Accounting 307 for midterm 1

Norwood Appliance produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate executives, $100,000; assembly-line workers, $80,000; security guards, $18,000; and plant supervisor, $30,000. The total of Norwood's direct labor cost was:

$80,000

Managers use management accounting information to:

1. Develop, communicate, and implement strategies 2. Coordinate product design, production, and marketing decisions and evaluate a company's performance

Process costing: A. allocates all product costs, including materials and labor. B. results in different costs for different units produced. C. is commonly used by general contractors who construct custom-built homes. D. is used exclusively in manufacturing.

A. allocates all product costs, including materials and labor.

When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base. A. budgeted; actual B. budgeted; budgeted C. actual; budgeted D. actual; actual

A. budgeted; actual

22. One reason indirect costs may be underapplied is because: A. the actual allocation base quantity exceeds the budgeted quantity. B. budgeted indirect costs exceed actual indirect costs. C. requisitioned direct materials exceed budgeted material costs. D. Both A and B are correct

A. the actual allocation base quantity exceeds the budgeted quantity.

Actual OH rate

Actual OH costs/ Actual qnty. of the cost-allocation base (hrs)

Which of the following is a sign that an ABC system may be useful? A. There are small amounts of indirect costs. B. Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity. C. Operations remain fairly consistent. D. Operations staff agrees with accountants about the costs of manufacturing and marketing products and services.

B. Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.

Which of the following is a reason that has accelerated the demand for refinements to the costing system? A. The declining demand for customized products has led managers to decrease the variety of products and services their companies offer. B. The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs. C. The increased of automated processes has led to the increase in direct manufacturing cost leading to a decrease in breakeven point. D. The increasing competition in product markets has led to an increase in contribution margin resulting in a decrease of breakeven point.

B. The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.

Nova Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently Nova produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change? A. Total manufacturing costs will increase and unit manufacturing costs will stay the same. B. Total manufacturing costs will increase and unit manufacturing costs will decrease. C. Total manufacturing costs will stay the same and unit manufacturing costs will stay the same. D. Total manufacturing costs will increase and unit manufacturing costs will also increase.

B. Total manufacturing costs will increase and unit manufacturing costs will decrease.

Job-costing is likely to be used by: A. oil refining companies. B. advertising agencies. C. postal service companies. D. beverage production companies.

B. advertising agencies.

Recognizing ABC information is not always perfect because: A. it mostly uses far too many indirect cost pools than what is actually required. B. it balances the need for better information against the costs of creating a complex system. C. it lacks the simplicity that traditional systems used to have to allocate overhead costs. D. it never measures how the resources of an organization are used.

B. it balances the need for better information against the costs of creating a complex system.

Budgeted OH rate

Budgeted OH cost/ Budgeted qnty of the cost allocation base (hrs)

Suoboda Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Activity Cost Pools Activity Rate Assembling products $4.62 per assembly hour Processing customer orders $87.24 per customer order Setting up batches $13.19 per batch Data for one of the company's products follow: Product I90W Number of assembly hours 519 Number of customer orders 19 Number of batches 24 How much overhead cost would be assigned to Product I90W using the activity-based costing system? A. $316.56. B. $105.05. C. $4,371.90. D. $59,038.10.

C. $4,371.90.

Which of the following statements is true of ABC systems? A. ABC systems are time-driven cost systems. B. ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs. C. ABC systems provide valuable information to managers beyond accurate product costs. D. ABC systems assume all costs are variable costs.

C. ABC systems provide valuable information to managers beyond accurate product costs.

Planning consists of all of these areas EXCEPT? a. selecting organizational goals b. deciding how to attain the desired goals c. evaluating performance d. predicting results under various alternatives

C. Evaluating performance

Classifying a cost as either direct or indirect depends upon: A. the behavior of the cost in response to volume changes. B. whether the cost is expensed in the period in which it is incurred. C. whether the cost can be easily traced to the cost object. D. whether an expenditure is avoidable or not in the future.

