Accounting II:

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Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%. The division's residual income is closest to:

$1,324,320

The Maxit Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July: Actual variable manufacturing overhead cost incurred: $23,280 Actual machine-hours worked: 1,900 hours Variable overhead rate variance: $3,870 U Total variable overhead spending variance: $5,280 U The variable overhead efficiency variance for July is

$1,410 U

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: Sales$36,480,000 Net operating income$2,808,960 Average operating assets$8,000,000 The company's minimum required rate of return 16% The division's residual income is closest to:

$1,528,960

Majer Corporation makes a product with the following standard costs: Standard Quantityor HoursStandard Price orRateStandard Cost Per UnitDirect materials 6.7ounces$3.00per ounce$20.10Direct labor 0.7hours$18.00per hour$12.60Variable overhead 0.7hours$3.00per hour$2.10 The company reported the following results concerning this product in February. Originally budgeted output 5,700unitsActual output 8,500unitsRaw materials used in production 30,800ouncesActual direct labor-hours 1,980hoursPurchases of raw materials 33,200ouncesActual price of raw materials$92.90per ounceActual direct labor rate$102.40per hourActual variable overhead rate$2.10per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for February is:

$1,782 F

Milar Corporation makes a product with the following standard costs: Standard Quantity orHoursStandard Price orRateDirect materials 2.0pounds$7.00per poundDirect labor 0.5hours$13.00per hourVariable overhead 0.5hours$7.00per hour In January the company produced 4,500 units using 10,110 pounds of the direct material and 2,090 direct labor-hours. During the month, the company purchased 10,680 pounds of the direct material at a cost of $76,560. The actual direct labor cost was $38,257 and the actual variable overhead cost was $11,958. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

$1,800 U

Sales: $400,000 Margin of Safety: $100,000 Contribution Margin Ratio: 75% Degree of Operating Leverage: 4 What is the Total Fixed Expenses to be Next Year?

$400,000 - $100,000= $300,000 $300,000 * 75% = $225,000

The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%. What was the Consumer Products Division's minimum required return in May?

$80,000

Variable Manufacturing Overhead Efficiency Variance

(AH X AR) - (AH - SR)

Tanouye Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time12.7 Process time1.6 Inspection time0.4 Move time2.1 Queue time8.8 The throughput time was:

12.9 hours

Actual Quantity of Input, at Actual Price

AQ x AP

Actual Quantity of Input, at Standard Price

AQ x SP

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 Cost A)YesYes B)YesNo C)NoYes D)NoNo

D) No No

A joint product is:

one of several products produced from a common input.

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $24,000 and variable expenses of $6,480. Product Y45E had sales of $29,000 and variable expenses of $11,010. The fixed expenses of the entire company were $32,280. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

would decrease.

$1,300

At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $10,370 and that the associated rate variance was $340 unfavorable. If 5,900 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:

$1.70 per MH

Labor Rate Variance (LRV)

(AH x AR) - (AH x SR)

Materials Price Variance (MPV)

(AQ x AP) - (AQ x SP)

Profit

(Sales - Variable Expenses) - Fixed Expenses

Fixed overhead costthat can be eliminated ifthe bowls are purchasedfrom the outside supplier The variablesellingcost of theSnack Buster A)YesYes B)YesNo C)NoYes D)NoNo

Choice B

Contribution Margin (CM) Ratio

Contribution Margin (CM) Per Unit / Sales Price Per Unit

Which of the following statements about using a plantwide overhead rate based on direct labor is correct?

It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

Margin of Safety in Dollars

Total Sales - Break Even Sales

In a job-order costing system, manufacturing overhead applied is recorded as a debit to:

Work in Process inventory.

Product costs that have become expenses can be found in:

cost of goods sold.

Dizzy Amusement Park is open from 8:00 am till midnight every day of the year. Dizzy charges its patrons a daily entrance fee of $30 per person which gives them unlimited access to all of the park's 35 rides. Dizzy employees a certified operator for each of its 35 rides. Each operator is paid $20 per hour. The cost of the certified operators would best be described as a:

fixed cost

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

Kinsi Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that:

generates the highest contribution margin per stamping machine hour.

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.

