mgmt 201 final
Manufacturing overhead includes:
all manufacturing costs except direct labor and direct materials.
Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of: Direct Labor, Period CostA)Yes,Yes B)Yes, No C)No, Yes D)No,No
Choice D
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: Average Cost per UnitDirect materials$ 4.85Direct labor$ 4.20Variable manufacturing overhead$ 1.55Fixed manufacturing overhead$ 9.00Fixed selling expense$ 3.15Fixed administrative expense$ 1.80Sales commissions$ 0.50Variable administrative expense$ 0.45 If the selling price is $25.00 per unit, the contribution margin per unit sold is closest to:
$13.45 Selling-variable cost+ddirect materials laborcomissionsadmin
The following costs were incurred in May: Direct materials$41,000Direct labor$13,000Manufacturing overhead$46,000Selling expenses$18,000Administrative expenses$15,000 Conversion costs during the month totaled:
Conversion cost = Direct labor + Manufacturing overhead = $13,000 + $46,000 = $59,000
Lagle Corporation has provided the following information: Cost per UnitCost per PeriodDirect materials$ 4.85 Direct labor$ 3.35 Variable manufacturing overhead$ 1.35 Fixed manufacturing overhead $ 8,000Sales commissions$ 1.50 Variable administrative expense$ 0.45 Fixed selling and administrative expense $ 4,400 If 5,000 units are sold, the variable cost per unit sold is closest to:
$11.50
Bellucci Corporation has provided the following information: Cost per UnitCost per PeriodDirect materials$ 7.10 Direct labor$ 3.95 Variable manufacturing overhead$ 1.75 Fixed manufacturing overhead $ 105,300Sales commissions$ 1.00 Variable administrative expense$ 0.50 Fixed selling and administrative expense $ 36,450 The incremental manufacturing cost that the company will incur if it increases production from 9,000 to 9,001 units is closest to (assume that the increase is within the relevant range):
$12.80 add direct labor, materials, variable moh
An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's BookstoreIncome StatementFor Quarter Ended March 31Sales $ 900,000Cost of goods sold 630,000Gross margin 270,000Selling and administrative expenses Selling$ 100,000 Administrative104,000204,000Net operating income $ 66,000 On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is:
$144,000 Unit sales = $900,000 ÷ $50 per book = 18,000 books Sales $ 900,000Variable expenses: Cost of goods sold$ 630,000 Variable selling ($5 per book × 18,000 books)90,000 Variable administrative (4% of $900,000)36,000756,000Contribution margin $ 144,000
Perteet Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per UnitDirect materials$6.70Direct labor$3.25Variable manufacturing overhead$1.60Fixed manufacturing overhead$3.00Fixed selling expense$0.70Fixed administrative expense$0.40Sales commissions$0.50Variable administrative expense$0.55 If 4,000 units are produced, the total amount of manufacturing overhead cost is closest to:
$21,400 Total variable manufacturing overhead cost($1.60 per unit × 4,000 units)$ 6,400Total fixed manufacturing overhead cost($3.00 per unit × 5,000 units*)15,000Total manufacturing overhead cost (a)$21,400 *The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed manufacturing overhead cost by 5,000 units.
Kesterson Corporation has provided the following information: Cost per UnitCost per PeriodDirect materials$ 6.20 Direct labor$ 3.10 Variable manufacturing overhead$ 1.35 Fixed manufacturing overhead $ 14,000Sales commissions$ 1.50 Variable administrative expense$ 0.40 Fixed selling and administrative expense $ 4,500 If 6,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:
$22,100 Total variable manufacturing overhead cost($1.35 per unit × 6,000 units)$ 8,100Total fixed manufacturing overhead cost14,000Total indirect manufacturing cost$ 22,100
The following costs were incurred in May: Direct materials$33,000Direct labor$13,000Manufacturing overhead$23,000Selling expenses$16,000Administrative expense$34,000 Prime costs during the month totaled:
$46,000 Prime cost = Direct materials + Direct labor
Dake Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows: Average Cost per UnitDirect materials$ 6.55Direct labor$ 3.50Variable manufacturing overhead$ 1.40Fixed manufacturing overhead$ 2.60Fixed selling expense$ 0.70Fixed administrative expense$ 0.40Sales commissions$ 1.50Variable administrative expense$ 0.45 For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:
$56,200 Direct materials$ 6.55Direct labor3.50Variable manufacturing overhead1.40Variable manufacturing cost per unit$ 11.45 Total variable manufacturing cost($11.45 per unit × 4,000 units produced)$ 45,800Total fixed manufacturing overhead cost($2.60 per unit × 4,000 units produced)10,400Total product (manufacturing) cost$ 56,200
At a sales volume of 20,000 units, Choice Corporation's sales commissions (a cost that is variable with respect to sales volume) total $132,000. To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 18,500 units? (Assume that this sales volume is within the relevant range.)
