before upgrading 40,000 Incremental revenue from upgrading 150,000 Less cost of upgrading 130,000 Financial advantage (disadvantage) from upgrading $ $20,000
$20,000
Data concerning Follick Corporation's single product appear below: Selling price per unit $ 250.00 Variable expense per unit $ 77.50 Fixed expense per month $ 149,730 The break-even in monthly dollar sales is closest to: CM ratio = Unit contribution margin ÷ Unit selling price = ($250.00 per unit - $77.50 per unit) ÷ $250.00 per unit = $172.50 per unit ÷ $250.00 per unit = 0.69 Dollar sales to break even = Fixed expenses ÷ CM ratio = $149,730 ÷ 0.69 = $217,000
$217,000
The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,000 direct labor-hours will be required in February. The variable overhead rate is $8.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,900 per month, which includes depreciation of $18,050. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for February should be: budgeted DL hrs x variable OH rate-> add to fixed rate /budgeted labor hours
$23.50 per direct labor-hour
Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs $ 45,000 $ 61,900 Processing costs $ 41,500 $ 41,500 Equipment rental $ 14,500 $ 14,500 Occupancy costs $ 16,600 $ 24,500 What is the financial advantage (disadvantage) of Alternative B over Alternative A?
$24,800
Bolka Corporation, a merchandising company, reported the following results for October: Sales $ 418,000 Cost of goods sold (all variable) $ 175,500 Total variable selling expense $ 23,700 Total fixed selling expense $ 21,800 Total variable administrative expense $ 16,200 Total fixed administrative expense $ 34,300 The gross margin for October is: sales-cost of good sold=gross margin
$242,500
The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in May. The variable overhead rate is $7.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $139,160 per month, which includes depreciation of $24,860. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for May should be:
$27.20
A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 3.10 DLHs Standard variable overhead rate $ 10.45 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 9,500 DLHs Actual total variable manufacturing overhead cost $95,770 Actual output 2,800 units What is the variable overhead rate variance for the month? AH × AR = $95,770 Variable overhead rate variance = (AH × AR) − (AH × SR) = ($95,770) − (9,500 hours × $10.45 per hour) = $95,770 − $99,275 = $3,505 F
$3,505 F
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 32,800 Total fixed manufacturing overhead cost $164,000 Variable manufacturing overhead per machine-hour $5.00 Recently, Job T687 was completed with the following characteristics: Number of units in the job 10 Total machine-hours 30 Direct materials $ 745 Direct labor cost $ 1,490 The amount of overhead applied to Job T687 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) = $164,000 + ($5.00 per machine-hour × 32,800 machine-hours) = $164,000 + $164,000 = $328,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $328,000 ÷ 32,800 machine-hours = $10 per machine-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $10 per machine-hour × 30 machine-hours = $300
$300.00
Sedita Inc. is working on its cash budget for July. The budgeted beginning cash balance is $30,000. Budgeted cash receipts total $186,000 and budgeted cash disbursements total $185,000. The desired ending cash balance is $53,000. The excess (deficiency) of cash available over disbursements for July will be: Beginning cash balance $ 30,000 Add cash receipts (all sales are for cash) 186,000 Total cash available 216,000 Less cash disbursements 185,000 Excess (deficiency) of cash available over disbursements $ 31,000
$31,000
In August, one of the processing departments at Tsuzuki Corporation had beginning work in process inventory of $24,300 and ending work in process inventory of $13,300. During the month, $286,000 of costs were added to production. In the department's cost reconciliation report for August, the total cost to be accounted for would be:
$310,300
Jilk Inc.'s contribution margin ratio is 60% and its fixed monthly expenses are $42,500. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $127,000? Profit = (CM ratio × Sales) - Fixed expenses = (0.60 × $127,000) - $42,500 = $76,200 - $42,500 = $33,700
$33,700
Two alternatives, code-named X and Y, are under consideration at Guyer Corporation. Costs associated with the alternatives are listed below. Alternative X Alternative Y Materials costs $ 53,000 $ 77,000 Processing costs $ 58,200 $ 58,200 Equipment rental $ 21,800 $ 21,800 Occupancy costs $ 20,800 $ 30,900 What is the financial advantage (disadvantage) of Alternative Y over Alternative X?