Delivery Cycle Time

wait time + throughput time

Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 4,000 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 4,000 Machine-Hours Actual CostsVariable overhead costs: Supplies$11,200 $12,230 Indirect labor 32,000 32,200 Fixed overhead costs: Supervision 20,100 19,740 Utilities 6,300 6,210 Factory depreciation 7,300 7,610 Total overhead cost$76,900 $77,990 The company actually worked 4,320 machine-hours during the month. The standard hours allowed for the actual output were 4,310 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

$108 Unfavorable

Chhom Corporation makes a product whose direct labor standards are 0.8 hours per unit and $37 per hour. In November the company produced 7,800 units using 5,740 direct labor-hours. The actual direct labor cost was $120,540. The labor efficiency variance for November is:

$18,500. F

The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 5.2hoursStandard variable overhead rate$11.60per hour The following data pertain to operations for the last month: Actual hours 2,500hoursActual total variable manufacturing overhead cost$29,590 Actual output 150units What is the variable overhead efficiency variance for the month?

$19,952 U

The following labor standards have been established for a particular product: Standard labor-hours per unit of output 9.1hours Standard labor rate$16.20per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 9,200hours Actual total labor cost$146,280 Actual output 910units What is the labor rate variance for the month?

$2,760 F

The following labor standards have been established for a particular product: Standard labor-hours per unit of output 9.5hoursStandard labor rate$16.25per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 11,600hoursActual total labor cost$185,600 Actual output 2,000units What is the labor rate variance for the month?

$2,900 F

The following materials standards have been established for a particular product: Standard quantity per unit of output 5.6poundsStandard price$14.40per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased 6,600poundsActual cost of materials purchased$64,080 Actual materials used in production 6,100poundsActual output 820units The direct materials purchases variance is computed when the materials are purchased. What is the materials quantity variance for the month?

$21,715 U

The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.4hoursStandard labor rate$12.20per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 6,200hoursActual total labor cost$73,160 Actual output 950units What is the labor efficiency variance for the month?

$21,716 F

Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.20 hours per unit. The variable overhead rate standard is $8.90 per hour. In January the company produced 4,900 units using 1,010 direct labor-hours. The actual variable overhead rate was $8.80 per hour. The variable overhead efficiency variance for January is:

$267 U

The following materials standards have been established for a particular product: Standard quantity per unit of output 5.0metersStandard price$17.70per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,900metersActual cost of materials purchased$143,780 Actual materials used in production 7,400metersActual output 1,450units What is the materials price variance for the month?

$3,950 U

If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?

$30,000

Sioux Corporation is estimating the following sales for the first four months of next year: January$210,000February$280,000March$340,000April$370,000 Sales are normally collected 60% in the month of sale and 40% in the month following the sale. Based on this information, how much cash should Sioux expect to collect during the month of April?

$358,000

Walbin Corporation uses the weighted-average method in its process costing system. The beginning work in process inventory in a particular department consisted of 21,000 units, 100% complete with respect to materials cost and 40% complete with respect to conversion costs. The total cost in the beginning work in process inventory was $26,400. A total of 59,000 units were transferred out of the department during the month. The costs per equivalent unit were computed to be $2.20 for materials and $3.90 for conversion costs. The total cost of the units completed and transferred out of the department was:

$359,900

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard QuantityStandard Price orRateStandard CostDirect materials 6.00pounds$.80per pound$4.80Direct labor 0.60hours$35.50per hour$21.30Variable manufacturing overhead 0.60hours$8.70per hour$5.22 During March, the following activity was recorded by the company: The company produced 2,600 units during the month. A total of 19,600 pounds of material were purchased at a cost of $13,780. There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,820 pounds of material remained in the warehouse. During March, 1,110 direct labor-hours were worked at a rate of $32.50 per hour. Variable manufacturing overhead costs during March totaled $14,261. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for March is:

$4,604 U

Milar Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price orRateDirect materials 13.0pounds$12.50per poundDirect labor 0.8hours$38.00per hourVariable overhead 0.8hours$18.00per hour In January the company produced 3,490 units using 13,960 pounds of the direct material and 2,912 direct labor-hours. During the month, the company purchased 14,720 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $110,238 and the actual variable overhead cost was $50,284. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for January is:

$418 F

The West Division of Cecchetti Corporation had average operating assets of $240,000 and net operating income of $42,200 in August. The minimum required rate of return for performance evaluation purposes is 19%. What was the West Division's minimum required return in August?