C. Whether the cost can be easily traced to the cost object.

The advantage of using normal costing instead of actual costing is: A. indirect costs are assigned at the end of the year when they are known. B. the job cost is more accurate under normal costing. C. indirect costs are assigned to a job on a timely basis. D. normal costing provides a higher gross profit margin.

C. indirect costs are assigned to a job on a timely basis.

Design costs are an example of: A. unit-level costs. B. batch-level costs. C. product-sustaining costs. D. facility-sustaining costs.

C. product-sustaining costs

Cost of goods manufactured will usually include: A. only costs incurred during the current period. B. only direct labor and direct materials costs. C. some costs incurred during the prior period as well as costs incurred during the current period. D. some period costs as well as some product costs

C. some costs incurred during the prior period as well as costs incurred during the current period

Eigen Manufacturing Corp. provided the following information for last month: Sales $40,000 Variable costs 14,000 Fixed costs 10,000 Operating income $16,000 If sales reduce to half of the amount in the next month, what is the projected operating income? A. $15,000. B. $6,000. C. $16,000. D. $3,000.

D. $3,000.

Companies use ABC system information to: A. analyze costs. B. prepare budgets. C. evaluate performance. D. All of these answers are correct

D. All of these answers are correct

23. Product costing information is used by managers: A. to make decisions and strategy. B. for planning and control. C. for cost management. D. All of these answers are correct.

D. All of these answers are correct.

Put the following ABC implementation steps in order: A Compute the allocation rates. B Compute the total cost of the products. C Identify the products that are the cost objects. D Select the cost allocation bases. A. DACB B. DBCA C. BADC D. CDAB

D. CDAB

Micro Computer Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company. The cost of this toll-free line would be classified as which of the following? A. Product cost. B. Manufacturing overhead. C. Direct labor. D. Period cost.

D. period or selling cost

Normal costing is a method of job costing that allocates an indirect cost based on the actual indirect-cost rate times the actual quantity of the cost-allocation base? true or false?

False allocates an indirect cost based on the budgeted indirect-cost rate times the actual activity consumption

How does management accounting differ from financial​ accounting?

Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles​ (GAAP).

Distinguish planning decisions from control decisions.

Planning decisions focus on selecting organization​ goals, predicting results under various alternative ways of achieving those​ goals, deciding how to attain the desired​ goals, and communicating the goals and how to attain them to the entire organization.Control decisions focus on taking actions that implement the planning​ decisions, deciding how to evaluate​ performance, and what related feedback to provide that will help future decision making.

Output unit-level costs

costs of activities performed on each individual unit of a product or service. These costs increase as the number of units produced increases.

Batch-level costs

costs of activities related to a group of units of products or services rather than to each individual unit of product or service.

Facility-sustaining costs are?

costs that can not be traced to individual products but support the company as a whole

Product-sustaining cost are?

costs used to support individual products regardless of the number of units or batches tested.

Management accounting includes all of the following EXCEPT? a. implementing strategies b. developing budgets c. preparing special studies and forecasts d. preparing the statement of cash flows

d. preparing the statement of cash flows

formula for COST OF GOODS MANUFACTURED?

direct materials+ direct labor+ OH+ beg wip - end wip

Process costing is used to assign manufacturing costs to unique batches of a product. true or false

false

cost management is narrowly focused on a continuous reduction of costs? true or false

false

financial​ accounting

focuses on reporting financial information to external parties such as investors, government agencies, banks, and suppliers based on Generally Accepted Accounting Principles (GAAP)

process costing

is best used by companies that produce many units of a single product and when one unit of output is indistinguishable from any other unit of output. Because the units of output are identical, the company will probably use an average cost system to determine product cost.

Cost accounting

is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization

Management accounting

is the process of measuring, analyzing, and reporting financial and non-financial information that helps managers make decisions to fulfill the goals of an organization

Batch-level costs are?

related to a group of units of the products. They are not related to the number of units tested.

output unit-level costs are?

related to the number of units tested; required for each unit tested

financial accounting information affects managers' decisions and actions

through compensation, which is often, in part, based on numbers in financial statements.

if a company overcost one of its products, then it will undercost at least one of its other products. true or false?

true

products, services, departments, and customers may be cost objects? true or false?

true