$6.60 Sales commission per unit = Total sales commissions ÷ Unit sales = $132,000 ÷ 20,000 = $6.60 The average sales commission per unit is constant within the relevant range.
In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $30,000, the direct labor cost was:
$81,000 Direct labor = 0.60 × Conversion cost Manufacturing overhead = $54,000 Conversion cost = Direct labor + Manufacturing overhead Conversion cost = Direct labor + $54,000 Conversion cost = (0.60 × Conversion cost) + $54,000 0.40 × Conversion cost = $54,000 Conversion cost = $54,000 ÷ 0.40 Conversion cost = $135,000 Direct labor = 0.60 × Conversion cost = 0.60 × $135,000 = $81,000
Haack Incorporated is a merchandising company. Last month the company's cost of goods sold was $84,000. The company's beginning merchandise inventory was $20,000 and its ending merchandise inventory was $18,000. What was the total amount of the company's merchandise purchases for the month?
$82,000 Cost of goods sold = Beginning merchandise inventory + Purchases − Ending merchandise inventory $84,000 = $20,000 + Purchases − $18,000 Purchases = $84,000 − $20,000 + $18,000 = $82,000
Vignana Corporation manufactures and sells hand-painted clay figurines of popular sports heroes. Shown below are some of the costs incurred by Vignana for last year: Cost of clay used in production$ 65,000Wages paid to the workers who paint the figurines$ 90,000Wages paid to the sales manager's secretary$ 22,000Cost of junk mail advertising$ 47,000 What is the total of the conversion costs above?
$90,000 Conversion costs include only the wages paid to the workers who paint the figurines.
A merchandising company typically will have a high proportion of which type of cost in its cost structure?
Variable.
A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,100 and is paid at the beginning of the first year. Sixty percent of the premium applies to manufacturing operations and forty percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? ProductPeriodA)$ 280$ 420B)$ 420$ 280C)$ 700$ 0D)$ 0$ 700
B Annual insurance expense = $2,100 ÷ 3 = $700 Portion applicable to product cost = 0.60 × $700 = $420 Portion applicable to period cost = 0.40 × $700 = $280
Direct labor cost is classified as: Conversion costPrime CostA)YesYesB)NoNoC)NoYesD)YesNo
A
Which of the following is an example of a period cost in a company that makes clothing?
Advertising cost for a new line of clothing.
Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle? Direct CostFixed CostA)YesYesB)YesNoC)NoYesD)NoNo
C
As the level of activity increases, how will a mixed cost in total and per unit behave? In TotalPer UnitA)IncreaseDecreaseB)IncreaseIncreaseC)IncreaseNo effectD)DecreaseIncreaseE)DecreaseNo effect
Choice A
The cost of electricity for running production equipment is classified as: Conversion costPeriod costA)YesNoB)YesYesC)NoYesD)NoNo
Choice A
A factory supervisor's wages are classified as: Indirect laborFixed manufacturing overheadA)NoNoB)YesYesC)YesNoD)NoYes
Choice B
The following data have been collected for four different cost items. Cost ItemCost at 100 unitsCost at 140 unitsW$8,000$10,560X$5,000$ 5,000Y$6,500$ 9,100Z$6,700$ 8,580 Which of the following classifications of these cost items by cost behavior is correct? Cost WCost XCost YCost ZA)variablefixedmixedvariableB)mixedfixedvariablemixedC)variablefixedvariablevariableD)mixedfixedmixedmixed
Choice B
Which of the following approaches to preparing an income statement includes a calculation of the gross margin? TraditionalApproachContributionApproachA)YesYesB)YesNoC)NoYesD)NoNo
Choice B
The cost of direct materials is classified as a: Conversion costPrime costA)NoNoB)YesNoC)NoYesD)YesYes
Choice C
The fixed portion of the cost of electricity for a manufacturing facility is classified as a: Period costProduct CostA)YesYesB)NoNoC)NoYesD)YesNo
Choice C
The costs of direct materials are classified as: Conversion costManufacturing costPrime costA)YesYesYesB)NoNoNoC)YesYesNoD)NoYesYes
D
Which of the following is correct concerning reactions to INCREASES in activity? Total Variable CostVariable Cost Per UnitA)IncreasesDecreasesB)ConstantDecreasesC)DecreasesConstantD)IncreasesConstant
D
Which of the following is NOT a period cost?
