Managerial Accounting

Peluso Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Peluso's plant manager is considering making the headlights now being purchased from an outside supplier for $11 each. The Peluso plant has idle equipment that could be used to manufacture the headlights. The design engineer estimates that each headlight requires $4 of direct materials, $3 of direct labor, and $6.00 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision by Peluso Company to manufacture the headlights should result in a net gain (loss) for each headlight of:

$0.40 Make or Buy Decision. The company should select the "Make" because the cost is less for the firm. There is 40%*6=2.40 of manufacturing overhead that is irrelevant because it is present whether the company Makes or Buys. Make Buy Difference Cost to Supplier 11 Direct Material 4 Direct Labor 3 Manufacturing Overhead -- Avoidable 60%*6=3.60 TOTAL 10.60 11 .40

Orscheln Snow Removal's cost formula for its vehicle operating cost is $2,800 per month plus $381 per snow-day. For the month of February, the company planned for activity of 17 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,920. The activity variance for vehicle operating cost in February would be closest to:

$1,143 F Activity variance is the difference due solely to the change from 17 planned snow days to 14 actual snow days. The planning budget cost is 2800+381*17=9277. The flexible budget cost is 2800 + 381 * 14 = 8134. This is a favorable variance because costs are LESS. The amount is 9277-8134=1,143

The following labor standards have been established for a particular product: standard labor hours per unit of output - 1.5 hours standard labor rate - $17.55 per hour The following data pertain to operations concerning the product for the last month: actual hours worked - 5,300 hours actual total labor cost - $94,340 actual output - 3,600 units What is the labor rate variance for the month?

$1,325 U Labor rate variance = Actual quantity * standard price - actual quantity * actual price = 5300 * 17.55 - 94340 = 1325. It is unfavorable because AQ*SP = $93,015, which is LESS than the actual cost of $94,340.

Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$111,780 On the overhead budget all overhead counts including the non-cash overhead of depreciation. Variable overhead of 8100 * 1.40 + 100,440=11,340+100,440=111,780

A. Shown below is the sales forecast for Cooper Inc. for the first four months of the coming year. Cash sales - 15,000-24,000-18,000-14,000 Credit sales - 100,000-120,000-90,000-70,000 On average, 50% of credit sales are paid for in the month of the sale, 30% in the month following sale, and the remainder are paid two months after the month of the sale. Assuming there are no bad debts, the expected cash inflow in March is:

$119,000 March cash sales + 50% of March credit sales + 30% of February credit sales + 20% * January credit sales= 18,000+50%*90,000+30% * 120,000+20%*100,000 = 18,000 + 45,000 + 36,000 + 20,000 = 119,000

Gaucher Corporation has provided the following data from its activity-based costing accounting system: Designing products - $582,016-4,547 Setting up batches - $29,769-960 Assembling products - $19,440-1,620 The activity rate for the "designing products" activity cost pool is closest to:

$128 per product design hour Finding the rate to use in activity based costing begins with information on measuring the amount of cost created by the amount of activity. Here $582,016 in cost occurs over 4,547 product design hours. So the cost per product design hour is $582016/4547 = $128

The following labor standards have been established for a particular product: standard labor hours per unit of output - 4.0 hours standard labor rate - $12.30 per hour The following data pertain to operations concerning the product for the last month: actual hours worked - 7,100 hours actual total labor cost - $89,105 actual output - 1,500 units What is the labor efficiency variance for the month?

$13,530 U The labor efficiency variance is the standard quantity * standard price - actual quantity * standard price = 4.0 hours * 1,500 units *$12.30 per hour - 7100 hours * $12.30 per hour = 1325. It is unfavorable because actual quantity is 7100 and the standard quantity is 6000.

Olds Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced - 1,000 Variable costs per unit: Direct materials - $50 Direct labor - $47 Variable manufacturing overhead - $2 Variable s&a expense - $8 Fixed costs: Fixed MO - $31,000 Fixed S&A expense - $69,000 There were no beginning or ending inventories. The absorption costing unit product cost was:

$130 The absorption cost includes both the variable product costs of $99 from the direct materials, direct labor, and variable manufacturing overhead as well as the allocation of fixed manufacturing overhead of 31000/1000 = $31 per unit for a total of $130.

