ACC 220 Final

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):

indirect material cost

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will:

have no effect on the break-even volume.

BR Company has a contribution margin of 8%. Sales are $517,000, net operating income is $41,360, and average operating assets are $136,000. What is the company's return on investment (ROI)?

$41,360 ÷ $136,000 = 30.4%

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 dollar, what should be the total sales commissions at a sales volume of 35,000 units?

$514,300 ÷ 37,000 = $13.90 $13.90 × 35,000 = $486,500

Abburi Company's manufacturing overhead is 40% of its total conversion costs. If direct labor is $67,200 and if direct materials are $23,600, the manufacturing overhead is:

$67,200 ÷ 0.60 = $112,000 0.40 × $112,000 = $44,800

Haack Incorporated is a merchandising company. Last month the company's cost of goods sold was $69,400. The company's beginning merchandise inventory was $11,600 and its ending merchandise inventory was $29,400. What was the total amount of the company's merchandise purchases for the month?

$69,400 − $11,600 + $29,400 = $87,200

Assume that a company's budgeted revenue per unit is $50. The company's planned level of activity was 2,000 units and its actual level of activity was 2,200 units. Its actual revenue was $100,800. The company's revenue variance is:

(2,200 x 50) = 110,000 - 100,800 = 9,200 U

The Assembly Department started the month with 25,800 units in its beginning work in process inventory. An additional 310,800 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 30,800 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month?

25,800 + 310,800 − 30,800 = 305,800

Bims Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 2,600 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 62,500 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 21,000 units in the ending work in process inventory of the Assembly Department that were 60% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month?

2,600 + 62,500 − 21,000 = 44,100

Assume a company's estimated sales is 28,000 units. Its desired ending finished goods inventory is 5,500 units, and its beginning finished goods inventory is 3,500 units. What is the required production in units?

28,000 + 5,500= 33,500 - 3,500 = 30,000

Bendel Incorporated has an operating leverage of 5.7. If the company's sales volume increases by 15%, its net operating income should increase by about:

5.7 × 15% = 85.5%

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

Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $50,000 and $60,000, respectively. The company expects to collect 40% of its credit sales in the month of the sale and the remaining 60% in the following month. What amount of accounts receivable would the company report in its balance sheet at the end of the second month?

60,000 x .6 = 36,000

All materials in the Fabrication Department are added at the beginning of the production process. On July 1, the Fabrication Department had 30 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 20 canoes in process that were 40% complete with respect to conversion cost. During July, the Fabrication Department completed 72 canoes and transferred them to the Waterproofing Department. What are the Fabrication Department's equivalent units of production related to materials for July?

72 + 1.00 × 20 = 92

Which of the following is a criticism of return on investment (ROI)?

A manager who is evaluated using ROI may reject investment opportunities that lower her ROI even though the investment would be profitable for the company as a whole.

The journal entry to record applying overhead during the production process is:

Debit work in process and credit manufacturing overhead

Conversion costs include:

Direct labor cost and manufacturing overhead cost.

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

Facility-level

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

Manufacturing overhead is incurred only to support some jobs.

Which of the following is the correct formula to compute the predetermined overhead rate?

Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

contribution margin formula

Sales − variable expenses = contribution margin

If the contribution margin is not sufficient to cover fixed expenses:

a loss occurs

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year?

contribution margin ratio increases and break even point decreases

Manufacturing overhead includes:

all manufacturing costs except direct labor and direct materials

- A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product. - A direct cost is a cost that can be easily traced to the particular cost object under consideration. - A cost can be direct or indirect. The classification can change if the cost object changes.

all of these are true

1. Batch-level activities are performed each time a batch of goods is processed. The cost of a batch-level activity does not depend on the number of units in the batch. 2. Facility-level costs cannot be traced on a cause-and-effect basis to individual products.

both are true

Which of the following performance measures will increase if inventory decreases and all else remains the same?

both return on investment and residual outcome

1. Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period. 2. The number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory.

both statements are true

During June, Buttrey Corporation incurred $75,000 of direct labor costs and $15,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

debit to Work in Process of $75,000

Which of the following journal entries would be used to record direct labor costs in a company having two processing departments (Department A and Department B)?

debit work in process department A and B then credit salaries and wages payable

In activity-based costing, the total activity in an activity cost pool can be computed by:

dividing the total overhead cost in the activity cost pool by the activity cost pool's activity rate.

Which of the following budgets are prepared before the sales budget?

neither the budgeted income statement nor the direct labor budget

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

net operating income

Poorly trained workers could have an unfavorable effect on which of the following variances?

not labor rate variance but materials quantity variance

1. Residual income should be used to evaluate an investment center rather than a cost or profit center. 2. Residual income can be used most effectively in comparing the performance of divisions of different size. 3. Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return.

only 1 and 3 are true

1. When designing an activity-based costing system, related activities are frequently combined to reduce the amount of detail and record-keeping cost. 2. Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours. 3. Activity-based costing involves a two-stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures. 4. The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs.

only 1 and 3 are true

1. If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used. 2. Actual overhead costs are not assigned to jobs in a job costing system. 3. The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.

only 2 is true

Departmental overhead rates may not correctly assign overhead costs due to:

overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production

The cost of direct materials is classified as a:

prime cost but not a conversion cost

In process costing, a separate work in process account is kept for each:

processing department

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

The production department should generally be responsible for materials price variances that resulted from:

rush orders arising from poor scheduling.

If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then:

the standard variable overhead rate exceeded the actual rate.

Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:

units in beginning work in process and the units started.

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