$34,100
Acheson Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated manufacturing overhead $ 157,400 Estimated machine-hours 4,570 Actual manufacturing overhead $ 156,700 Actual machine-hours 4,720 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The predetermined overhead rate is closest to: Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $157,400 ÷ 4,570 machine-hours = $34.44 per machine-hour
$34.44
Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for January. Sales (4,300 units) $ 94,600 Variable expenses 47,300 Contribution margin 47,300 Fixed expenses 35,000 Net operating income $ 12,300 If the company sells 4,900 units, its total contribution margin should be closest to: Selling price per unit = Sales ÷ Quantity sold = $94,600 ÷ 4,300 units = $22 per unit Variable expenses per unit = Variable expenses ÷ Quantity sold Variable expenses per unit = $47,300 ÷ 4,300 units = $11.00 per unit Unit CM = Selling price per unit - Variable expenses per unit = $22 per unit - $11.00 per unit = $11.00 per unit Total CM = Unit CM × Quantity sold = $11.00 per unit × 4,900 units = $53,900
$53,900
Cubie Corporation has provided the following data concerning its only product: Selling price $ 105 per unit Current sales 12,300 units Break-even sales 8,610 units What is the margin of safety in dollars? Margin of safety in dollars = Total sales - Break-even sales = (12,300 u × $105 per u) - (8,610 u × $105 per u) = $1,291,500 - $904,050 = $387,450
$387,450
Handerson Corporation makes a product with the following standard costs: The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for August is: Variable overhead rate variance = (AH × AR) − (AH × SR) = ($8,540) − (1,160 hours × $7.00 per hour) = $8,540 − $8,120 = $420 U
$420 U
Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (7,600 units) $ 387,600 Variable expenses 235,600 Contribution margin 152,000 Fixed expenses 103,500 Net operating income $ 48,500 If the company sells 7,500 units, its net operating income should be closest to:
$46,500
Smith Corporation makes and sells a single product called a Pod. Each Pod requires 2.1 direct labor-hours at $10.30 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. Smith Corporation is preparing a Direct Labor Budget for the second quarter of the year. In June the company has budgeted to produce 22,700 Pods. Budgeted direct labor costs incurred in June would be: Budgeted direct labor cost = Budgeted production × 2.1 direct labor-hours per unit × $10.30 per direct labor-hour = 22,700 units × 2.1 direct labor-hours per unit × $10.30 per direct labor-hour = 22,700 units × $21.63 per unit = $491,001
$491,001
Gayne Corporation's contribution margin ratio is 18% and its fixed monthly expenses are $51,000. If the company's sales for a month are $313,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change. Profit = (CM ratio × Sales) - Fixed expenses = (0.18 × $313,000) - $51,000 = $56,340 - $51,000 = $5,340
$5,340
Job 910 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $ 2,434 Direct labor-hours 72 labor-hours Direct labor wage rate $ 14 per labor-hour Machine-hours 132 machine-hours The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $15 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 910 would be: Direct materials $ 2,434 Direct labor (72 direct labor-hours × $14 per direct labor-hour) 1,008 Overhead (132 machine-hours × $15 per machine-hour) 1,980 2434+1008+1980=5422 Total manufacturing cost for Job 910 $ 5,422
$5,422
Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $240,000 and 4,780 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $247,000 and actual direct labor-hours were 4,600. The predetermined overhead rate for the year was closest to: Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total direct labor-hours = $240,000 ÷ 4,780 direct labor-hours = $50.21 per direct labor-hour
$50.21
Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $240,300 and 4,740 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $245,000 and actual direct labor-hours were 4,620. The predetermined overhead rate for the year was closest to:
$50.70
Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the amount of cost of goods manufactured for the year? Cost of goods manufactured is represented by the debit to Finished Goods and the credit to Work in Process (entry f) = $517,200 cost of goods manufactured
$517,200
The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,200 direct labor-hours will be required in January. The variable overhead rate is $9 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,040 per month, which includes depreciation of $3,720. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: Budgeted direct labor-hours 2,200 Variable manufacturing overhead rate $ 9 ============================================== Variable manufacturing overhead $ 19,800 Fixed manufacturing overhead 43,040 =============================================== Total manufacturing overhead 62,840 Less depreciation 3,720 ============================================== Cash disbursement for manufacturing overhead $ 59,120
$59,120
Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the manufacturing overapplied or underapplied for the year?