Arrow Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. direct materials - 8 pounds-$1.80/pound-$14.40 direct labor - .25 hour-$8/hour-$2.00 During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor-hours. 7. The direct materials price variance for May is:

$16,000 unfavorable Direct materials price variance = Actual quantity * standard price - actual quantity * actual price = 1.80 * 160,000 - 304000 = 16,000. This is unfavorable because at the standard price the cost of materials would have been $288,000, which is less than the actual cost at $304,000. Note that the price variance uses the amount PURCHASED and not the amount USED.

Arrow Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. direct materials - 8 pounds-$1.80/pound-$14.40 direct labor - .25 hour-$8/hour-$2.00 During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor-hours. The direct materials quantity variance for May is:

$17,100 favorable The direct materials quantity variance is standard price * standard quantity - standard price * actual quantity = 1.80 * 8 * 19000 - 1.8 * 142,500 = 273600-256500 = 17,100. It is favorable because the cost at the standard quantity is more than at the actual quantity. Note that the quantity variance uses the amount USED and not the amount PURCHASED.

Arrow Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. direct materials - 8 pounds-$1.80/pound-$14.40 direct labor - .25 hour-$8/hour-$2.00 During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor-hours. The direct labor efficiency variance for May is:

$2,000 unfavorable The direct labor efficiency = standard price * standard quantity - standard price * actual quantity = 8 * .25 * 19,000 - 8 * 5000 = 38,000 - 40,000 = 2000. This is unfavorable because the expected cost at the standard quantity is less than the actual cost at the actual quantity.

Arrow Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. direct materials - 8 pounds-$1.80/pound-$14.40 direct labor - .25 hour-$8/hour-$2.00 During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor-hours. The direct labor rate variance for May is:

$2,200 favorable Direct labor rate variance = standard price * actual quantity - actual price * actual quantity = 8 * 5000 - 37800 = 40,000 - 37,800=2200. This is favorable because the expected cost at the standard rate is more than the actual cost.

MacPhail Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 5,600 units, but its actual level of activity was 5,650 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:Data used in budgeting: Actual results for April: Variable - $43.90 Direct labor - 0-6.50 Direct Materials -0-19.10 Manufacturing overhead - 37,800-1.90 S&A expenses - 23,900-.60 Total expenses - 61,700-28.10 Actual results Revenue - $244,195 direct labor - $36,105 direct materials - $110,175 MO -$47,565 S&A expenses - $27,660 The spending variance for direct materials in April would be closest to:

$2,260 U : The flexible budget cost for direct materials is 19.10*5650 = 107915 and actual results are 110,175. The difference is 2260 Unfavorable because actual costs are more than flexible budget expected costs.

The following materials standards have been established for a particular product: Standard quantity per unit of output - 7.3 pounds standard price - $14,45 per pound The following data pertain to operations concerning the product for the last month: Actual materials purchases - 6,600 pounds actual cost of materials purchased - $91,740 Actual materials used in production - 5,900 actual output - 1,000 units What is the materials quantity variance for the month?

$20,230 F The materials quantity variance is the difference between the standard quantity * standard price and the actual quantity times standard price. 7.3 pounds per unit*$14.45 per pound*1000 units - 5900*$14.45 = 20230 FAVORABLE because the standard quantity (7300) is more than the actual quantity (5900)

McKenrick Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Wages and salaries - $280,000 Depreciation - 220,000 Utilities - 120,000 Total - $620,000 Wages and salaries - 50%-25%-25%-100% Depreciation - 5%-45%-50%-100% Utilities - 20%-50%-30%-100% How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?