$45,600

Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $26,900. The South Division's divisional segment margin is $42,800 and the West Division's divisional segment margin is $29,900. What is the amount of the common fixed expense not traceable to the individual divisions?

$45,800

Gipple Corporation makes a product that uses a material with the quantity standard of 8.4 grams per unit of output and the price standard of $7.10 per gram. In January the company produced 4,500 units using 25,970 grams of the direct material. During the month the company purchased 28,500 grams of the direct material at $7.30 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:

$5,700 U

Bulluck Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 4.10grams $1.60per gram Direct labor 0.60hours$17.00per hour Variable overhead 0.60hours$2.60per hour The company reported the following results concerning this product in July. Actual output 3,600units Raw materials used in production 11,970grams Actual direct labor-hours 1,950hours Purchases of raw materials 12,700grams Actual price of raw materials purchased$1.80per gram Actual direct labor rate$12.00per hour Actual variable overhead rate$2.70per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for July is:

$546 F

Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or RateDirect labor 0.60hours$31.00per hourVariable overhead 0.60hours$5.10per hour In August the company produced 9,000 units using 5,510 direct labor-hours. The actual variable overhead cost was $26,448. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is:

$561 U

Majer Corporation makes a product with the following standard costs: Standard Quantityor HoursStandard Price orRateStandard Cost Per UnitDirect materials 6.6ounces$2.00per ounce$13.20Direct labor 0.6hours$17.00per hour$10.20Variable overhead 0.6hours$2.00per hour$1.20 The company reported the following results concerning this product in February. Originally budgeted output 5,600unitsActual output 8,400unitsRaw materials used in production 30,700ouncesActual direct labor-hours 1,970hoursPurchases of raw materials 31,700ouncesActual price of raw materials$82.90per ounceActual direct labor rate$92.40per hourActual variable overhead rate$4.70per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for February is:

$6,140 F

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard QuantityStandard Price or RateStandard CostDirect materials 1.5pounds$7.50per pound$11.25Direct labor 0.6hours$24.00per hour$14.40Variable manufacturing overhead 0.6hours$5.75per hour$3.45 During March, the following activity was recorded by the company: The company produced 6,600 units during the month. A total of 13,400 pounds of material were purchased at a cost of $37,520. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,680 pounds of material remained in the warehouse. During March, 4,160 direct labor-hours were worked at a rate of $24.50 per hour. Variable manufacturing overhead costs during March totaled $14,552. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for March is:

$6,150 U

Suver Corporation has a standard costing system. The following data are available for June: Actual quantity of direct materials purchased 30,000pounds Standard price of direct materials$6.00per pound Material price variance$6,000Unfavorable Material quantity variance$3,000Favorable The actual price per pound of direct materials purchased in June was:

$6.20 per pound

Irving Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect labor 0.20hours$21.00per hour$4.20 Variable overhead 0.20hours$5.70per hour$1.14 In November the company's budgeted production was 6,000 units, but the actual production was 5,800 units. The company used 1,500 direct labor-hours to produce this output. The actual variable overhead cost was $7,950. The company applies variable overhead on the basis of direct labor-hours. The variable overhead rate variance for November is:

$600 F

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 2.90DLHsStandard variable overhead rate$10.65per DLH The following data pertain to operations for the last month: Actual direct labor-hours 9,700DLHsActual total variable manufacturing overhead cost$95,750 Actual output 2,400units What is the variable overhead rate variance for the month

$7,555 F

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 4.60DLHsStandard variable overhead rate$11.55per DLH The following data pertain to operations for the last month: Actual direct labor-hours 8,500DLHsActual total variable manufacturing overhead cost$95,930 Actual output 1,700units What is the variable overhead efficiency variance for the month?