$6,300 over-applied
Deidoro Company has provided the following data for maintenance cost: Prior Year Current Year Machine hours 20,200 22,500 Maintenance cost $ 32,600 $ 35,590 Maintenance cost is a mixed cost with variable and fixed components. The fixed and variable components of maintenance cost are closest to:
$6,340 per year; $1.300 per machine hour
Pedregon Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 6.70 Direct labor $ 3.80 Variable manufacturing overhead $ 1.50 Fixed manufacturing overhead $ 15,200 Sales commissions $ 0.70 Variable administrative expense $ 0.75 Fixed selling and administrative expense $ 6,800 If the selling price is $20.80 per unit, the contribution margin per unit sold is closest to:
$7.35
Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $536,000 or a new model 220 machine costing $463,000 to replace a machine that was purchased 9 years ago for $484,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $463,000 in the new machine, the money could be invested in a project that would return a total of $488,000. In making the decision to buy the model 220 machine rather than the model 370 machine, the differential cost was: Differential cost = $536,000 − $463,000 = $73,000 differential cost = new model- other new model
$73,000
Handerson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 10.2 kilos $ 7.70 per kilo Direct labor 0.3 hours $ 37.00 per hour Variable overhead 0.3 hours $ 7.70 per hour The company reported the following results concerning this product in August. Actual output 4,900 units Raw materials used in production 30,730 kilos Purchases of raw materials 33,300 kilos Actual direct labor-hours 1,100 hours Actual cost of raw materials purchases $ 212,920 Actual direct labor cost $ 24,436 Actual variable overhead cost $ 9,240 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for August is:
$770 U
Tyare Corporation had the following inventory balances at the beginning and end of May: Raw materials $ 33,000 $ 45,000 Finished Goods $ 82,500 $ 81,000 Work in Process $ 21,000 $ 17,655 During May, $66,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $12 per direct labor-hour, and it paid its direct labor workers $15 per hour. A total of 450 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $7,800 of direct materials cost. The Corporation incurred $44,250 of actual manufacturing overhead cost during the month and applied $44,100 in manufacturing overhead cost. The raw materials purchased during May totaled: Raw materials used in production = Beginning raw materials inventory + Purchases of raw materials - Ending raw materials inventory $66,000 = $33,000 + Purchases of raw materials - $45,000 Purchases of raw materials = $66,000 - $33,000 + $45,000 = $78,000
$78,000
Dermody Snow Removal's cost formula for its vehicle operating cost is $2,920 per month plus $322 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,350. The spending variance for vehicle operating cost in December would be closest to: Actual results $ 8,350 Flexible budget [$2,920 + ($322 × 14)] 7,428 =================================================== Spending variance $ 922
$922
The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: Sales $ 925,000 Variable expenses $ 406,500 Fixed manufacturing expenses $ 339,000 Fixed selling and administrative expenses $ 246,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $208,500 of the fixed manufacturing expenses and $119,500 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued. What would be the financial advantage (disadvantage) from dropping product D74F?
($190,500)
Lusk Corporation produces and sells 16,000 units of Product X each month. The selling price of Product X is $30 per unit, and variable expenses are $24 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $110,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:
($56,000)
Eddie Corporation is considering the following three investment projects (Ignore income taxes.): Project C Project D Project E Investment required $11,900 $50,000 $95,000 Present value of cash inflows $13,580 $67,300 $109,410 The profitability index of investment project D is closest to: Investment required (a) $(50,000) Present value of cash inflows 67,300 Net present value (b) $17,300 ================================== Project profitability index (b) ÷ (a) 0.35
0.35
Domingo Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 700 units. The costs and percentage completion of these units in beginning inventory were: A total of 7,100 units were started and 6,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: The ending inventory was 85% complete with respect to materials and 75% complete with respect to conversion costs. How many units are in ending work in process inventory in the first processing department at the end of the month? Units in ending work in process = Units in beginning work in process + Units started into production - Units transferred to the next department = 700 + 7,100 - 6,400 = 1,400
1,400
Domingo Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 1,100 units. The costs and percentage completion of these units in beginning inventory were: A total of 7,500 units were started and 6,800 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: The ending inventory was 85% complete with respect to materials and 75% complete with respect to conversion costs. How many units are in ending work in process inventory in the first processing department at the end of the month? Units in ending work in process = Units in beginning work in process + Units started into production - Units transferred to the next department 1,100 + 7,500 - 6,800 = 1,800
1,800
The management of Lanzilotta Corporation is considering a project that would require an investment of $218,000 and would last for 6 years. The annual net operating income from the project would be $106,000, which includes depreciation of $31,000. The scrap value of the project's assets at the end of the project would be $26,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to (Ignore income taxes.): Net operating income $ 106,000 Add: Noncash deduction for depreciation 31,000 Annual net cash inflow $ 137,000 Payback period = Investment required ÷ Annual net cash inflow = $218,000 ÷ $137,000 per year = 1.6 years