$229,000 The way to use this information from an activity costing system is that the Setting Up Cost Pool would be 25% * 280,000 + 45% * 220,000 + 50% * 120,000 = 70,000+99,000+60,000=229,000

Lantto 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 $34,810 per month plus $2,850 per flight plus $12 per passenger. The company expected its activity in June to be 70 flights and 292 passengers, but the actual activity was 69 flights and 291 passengers. The actual cost for plane operating costs in June was $236,550. The plane operating costs in the flexible budget for June would be closest to:

$234,952 The flexible budget uses the parameters of the planning budget at the actual activity levels: 34810+2850*69+12*291=34810+196650+3492=234952

MacPhail Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 5,600 units, but its actual level of activity was 5,650 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:Data used in budgeting: Actual results for April: Variable - $43.90 Direct labor - 0-6.50 Direct Materials -0-19.10 Manufacturing overhead - 37,800-1.90 S&A expenses - 23,900-.60 Total expenses - 61,700-28.10 Actual results Revenue - $244,195 direct labor - $36,105 direct materials - $110,175 MO -$47,565 S&A expenses - $27,660 The revenue variance for April would be closest to:

$3,840 U Flexible Budget revenue = 43.90*5650 = 248035 vs. actual revenue of 244195. The difference is 3840 UNFAVORABLE because actual results are less than the flexible budget amount.

A company's current net operating income is $16,800 and its average operating assets are $80,000. The company's required rate of return is 18%. A new project being considered would require an investment of $15,000 and would generate annual net operating income of $3,000. What is the residual income of the new project?

$300 Residual income = net operating income- (average operating assets * minimum required rate of return)=3,000-(15,000*.18)=3000-2,700=300

A. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

$31,584.00 The Direct Labor cost for June and July is for 2100 + 1900 units = 4000 units. The labor for these units is .84 DLH per unit * 4000 = 3360 DLH. The amount employees are paid for 3360 hours is 3360 * 9.40 = 31,584

Cockriel Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced - 8,000 Variable costs per unit: Direct materials - $14 Direct labor - $22 Variable MO - $1 Variable S&A - $6 Fixed costs Fixed MO - $88,000 Fixed S&A expense - $608,000 There were no beginning or ending inventories. The variable costing unit product cost was:

$37 Variable costing of the product includes only the Direct materials, direct labor and variable manufacturing overhead costs of $14 + $22 + $1 = $37. Selling and administrative expenses are not product costs. Fixed costs are not considered product costs in Variable Costing.

Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual purchase price per pound was $0.50 more than the standard purchase price per pound, then the materials price variance was:

$37,500 U The material price variance = the difference in price between standard price per pound and actual price per pound times the amount purchased. .50 * 75000 = 37500. This is unfavorable because actual purchase price is more.

Sugiki Corporation has two divisions: the Alpha Division and the Delta Division. The Alpha Division has sales of $820,000, variable expenses of $369,000, and traceable fixed expenses of $347,300. The Delta Division has sales of $460,000, variable expenses of $294,400, and traceable fixed expenses of $134,100. The total amount of common fixed expenses not traceable to the individual divisions is $97,300. What is the company's net operating income?

$37,900 Net Operating income is calculated as the sum of all of the segment margins less common fixed expenses. The segment margin for Alpha = 820000-369000-347300=103700. The segment margin for Delta = 460000-294400-134100=31,500. Net Operating income = 103700 + 31,500-97,300=37,900.

MacPhail Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 5,600 units, but its actual level of activity was 5,650 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:Data used in budgeting: Actual results for April: Variable - $43.90 Direct labor - 0-6.50 Direct Materials -0-19.10 Manufacturing overhead - 37,800-1.90 S&A expenses - 23,900-.60 Total expenses - 61,700-28.10 Actual results Revenue - $244,195 direct labor - $36,105 direct materials - $110,175 MO -$47,565 S&A expenses - $27,660 The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for April would be closest to:

$4,880 F The Flexible Budget NOI= (43.90-28.10)*5650-61700=27570; The actual NOI = 244195-36105-110175-47565-27660=22690; The difference between the flexible budget and the actual results is 4,880. This is unfavorable because the actual income is less than the flexible budget income.