Depreciation of factory maintenance equipment.
Which of the following costs is classified as both a prime cost and a conversion cost?
Direct labor.
Kesterson Corporation has provided the following information: Cost per UnitCost per PeriodDirect materials$ 6.20 Direct labor$ 3.10 Variable manufacturing overhead$ 1.35 Fixed manufacturing overhead $ 14,000Sales commissions$ 1.50 Variable administrative expense$ 0.40 Fixed selling and administrative expense $ 4,500 The incremental manufacturing cost that the company will incur if it increases production from 5,000 to 5,001 units is closest to:
Direct materials$ 6.20Direct labor3.10Variable manufacturing overhead1.35Incremental manufacturing cost$ 10.65
Which of the following statements is true when referring to fixed costs?
Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.
Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies?
Fixed manufacturing overhead.
Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as:
MOH
Which of the following statements is correct in describing manufacturing overhead
Manufacturing overhead consists of all manufacturing cost except for prime cost.
Which of the following costs could contain both variable and fixed cost elements with respect to the total output of the company?
Manufacturing overhead.
Which of the following statements about product costs is true?
Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets.
Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?
Production supplies.
Contribution margin is:
Sales less variable production, variable selling, and variable administrative expenses.
Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?
The amount paid to the individual who stains a chair.
Which costs will change with a decrease in activity within the relevant range?
Unit fixed costs and total variable cost.
Which of the following statements concerning direct and indirect costs is NOT true?
Whether a particular cost is classified as direct or indirect does not depend on the cost object.
An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's BookstoreIncome StatementFor Quarter Ended March 31Sales $ 900,000Cost of goods sold 630,000Gross margin 270,000Selling and administrative expenses Selling$ 100,000 Administrative104,000204,000Net operating income $ 66,000 On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:
Y = $78,000 + $7X Unit sales = $900,000 ÷ $50 per book = 18,000 books Selling expenses = Fixed selling expenses + ($5 per book × 18,000 books) $100,000 = Fixed selling expenses + $90,000 Fixed selling expenses = $100,000 − $90,000 = $10,000 Administrative expenses = Fixed administrative expenses + (0.04 × $900,000) $104,000 = Fixed administrative expenses + $36,000 Fixed administrative expenses = $104,000 − $36,000 = $68,000 Variable administrative expense per unit = 0.04 × $50 per book = $2 per book Y = ($10,000 + $68,000) + ($5 + $2) X Y = $78,000 + $7X
An example of a committed fixed cost is:
a long-term equipment lease.
Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as:
a period cost that is fixed with respect to the company's output.
The salary paid to the president of a company would be classified on the income statement as a(n):
administrative expense.
Differential costs can:
be either fixed or variable.
Prime cost consists of:
direct materials and direct labor.
Direct costs:
can be easily traced to a particular cost object.
Product costs that have become expenses can be found in:
cost of goods sold.
The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:
cost structure.
Fixed costs expressed on a per unit basis:
decrease with increases in activity.
All of the following are examples of product costs except:
depreciation on the company's retail outlets.
For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have remained stable. This cost per unit increase may be due to _____________ costs if the level of activity at Jinan is _______________.
fixed, decreasing
When the level of activity decreases within the relevant range, the fixed cost per unit will:
increase.
The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):
indirect material cost.
Factory overhead is typically a(n):
mixed cost.
Property taxes on a company's factory building would be classified as a(n):
product cost.
One full-time clerical worker is needed for every 750 accounts receivable. The total wages of the accounts receivable clerks is an example of a:
step-variable cost.
A cost incurred in the past that is not relevant to any current decision is classified as a(n):
sunk cost.
The term that refers to costs incurred in the past that are not relevant to a decision is:
sunk cost.
All of the following can be differential costs except:
sunk costs.
An example of a committed fixed cost would be:
taxes on real estate.
In the standard cost formula Y = a + bX, what does the "X" represent?
the level of activity
In the standard cost formula Y = a + bX, what does the "Y" represent?
total cost
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.
Within the relevant range, a difference between variable costs and fixed costs is:
variable costs per unit are constant and fixed costs per unit fluctuate.
Within the relevant range, variable costs can be expected to
vary in total in direct proportion to changes in the activity level.