1.6 years
Rotan Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: Hours Move time 4.2 Wait time 11.9 Queue time 6.1 Process time 2.2 Inspection time 1.2 The throughput time was: Throughput time = Process time + Inspection time + Move time + Queue time
13.7 hours
Kingcade Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time 18.7 Process time 1.5 Inspection time 0.5 Move time 2.4 Queue time 9.5 The throughput time was:
13.9 hours Throughput time = Process time + Inspection time + Move time + Queue time
Rotan Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: Hours Move time 5.0 Wait time 12.7 Queue time 6.9 Process time 3.0 Inspection time 2.0 The throughput time was: add everything but the wait time
16.9 hours
A company with $690,000 in operating assets is considering the purchase of a machine that costs $78,000 and which is expected to reduce operating costs by $20,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to (Ignore income taxes.): Payback period = Investment required ÷ Annual net cash inflow = $78,000 ÷ $20,000 = 3.9 years
3.9 years
Cabell Products is a division of a major corporation. Last year the division had total sales of $23,170,000, net operating income of $1,668,240, and average operating assets of $5,097,400. The company's minimum required rate of return is 19%. The division's return on investment (ROI) is closest to: ROI = Net operating income ÷ Average operating assets
32.7%
Cabell Products is a division of a major corporation. Last year the division had total sales of $27,170,000, net operating income of $2,662,660, and average operating assets of $8,151,000. The company's minimum required rate of return is 12%. The division's return on investment (ROI) is closest to: ROI = Net operating income ÷ Average operating assets = $2,662,660 ÷ $8,151,000 = 32.7%
32.7%
Navern Corporation manufactures and sells custom home elevators. From the time an order is placed until the time the elevator is installed in the customer's home averages 67 days. This 67 days is spent as follows: Throughput time = Process time + Inspection time + Move time + Queue time = 19 days + 9 days + 18 days + 8 days = 54 days MCE = Value-added time (Process time) ÷ Throughput (manufacturing cycle) time = 19 days ÷ 54 days = 35.2%
35.2%
The following data are for the Akron Division of Consolidated Rubber, Inc.: Sales $ 870,000 Net operating income $ 57,000 Average operating assets $ 370,000 Stockholders' equity $ 87,000 Residual income $ 27,000 For the past year, the margin used in ROI calculations was: Margin = Net operating income ÷ Sales = $57,000 ÷ $870,000 = 6.55%
6.55%
A cement manufacturer has supplied the following data: Tons of cement produced and sold 315,000 Sales revenue $ 1,019,000 Variable manufacturing expense $ 240,000 Fixed manufacturing expense $ 337,000 Variable selling and administrative expense $ 167,600 Fixed selling and administrative expense $ 101,000 Net operating income $ 173,400 Contribution margin = Sales - Variable expenses = $1,019,000 - ($240,000 + $167,600) = $1,019,000 - $407,600 = $611,400 CM ratio = Contribution margin ÷ Sales = $611,400 ÷ $1,019,000 = 0.60 sales-variable expenses= -> divide by sales
60.0%
Harden, Inc., has budgeted sales in units for the next five months as follows: June 7,100 units July 5,400 units August 7,200 units September 6,900 units October 5,000 units Past experience has shown that the ending inventory for each month should be equal to 10% of the next month's sales in units. The inventory on May 31 contained 710 units. The company needs to prepare a production budget for the next five months. The beginning inventory for September should be: Beginning inventory for September = Ending inventory for August = 10% of September's sales = 10% × 6,900 units = 690 units
690 units
Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: Sales $ 37,980,000 Net operating income $ 3,558,960 Average operating assets $ 9,500,000 The company's minimum required rate of return 16 % The division's margin used to compute ROI is closest to: Margin = Net operating income ÷ Sales
9.4%
Which of the following statements about using a plantwide overhead rate based on direct labor is correct?
It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.
In a job-order costing system that is based on machine-hours, which of the following formulas is correct?
Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours
In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and:
Purchases of raw materials
During March, Zea Inc. transferred $57,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $63,000. The journal entries to record these transactions would include a:
credit to Work in Process of $57,000.
During March, Zea Inc. transferred $66,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $72,000. The journal entries to record these transactions would include a:
credit to Work in Process of $66,000.
When using a flexible budget, a decrease in activity within the relevant range:
decreases total costs.
In describing the cost formula equation, Y = a + bX, which of the following is correct:
in the high-low method, "b" equals the change in cost divided by the change in activity.
The internal rate of return method assumes that a project's cash flows are reinvested at the:
internal rate of return.
Factory overhead is typically a(n):
mixed cost.
If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:
not change.
Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:
return on investment.
Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:
the incremental costs associated with the order.
The usual starting point for a master budget is:
the sales forecast or sales budget.