$7,854 U

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: Per UnitDirect materials$22.50 Direct labor$7.50 Variable manufacturing overhead$1.70 Fixed manufacturing overhead$19.00 Variable selling & administrative expense$2.70 Fixed selling & administrative expense$8.60 The normal selling price of the product is $67.80 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $60.60 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:

$84,300

Chavin Company had the following results during August: net operating income, $220,000; turnover, 5; and ROI 25%. Chavin Company's average operating assets were:

$880,000

Handerson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateDirect materials 8.9kilos$6.40per kiloDirect labor 0.4hours$24.00per hourVariable overhead 0.4hours$6.40per hour The company reported the following results concerning this product in August. Actual output 3,600unitsRaw materials used in production 29,430kilosPurchases of raw materials 32,000kilosActual direct labor-hours 1,100hoursActual cost of raw materials purchases$199,920 Actual direct labor cost$23,136 Actual variable overhead cost$7,940 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for August is:

$900 U

Target Profit

(fixed costs + target profit)/contribution margin ratio

Vandenheuvel Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: HoursMove time2.4Wait time18.2Queue time6.8Process time1.8Inspection time0.3 The manufacturing cycle efficiency (MCE) was closest to:

0.16

Simkin Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time20.6 Process time1.9 Inspection time0.1 Move time2.7 Queue time4.8 The manufacturing cycle efficiency (MCE) was closest to:

0.20

Piper Corporation's standards call for 2,200 direct labor-hours to produce 1,100 units of product. During October the company worked 950 direct labor-hours and produced 950 units. The standard hours allowed for October would be:

1,900 hours

Schapp Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: Hours Move time2.6 Wait time10.4 Queue time6.8 Process time1.5 Inspection time0.4 The throughput time was:

11.3 hours

Kingcade Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time18.3 Process time1.1 Inspection time0.1 Move time2.0 Queue time9.1 The throughput time was:

12.3 hours

Mcmurtry Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its break-even sales are 8,100 units. The margin of safety as a percentage of sales is closest to:

19%

Pinkton Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: Hours Move time3.6 Wait time13.3 Queue time5.1 Process time0.5 Inspection time0.2 The delivery cycle time was:

22.7 hours

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000. The division's turnover is closest to:

3.26

Agustin Industries is a division of a major corporation. Data concerning the most recent year appears below: Sales$17,000,000 Net operating income$1,581,000 Average operating assets$5,000,000 The division's turnover is closest to:

3.40

30.6 hours

31.62%

32.1%

Navern Corporation manufactures and sells custom home elevators. From the time an order is placed until the time the elevator is installed in the customer's home averages 90 days. This 90 days is spent as follows: Wait time40days Inspection time2days Process time18days Move time20days Queue time10days What is Navern's manufacturing cycle efficiency (MCE) for its elevators?

36.0%

Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time28.0 Process time1.0 Inspection time0.4 Move time3.2 Queue time5.1 The delivery cycle time was:

37.7 hours

4.22

Krizun Industries makes heavy construction equipment. The standard for a particular crane calls for 26 direct labor-hours at $16 per direct labor-hour. During a recent period 1,600 cranes were made. The labor efficiency variance was $5,600 Unfavorable. How many actual direct labor-hours were worked?

41,950 direct labor-hours

The Fime Corporation uses a standard costing system. The following data have been assembled for December: Actual direct labor-hours worked 6,600hours Standard direct labor rate$8per hour Labor efficiency variance$3,600Unfavorable The standard hours allowed for December's production is:

6,150 hours

The following data are for the Akron Division of Consolidated Rubber, Inc.: Sales$750,000 Net operating income$45,000 Average operating assets$250,000 Stockholders' equity$75,000 Residual income$15,000 For the past year, the margin used in ROI calculations was:

6.00%

7.6%

7.7%

Ben Corporation manufactures two products: Product E05G and Product L64Y. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products E05G and L64Y.

879,000 (Total Overhead) / 10,000 (DLH) = 87.9 87.90*3000= 263,700 263,700/879,000 = 30%

Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products ABCD Direct materials$19.90$15.20$20.80$23.20 Direct labor 12.20 8.70 10.50 7.40 Variable manufacturing overhead 1.60 2.10 2.00 2.10 Fixed manufacturing overhead 10.80 11.90 8.80 10.70 Unit product cost$44.50$37.90$42.10$43.40 Additional data concerning these products are listed below. Products ABCD Grinding minutes per unit 1.20 0.70 0.60 0.60 Selling price per unit$59.30$51.70$59.50$55.60 Variable selling cost per unit$3.60$1.50$2.20$3.60 Monthly demand in units 4,000 2,000 4,000 2,000 The grinding machines are potentially the constraint in the production facility. A total of 9,000 minutes are available per month on these machines. Direct labor is a variable cost in this company. How many minutes of grinding machine time would be required to satisfy demand for all four products?