1. Spendlove Corporation has provided the following data from its activity-based costing system: Assembly $19.56 per machine hour Processing orders $26.12 per order Inspection $68.80 per inspection hourThe company makes 430 units of product S78N a year, requiring a total of 1,120 machine-hours, 40 orders, and 30 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. According to the activity-based costing system, the total costs for this product line is

$50,460 In activity based costing, the activities are measured for each product and costing uses those measures: Cost Amount used for the product line Total Assembly 19.56 per machine hour 1120 machine hours 21907.20 Processing orders 26.12 per order 40 orders 1044.8 Inspection 68.80 per inspection hour 30 inspection hours 783.6 Direct Materials 49.81 per unit 430 units 21418.3 Direct Labor 12.34 per unit 430 units 5306.2 Total costs $50,460.1

A. Lunderville Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 3,200 units are planned to be sold in December. The variable selling and administrative expense is $3.10 per unit. The budgeted fixed selling and administrative expense is $60,800 per month, which includes depreciation of $6,720 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the December selling and administrative expense budget should be:

$64,000 The cash disbursements for selling & administrative expenses are the variable selling & administrative expenses plus the cash-based fixed expenses. This is (3,200 *3.10)+ (60,800-6720)=9920+54080=64000

Salyers Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below Activity level - 57 guests Variable overhead costs: Supplies - $148.20 laundry - 216.60 Fixed overhead costs Utilities - 170.00 Salaries and wages - 4,310,000 Depreciation - 2,340.000 Total overhead cost - $7,184.80 The Inn's variable overhead costs are driven by the number of guests.What would be the total budgeted overhead cost for a month if the activity level is 53 guests?

$7,159.20 Variable overhead per unit * actual guests + Fixed overhead = Total overhead; (148.2+216.6)/57*53+(170+4310+2340) = 7159.2

Farver 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 $44,420 per month plus $2,008 per flight plus $1 per passenger. The company expected its activity in May to be 80 flights and 281 passengers, but the actual activity was 81 flights and 277 passengers. The actual cost for plane operating costs in May was $199,650. The spending variance for plane operating costs in May would be closest to:

$7,695 F The spending variance is the difference between the flexible budget and actual costs. The flexible budget cost is 44420+2008*81 flights + 1*277 passengers = 207345. The actual costs were 199650. The variance is favorable because actual costs were less than the flexible budget. The amount is 207345-199650=7695

Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $11,470. The vehicle operating cost in the planning budget for December would be closest to:

$8,780 The planning budget uses the expected snow days of 16. So the amount planned would be 1900 + 430 * 16 = 1900 + 6880=8780.

MacPhail Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 5,600 units, but its actual level of activity was 5,650 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:Data used in budgeting: Actual results for April: Variable - $43.90 Direct labor - 0-6.50 Direct Materials -0-19.10 Manufacturing overhead - 37,800-1.90 S&A expenses - 23,900-.60 Total expenses - 61,700-28.10 Actual results Revenue - $244,195 direct labor - $36,105 direct materials - $110,175 MO -$47,565 S&A expenses - $27,660 The spending variance for manufacturing overhead in April would be closest to:

$970 F The spending variance for manufacturing overhead is based on the difference between the actual results of $47,565 and the flexible budget results of $48,535 (37800+1.9*5650). The difference is 970 and is favorable because actual costs are less.

Cung Inc. has some material that originally cost $68,400. The material has a scrap value of $30,100 as is, but if reworked at a cost of $1,400, it could be sold for $30,800. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap?

-$700 Sell or Process Further Decision. The company will LOSE $700 if it processes further. The revenue at split off: $30,100. The net revenue if processed further: $30,800-1400=$29,400

Niemiec Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: move time - 2.6 wait time - 13.3 queue time - 8.5 process time - 1.5 inspection time - .2 The manufacturing cycle efficiency (MCE) was closest to:

1. The manufacturing cycle efficiency (MCE) was closest to: A. 0.20B. 0.06C. 0.12D. 0.96 Discussion: MCE = process time / throughput time = 1.5/((2.6+8.5+1.5+.2)=1.5/12.8=11.7%

Galanis Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Wait time - 24.7 process time - 1.4 inspection time - .4 move time - 3.6 queue time - 8.7 The throughput time was:

14.1 hours Throughput time includes process time, inspection time, move time and queue time: 1.4 +.4+3.6+8.7=14.1

Craft Company produces a single product. Last year, the company had a net operating income of $80,000 using absorption costing and $74,500 using variable costing. The fixed manufacturing overhead cost was $5 per unit. There were no beginning inventories. If 21,500 units were produced last year, then sales last year were:

20,400 units The difference in the income between absorption and variable costing = $80,000-$74,500 = $5,500. This $5,500 is the deferred fixed manufacturing overhead that is deducted in variable costing, but not in fixed costing. If fixed manufacturing overhead is $5 per unit, then the $5,500 represents $5,500/$5 = 1,100 units in ending inventory. If 21,500 were produced and 1,100 are in ending inventory and there was no beginning inventory, then sales are 21,500+0-1100=20,400 units.

