Accounting 2: Exam 2 ( Ch. 8 & 9)

A retail store has 10,000 square feet of space and incurs rent costs of $5,000 per month. If Department A uses 2,000 square feet of space, the amount of rent allocated to the department will be $

$1,000 2,000/10,000=0.2 0.2 x 5,000 = 1,0000

XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the direct labor cost variance.

$1,000 F Labor cost variance = total actual cost - total standard cost. $84,000 - $85,000 = $1,000 F

XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the direct labor rate variance.

$1,000 U $84,000 - $83,000 = $1,000 U

XYZ Company makes one product and has calculated the following amounts for direct materials: Actual cost: AQ x AP = $150,000; AQ x SP = $145,000; Standard cost: SQ x SP = $152,000. Compute the direct materials variance.

$2,000 F $150,000 - $152,000 = $2,000 F

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct materials variance.

$220 F $17,280 - (35,000 x 0.5 lb x $1/lb) = $220 F

XYZ Company makes a product and has calculated the following amounts for direct materials: AQ x AP = $150,000; AQ x SP = $145,000; SQ x SP = $152,000. Compute the direct materials quantity variance.

$7,000 F $145,000 - $152,000 = $7,000 F

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct materials price variance.

$720 F $17,280/18,000=.96 actual cost. $1.00-.96=.04 x 18,000 lbs = $720 F

During the period, a company reports Sales of $38,000, Cost of Goods Sold of $20,000, and Income of $1,500. Profit margin is:

3.9% $1,500 / $38,000 = 3.9%

A manufacturing division has an average assets of $1,800,000 and income of $720,000. The division's return on investment is

40% 720,000/1,800,000=0.4

A company incurs advertising costs of $10,000. The company's three selling departments have the following sales: Department 1—$10,000; Department 2—$30,000; Department 3—$40,000. Advertising is allocated based on percent of sales. The amount of advertising allocated to Department 3 will be $

5,000 Department 3: 40,000/80,000=0.5 or 50% 10,000 x 0.5= $5,000

During the period, a company reports Sales of $48,000, Cost of Goods Sold of $28,000, and Income of $2,500. Profit margin is: Multiple choice question.

5.2% 2,500/48,000=0.052

A company has days' sales in accounts receivable of 40 days; days' sales in inventory of 55 days, and days' payable outstanding of 30 days. The cash conversion cycle is

65 40 + 55 - 30 = 65

Budget reports are commonly prepared for: (Check all that apply).

A quarter, month, and year.

A departmental contribution to overhead report is based on:

Controllable costs

A department that incurs costs without generating revenues is considered a(n):

Cost center

The cash conversion cycle is computed as:

Days' sales in accounts receivable plus days' sales in inventory minus days' payable outstanding

Which report is more effective in evaluating the performance of profit centers?

Departmental contribution to overhead reports

Profit centers commonly use _____ to report profit center performance:

Departmental income statements

Departmental income statements include:

Direct and indirect expenses

True or false: Controllable costs are the same as direct costs. True false question.

False The manager may or may not have control over all direct costs.

Transfer prices: (Check all that apply.)

Have a direct impact on division income, and are transfers within the same company.

Decisions related to allocating expenses include: (Check all that apply).

How to allocate indirect expenses and how to allocate service department expenses

Transfer pricing can use the following approaches:

Market-based, negotiated price, and cost

Evaluating manager's performance based solely on financial measures has limitations. Therefore, companies should consider using ___ measures to help evaluate manager performance.

Nonfinancial

When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.

Per unit, in total

A _____ center manager is evaluated on their success in generating income.

Profit center

Which of the following statements correctly define(s) a profit margin? (Check all that apply.)

Profit margin is the ratio of a business's net income to its net sales and Profit margin is also called return on sales.

Budget ___ compare actual results to budgeted results.

Reports

An example of a cost that a department manager would not control is:

The manager's own salary

Reports to ______ managers are usually less detailed because they need to concentrate on the key issues.

Upper level