9,800

9.3%

Rotan Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: Hours Move time3.2 Wait time10.9 Queue time5.1 Process time1.2 Inspection time0.2 The throughput time was:

9.7 hours

As the level of activity increases, how will a mixed cost in total and per unit behave? In Total PerUnit A)IncreaseDecrease B)IncreaseIncrease C)IncreaseNo effect D)DecreaseIncrease E)DecreaseNo effect

A. Increase Decrease

Flexible Budget

Actual Level of Activity

Price Variance

Actual Quantity of Input, at Standard Price - Actual Quantity of Input, at Actual Price

Revenue Variance

Actual Revenue - Flexible Budget Revenue

Activity Variace

Actual level of activity - Planned level of activity

Which of the following statements is true? I.Overhead can be applied slowly as a job is worked on. II.Overhead can be applied when the job is completed. III.Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory

All 3

Which of the following would usually be found on a job cost sheet under a normal cost system? Actual direct material cost Actual manufacturing overhead cost A)YesYes B)YesNo C)NoYes D)NoNo

Choice B

Poorly trained workers could have an unfavorable effect on which of the following variances? Labor Rate VarianceMaterials Quantity Variance A)YesYes B)YesNo C)NoYes D)NoNo

Choice C

Which of the following segment performance measures will decrease if there is an increase in the interest expense for that segment? Return on Investment Residual Income A)YesYes B)NoYes C)YesNo D)NoNo

Choice D

Degree of Operating Leverage

Contribution Margin / Net Operating Income

Which of the following would not be included in operating assets in return on investment calculations?

Factory building rented to (and occupied by) another company.

Dollar Sales to Break Even

Fixed Expenses / CM Ratio

Return on Investment ROI

Margin x Turnover

Residual Income

Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)

Return on Investment (ROI) Formula

Net Operating Income / Average Operating Assets

Margin

Net Operating Income / Sales

ROI

Net Operating Income / Sales X Sales / Average Operating Assests

Units Produced=Units Sold

No change in Inventory // Absorption=Variable

In a job-order costing system that is based on machine-hours, which of the following formulas is correct?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products ABCD Direct materials$19.90$15.20$20.80$23.20 Direct labor 12.20 8.70 10.50 7.40 Variable manufacturing overhead$1.60$2.10$2.00$2.10 Fixed manufacturing overhead 10.80 11.90 8.80 10.70 Unit product cost 44.50 37.90 42.10 43.40 Additional data concerning these products are listed below. Products ABCD Grinding minutes per unit 1.20 0.70 0.60 0.60 Selling price per unit$59.30$51.70$59.50$55.60 Variable selling cost per unit$3.60$1.50$2.20$3.60 Monthly demand in units 4,000 2,000 4,000 2,000 The grinding machines are potentially the constraint in the production facility. A total of 9,000 minutes are available per month on these machines. Direct labor is a variable cost in this company. Which product makes the MOST profitable use of the grinding machines?

Product C

Standard Quantity Allowed for Actual Output, at Standard Price

SQ X SP

Contribution Margin

Sales - Less:Variable Expenses

Turnover

Sales / Average Operating Assets

Spending Variance

Standard Quantity Allowed for Actual Output, at Standard Price - Actual Quantity of Input, at Actual Price

Quantity Variance

Standard Quantity Allowed for Actual Output, at Standard Price - Actual Quantity of Input, at Standard Price

A segment of a business responsible for both revenues and expenses would be called:

a profit center.

spending variance

actual cost - flexible budget cost

Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

debit to Manufacturing Overhead of $69,000

Throughput Time

process time + inspection time + move time + queue time

weighted average

product of the number of units + value per unit divided / sum of the number of units, represented by M

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.

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:

the incremental costs associated with the order.

Manufacturing Cycle Efficiency

value added time/manufacturing cycle time

Kneeland Corporation has provided the following information: Direct materials$6.80 Direct labor$4.15 Variable manufacturing overhead$1.65 Fixed manufacturing overhead $121,500 Sales commissions$1.00 Variable administrative expense$0.50 Fixed selling and administrative expense $40,500 If 10,000 units are produced, the total amount of manufacturing overhead cost is closest to

$138,000

Contribution Margin (CM) Ratio

1- Variable Expense Ratio

Net Operating Income

Contribution margin - fixed expenses

Jilk Inc.'s contribution margin ratio is 58% and its fixed monthly expenses are $36,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $103,000?