Average operating assets are $110,000 and net operating income is $23,100. The company invests $25,000 in new assets for a project that will increase net operating income by $4,750. What is the return on investment (ROI) of the new project?

21% Return on investment = net operating income / average operating assets=23100/110000= 21%

Average operating assets are $110,000, net operating income is $23,100, and sales are $300,000. What is the profit margin?

7.70% Profit Margin = Net operating income / sales = 23100/300000=7.7%

Supply costs at ABC Corporation's chain of gyms are listed below: March - 11,647-$28,561 April - 11,443-$28,395 May - 11,975-$28,819 June - 12,088-$28,892 July - 11,707-$28,622 August - 11,193-$28,221 September - 11,987-$28,820 October - 11,678-$28,578 November - 11,826-$28,703 Management believes that supply cost is a mixed cost that depends on client-visits. Using the high-low method to estimate the variable and fixed components of this cost, those estimates would be closest to:

A. $0.75 per client-visit; $19,826 per month Client Visit Supply Cost High: June 12,088 visits $28,892 Low: August 11,193 visits $28,221 Difference 895 visits $671 Variable cost per client visit = 671/895 = $.75per client visit Fixed Cost for supplies per month = 28,892-12,088 *.75 = 19826

A. Mosbey Inc. is working on its cash budget for June. The budgeted beginning cash balance is $16,000. Budgeted cash receipts total $188,000 and budgeted cash disbursements total $187,000. The desired ending cash balance is $40,000. The excess (deficiency) of cash available over disbursements for June will be:

A. $17,000 The ending balance of cash is $16,000 beginning balance + $188,000 receipts - $187,000 in disbursements = $17,000

Mancuso Corporation has provided its contribution format income statement for January. The company produces and sells a single product. Sales (2,900 units) - $269,700 Variable expenses - $107,300 Contribution margin - $162,400 Fixed expenses - $137,100 Net operating income - $25,300 If the company sells 3,100 units, its total contribution margin should be closest to:

A. $173,600 Contribution Margin per unit = 162,400/2900 = 56. So if there are 3100 units sold, then contribution margin = 3100 * 56=173,600

Chaffee Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 33,000 calls in a month, the costs of operating the helpline total $742,500. 7. To the nearest whole dollar, what should be the total cost of operating the helpline costs at a volume of 34,800 calls in a month? (Assume that this call volume is within the relevant range.)

A. $22.50 From the initial data, the cost per call is $742,500/33,000 = $22.48; Therefore the cost at 34,800 calls would be $22.48*34,800=78472

Hayne Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the most recently completed year appear below: Estimates made at the beginning of the year: Estimated machine-hours - 19,000 Estimated variable manufacturing overhead - $7.89 per machine hour Estimated total fixed manufacturing overhead - $465,880 Actual machine-hours for the year - 20,200 The predetermined overhead rate for the recently completed year was closest to:

A. $24.52 predetermined overhead rate = estimated total overhead / estimated machine hours = $465,880 / 19,000 = 24.52

Pool Company's variable expenses are 36% of sales. Pool is contemplating an advertising campaign that will cost $20,000. If sales increase by $80,000, the company's net operating income should increase by:

A. $31,200 Incremental income= incremental contribution margin-incremental fixed expenses Incremental contribution margin = (1-.36) * 80000=.64*80000= 51200 Incremental fixed cost = 20,000 Incremental income = 51200-20000=31200

Olis Corporation sells a product for $130 per unit. The product's current sales are 28,900 units and its break-even sales are 25,721 units. What is the margin of safety in dollars?