Profit= CM Ratio * Sales - Fixed Expenses 58% * 103000 - 36000= 23740

Property taxes on a company's factory building would be classified as a(n):

product cost.

A cost incurred in the past that is not relevant to any current decision is classified as a(n):

sunk cost.

Which of the following costs are always irrelevant in decision making?

sunk costs

Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative A Alternative B Materials costs$40,000 $56,000 Processing costs$37,000 $37,000 Equipment rental$13,000 $13,000 Occupancy costs$15,000 $22,000 What is the financial advantage (disadvantage) of Alternative B over Alternative A?

$(23,000)

Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79. What is the financial advantage (disadvantage) for the company from processing one batch of sugar beets into the end products industrial fiber and refined sugar rather than not processing that batch at all?

$1 per batch

The following are Silver Corporation's unit costs of making and selling an item at a volume of 8,000 units per month (which represents the company's capacity): Manufacturing: Direct materials$4 Direct labor$5 Variable overhead$2 Fixed overhead$8 Selling and administrative: Variable$1 Fixed$6 Present sales amount to 7,000 units per month. An order has been received from a customer in a foreign market for 1,000 units. The order would not affect regular sales. Total fixed costs, both manufacturing and selling and administrative, would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume that direct labor is a variable cost. Assume the company has 50 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap. The sale of these defective units will have no effect on the company's other sales. Which of the following costs is relevant in this decision?

$1 variable selling and administrative cost

Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 240 kilograms of the raw material that are in stock and that originally cost the company $2,112 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $9.25 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $8.35 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $71 for all 240 kilograms. What is the relevant cost of the 240 kilograms of the raw material when deciding whether to proceed with the special project?

$1,933

Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

$10,000

At a sales volume of 40,000 units, Lonnie Company's total fixed costs are $40,000 and total variable costs are $60,000. The relevant range is 30,000 to 50,000 units. If Lonnie were to sell 42,000 units, the total expected cost would be:

$103,000

Phaup 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: AverageCost per Unit Direct materials$4.85 Direct labor$4.00 Variable manufacturing overhead$1.75 Fixed manufacturing overhead$3.90 Fixed selling expense$0.90 Fixed administrative expense$0.60 Sales commissions$0.50 Variable administrative expense$0.45 For financial reporting purposes, the total amount of period costs incurred to sell 5,000 units is closest to:

$12,250

Stinehelfer Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets costs $56 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $24 or processed further for $12 to make the end product industrial fiber that is sold for $31. The beet juice can be sold as is for $43 or processed further for $29 to make the end product refined sugar that is sold for $91. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?

$19

Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?

$19 per batch

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: AverageCost per Unit Direct materials$6.70 Direct labor$3.25 Variable manufacturing overhead$1.60 Fixed manufacturing overhead$3.00 Fixed selling expense$0.70 Fixed administrative expense$0.40 Sales commissions$0.50 Variable administrative expense$0.55

$21,400

Sardi Inc. is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 17,000 of the components each year. The unit product cost of the component according to the company's cost accounting system is given as follows: Direct materials$8.20 Direct labor 8.30 Variable manufacturing overhead 1.20 Fixed manufacturing overhead 4.30 Unit product cost$22.00 Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 70% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 2 minutes on the machine that is the company's current constraint. If the component were bought, time would be freed up for use on another product that requires 4 minutes on this machine and that has a contribution margin of $7.00 per unit.

$24.21 per unit

Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period. Direct materials$8 Direct labor$9 Manufacturing overhead (70% variable and 30% unavoidable fixed)$10 A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

$28 per fan

Schickel Inc. regularly uses material B39U and currently has in stock 460 liters of the material for which it paid $3,128 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.95 per liter. New stocks of the material can be purchased on the open market for $6.45 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 760 liters of the material to be used in a job for a customer. The relevant cost of the 760 liters of material B39U is:

$4,902

Gallon Corporation had $24,000 of raw materials on hand on April 1. During the month, the Corporation purchased an additional $52,000 of raw materials. During April, $62,000 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 $2,000. The debits to the Work in Process account as a consequence of the raw materials transactions in April total:

$60,000

The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200. What is the financial advantage (disadvantage) to the company from upgrading the calculators?