A. $413,270 Margin of Safety (in dollars) = sales above breakeven = (28,900-25,721)*$130=$413,270

The following data have been recorded for recently completed Job 674 on its job cost sheet. Direct materials cost was $2,039. A total of 32 direct labor-hours and 175 machine-hours were worked on the job. The direct labor wage rate is $14 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $15 per machine-hour. The total cost for the job on its job cost sheet would be:

A. $5,112 Total Job Cost = 2,039 + 32*14+15*175=2039+448+2625=5,112

ABC Corporation sells its product for $195.70 per unit. In 2015 the company had total sales in units of 6,000. The total costs were the following: Variable cost of sales $457,800 Fixed cost of sales 100,000 Variable selling & administrative costs 108,500 Fixed selling & administrative costs 512,400 What is the best estimate of the total contribution margin?

A. $607,900 Total Contribution Margin = Total Sales - Total Variable Costs; Total Sales = 195.70 * 6000 = 1174200. Total Variable Costs = 457,800 + 108,500 = 566,300. Contribution Margin = 1171200-566300 = 607,900

The following costs were incurred in September: Direct materials $39,000 Direct labor 23,000 Manufacturing overhead 17,000 Selling expenses 14,000 Administrative expenses 27,000 Prime costs during the month totaled

A. $62,000 Prime costs ae direct labor and direct material costs

Buckeye Company has provided the following data for maintenance cost: 2014 2015 Machine hours 12,500 15,000 Maintenance cost $27,000 $31,000 The best estimate of the cost formula for maintenance would be:

A. $7,000 per year plus $1.60 per machine hour Difference in Machine hours = 2,500; Difference in Maintenance: $4,000; Maintenance cost per machine hour = $4,000 / 2,500 = 1.60 per machine hour; Fixed Cost of maintenance = 27000 - 1.60*12,500=7,000

Chaffee Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 33,000 calls in a month, the costs of operating the helpline total $742,500. 7. To the nearest whole dollar, what should be the total cost of operating the helpline costs at a volume of 34,800 calls in a month? (Assume that this call volume is within the relevant range.)

A. $783,000 From the initial data, the cost per call is $742,500/33,000 = $22.48; Therefore the cost at 34,800 calls would be $22.48*34,800=78472

Wedd Corporation had $35,000 of raw materials on hand on May 1. During the month, the company purchased an additional $68,000 of raw materials. During May, $92,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total:

A. $87,000 The decrease to Raw Materials Inventory is $92,000. This is made up of both direct materials and indirect materials. Since indirect materials are $5,000, then direct materials, which would be a debit to Work in Process, is 92,000-5,000=87,000.

A. Prestwich Company has budgeted production for next year as follows: Production in units - 60,000-80,000-90,000-70,000 Two pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next quarter's production needs for material A. A total of 30,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be:

A. 165,000 pounds In quarter 2, the materials needed are for production of 80,000 units + for 25% of the third quarter 90,000 production = 80,000 * 2 pounds + .25 * 90,000 * 2 pounds = 160,000+45,000 =205,000 pounds. The amount on hand at the beginning of the second quarter is 25% of the second quarter sales = .25 * 80,000 * 2 = 40,000. So purchases are 205,000- 40,000 = 165,000. Note that the amount at the beginning of the year is a distractor and not used in the solution of this problem.

Rothe Company manufactures and sells a single product that it sells for $90 per unit and has a contribution margin ratio of 35%. The company's fixed expenses are $46,800. If Rothe desires a monthly target net operating income equal to 15% of sales, the amount of sales in units will have to be (rounded):

A. 2,600 units The equations set up from this problem are the following: Net Operating income = contribution margin - fixed expenses Net Operating Income = 35%*90*sales in units - 46800. Net Operating Income = 15% * 90* sales in units So setting these equal and solving 35%*90*sales in units -46800=15%*90*sales in units 31.5 sales in units - 46800=13.5*sales in units 18 sales in units = 46800 Sales in units = 2600

Darth Company sells three products. Sales and contribution margin ratios for the three products follow: Sales in dollars - $20,000-$40,000-$100,000 Contribution margin ration - 45%-40%-15% Given these data, the contribution margin ratio for the company as a whole would be:

A. 25% Contribution margin for company as a whole = Total Contribution Margin / Total Sales Total Contribution Margin = .45 * 20000 + .4 * 40000 + .15 * 100000 = 9000+16000+15000=40000 Total Sales = 20000+40000+100000=160000 Overall contribution margin ratio = 40000/160000=25%

The management function of controlling is carried out through the use of

A. A performance report that compares budgeted to actual results.

The CMA certification requires

A. A rigorous professional exam and experience in financial management only.

Management accounting is used by

A. All of the above.

Common users of managerial accounting reports include the following:

A. Chief financial officer and operations manager

In a job-order costing system, indirect materials that have been previously purchased and that are used in production are recorded as a debit to:

A. Manufacturing Overhead.

The wages of factory maintenance personnel would usually be considered to be a

A. Manufacturing overhead cost

Hults Corporation has provided data concerning the company's Manufacturing Overhead account for the month of November. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $75,000 and the total of the credits to the account was $57,000. Which of the following statements is true?

A. Manufacturing overhead for the month was underapplied by $18,000.

Lietz Corporation has provided the following data concerning manufacturing overhead for January: Actual manufacturing overhead incurred - $52,000 Manufacturing overhead applied to work in process - $75,000 The company's Cost of Goods Sold was $369,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

A. Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000 If Manufacturing overhead is underapplied, then Cost of Goods Sold is too low and will increase; If Manufacturing overhead is overapplied, then Cost of Goods Sold is too high and will decrease. This is a case in which manufacturing overhead is overapplied.

1. Which of the following is not a limitation of activity-based costing?

A. More accurate product costs may result in increasing the selling prices of some products.

1. Designing a new product is an example of (an):

A. Product-level activity

Which of the following costs is an example of a period rather than a product cost?

A. Salaries of salespersons

In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:

A. The Cost of Goods Manufactured to be understated.

In a job-order costing system, the use of direct materials that have been previously purchased is recorded as a debit to:

A. Work in Process inventory.

Overapplied manufacturing overhead occurs when:

A. applied overhead exceeds actual overhead.

The degree of operating leverage can be calculated as:

A. contribution margin divided by net operating income.

The break-even point in unit sales increases when variable expenses:

A. increase and the selling price remains unchanged.

The amount by which a company's sales can decline before losses are incurred is called the:

A. margin of safety.

Wert Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:

A. overapplied by $60,000 The predetermined manufacturing overhead rate is $1,200,000 in overhead over direct labor cost of 50,000 direct labor hours * $12 per hour: 1,200,000 / (12*50,000)=1200000/600,000=2. So the manufacturing overhead applied would have been 650,000*2=$1,300,000. However the actual overhead is $1,240,000. $1,300,000- $1,240,000=$60,000 overapplied

The break-even point in unit sales is found by dividing total fixed expenses by:

A. the contribution margin per unit. breakeven point in units = fixed expenses/ contribution margin per unit. If one is computing breakeven point in dollars of sales = fixed expenses / contribution margin RATIO.

Balbuena Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Sales - $17,000-$19,000 Variable Expenses - $7,650-$9,270 The fixed expenses of the entire company were $15,630. If the sales mix were to shift toward Product K87W with total sales dollars remaining constant, the overall break-even point for the entire company:

A. would decrease. Which product is more profitable? Product K87W has a contribution margin ratio of (17000-7650)/17000= 55%; Product I57P has a contribution margin ration of (19000-9270)/19000=49%. So if the company has a sales mix shift toward K87W it is toward the higher profit margin product and the company will have a lower breakeven point.

Which of the following will not result in an increase in the residual income, assuming other factors remain constant?

An increase in the minimum required rate of return.

Routsong Company had the following sales and production data for the past four years: Production in units - 6,000-9,000-4,000-5,000 Sales in units - 6,000-6,000-5,000-7,000 Selling price per unit, variable cost per unit, and total fixed cost are the same in each year. Which of the following statements is not correct?

Because of the changes in production levels, under variable costing the unit product cost will change each year.

Freestone Company is considering renting Machine Y to replace Machine X. It is expected that Y will waste less direct materials than does X. If Y is rented, X will be sold on the open market. For this decision, which of the following factors is (are) relevant?

Both cost of direct materials and resale value of Machine X

Managerial Accounting and Financial Accounting differ in the following way:

Financial Accounting summarizes information for the company as a whole.

Guidelines for ethical behavior for management accountants require

Management accountants maintain professional competence.

Conversion costs include

Manufacturing overhead costs

Fixed manufacturing overhead is included in product costs under:

Only Absorption costing

Which of the following is true? I. A profit center has control over both cost and revenue.II. An investment center has control over invested funds, but not over costs and revenue.III. A cost center has no control over sales.

Only I and III

Property taxes are an example of a cost that would be considered to be:

Organization-sustaining.

A. Which of the following represents the normal sequence in which the indicated budgets are prepared?

Production, Cash, Income Statement

Which of the following activities would be classified as a batch-level activity?

Setting up equipment.

Institute of Management Accountants supports ethical practices by

Staffing an ethics hotline for its members

Moore Company produces a single product. During last year, Moore's variable production costs totaled $10,000 and its fixed manufacturing overhead costs totaled $6,800. The company produced 5,000 units during the year and sold 4,600 units. There were no units in the beginning inventory. Which of the following statements is true?

The net operating income under absorption costing for the year will be $544 lower than net operating income under variable costing. : The difference in income is the amount of deferred fixed manufacturing overhead. The ending inventory of 5,000-4,600=400 units were allocated fixed overhead of 6800/5000 = 1.36 for a total of 400 * 1.36=544. This amount is still part of ending inventory and is not deducted in an absorption costing income statement. So net operating income under absorption is lower under variable costing than under absorption costing when production is greater than sales.

Which of the following would be a measure in the category of Learning and Growth for a balanced scorecard?

The percentage of employees that received certifications in their area of expertise

Last month 10,000 units of a product were manufactured, and the total cost per unit was $60. At this level of production the variable cost is $30 per unit and the fixed cost is $30 per unit. If 10,500 units are manufactured the next month, and the costs remain within the same relevant range,

Total cost per unit will decrease Numerically the unchanging fixed cost is $30 * 10,000 = $300,000. The cost for 10,500 units = 10,500 units * $30 variable cost + fixed cost of $300,000 = $315,000 + $300,000 = $615,000. The total cost per unit is $615,000 / 10,500 units = $58.57. Alternatively, when production increases, fixed costs PER UNIT decrease because the same fixed cost is spread over more units, so total cost per unit will decrease.

If the labor efficiency variance is unfavorable, then

actual hours exceeded standard hours allowed for the actual output.

A. Budgeted production in units are determined by:

adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.

In an income statement segmented by product line, a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be:

classified as a common fixed expense and not allocated.

A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to the product total $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall net operating income would:

decrease by $10,000 per year The contribution to net operating income is Revenue - Avoidable Expenses= 200,000-140,000-(90000-40000)=10,000. Product A makes a $10,000 contribution to the company, so the company's income would decrease by $10,000 per year if the product were discontinued.

Which are the groups of performance measures on a balanced scorecard?

financial measures, customer measures, internal business process measures, and external business process measures.

A continuous (or perpetual) budget:

is a plan that is updated monthly or quarterly, dropping one period and adding another.

The opportunity cost of making a component part in a factory with no excess capacity is the:

net benefit foregone from the best alternative use of the capacity required.

Net operating income reported under absorption costing will exceed net operating income reported under variable costing for a given period if:

production exceeds sales for that period.

Turnover is computed by dividing average operating assets into:

sales.

A. Self-imposed budgets typically are:

subject to review by higher levels of management in order to prevent the budgets from becoming too loose.

All other things equal, if a division's traceable fixed expenses decrease:

the division's segment margin will increase.

When there is a production constraint, a company should emphasize the products with:

the highest contribution margin per unit of the constrained resource.

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:

unfavorable.

The purpose of a flexible budget is to:

update the static planning budget to reflect the actual level of activity of the period.