$8,800

The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below: Sales$830,000 Variable expenses$365,000 Fixed manufacturing expenses$291,000 Fixed selling and administrative expenses$166,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:

($173,000)

The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: Sales$830,000 Variable expenses$390,000 Fixed manufacturing expenses$266,000 Fixed selling and administrative expenses$232,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses and $103,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued. What would be the financial advantage (disadvantage) from dropping product D74F?

($226,000)

Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be:

($30,000)

Hodge Inc. has some material that originally cost $74,600. The material has a scrap value of $57,400 as is, but if reworked at a cost of $1,500, it could be sold for $54,400. What would be the financial advantage (disadvantage) of reworking and selling the material rather than selling it as is as scrap?

($4,500)

Sales to Attain Target Profit

(Fixed Expenses + Target Profit) / CM Ratio

Unit Sales to Attain Target Profit Equation

(Target Profit + Fixed Expenses) / Unit CM

Dollar Sales to Attain the Target Profit

(Target profit + Fixed expenses) / CM ratio

Companywide Break-Even

(Traceable FE + Common FE) / Overall Contribution Margin Ratio

Ahrends Corporation makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials$17.80 Direct labor 19.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 17.10 Unit product cost$54.90 An outside supplier has offered to sell the company all of these parts it needs for $48.50 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $273,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $8.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 70,000 units required each year?

273,000/70,000= 3.9 3.9+54.9= 58.8 58.8-8.2= 50.6

The cost of electricity for running production equipment is classified as Conversion cost Period cost A)YesNo B)YesYes C)NoYes D)NoNo

A. Yes No

Which method will produce the highest values for work in process and finished goods inventories?

Absorption Costing

Paparo Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool - Total Cost - Total Activity Assembly - $846,040 - 52,000 machine-hours Processing orders - $64,056 - 1,700 orders Inspection - $102,408 - 1,360 inspection-hours Assembly=16.27*1,080= $17,571.6 Processing= 37.68*70= $2,637.6 Inspection= 75.3*20= $1,506 Total overhead= $21,715.2 44 + 41.03 + (21,715.2/450)= $133.30

Which of the following approaches to preparing an income statement includes a calculation of the gross margin? TraditionalApproach ContributionApproach A)YesYes B)YesNo C)NoYes D)NoNo

WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: Product X Product Y Product Z Units produced 1,500 2,000 3,000 Per unit sales value at split-off$19.00 $21.00 $24.00 Added processing costs per unit$7.00 $7.50 $7.00 Per unit sales value if processed further$29.00 $29.00 $30.00 The cost of the joint raw material input is $149,000. Which of the products should be processed beyond the split-off point? Product X Product Y Product Z A)YesYesNo B)NoYesNo C)YesNoYes D)NoYesYes

Choice A

Segment Margin

Contribution Margin - Traceable fixed costs // Best Gauge of the long-run profitability of a segment.

The costs of direct materials are classified as:

Conversion cost Manufacturing cost Prime cost A)YesYesYes B)NoNoNo C)YesYesNo D)NoYesYes D. No Yes Yes

CVP

Cost Volume Profit

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?

Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory

Which of the following is correct concerning reactions to INCREASES in activity? Total Variable Cost Variable Cost PerUnit A)IncreaseDecrease B)ConstantDecrease C)DecreaseConstant D)IncreaseConstant

D) Increase Constant

Dollars Sales to Break Even

Fixed Expenses / CM Ratio

Unit Sales to Break Even

Fixed Expenses / Unit CM

Fixed Manufacturing Overhead (Absorption Costing) Per Unit

Fixed Manufacturing Overhead Annually / # of Units Produced Annually

Variable Costing

Fixed manufacturing costs are capacity costs and will be incurred even if nothing is produced.

Absorption Costing

Fixed manufacturing costs must be assigned to products to properly match revenues and costs.

Fixed MFG Overhead costs Per Unit

Fixed mfg Overhead / Units Produced

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?

Gross margin will increase.

Units Produced < Units Sold

Inventory DECREASES // Absorption < Variable

Units Produced > Units Sold

Inventory INCREASES // Absorption > Variable

An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data concerning those products appear below: LN JQ RQ Selling price per unit $165.88 $313.11 $494.52 Variable cost per unit $118.30 $239.61 $381.42 Minutes on the constraint 2.60 4.90 7.80 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.

LN, JQ, RQ

Which of the following costs could contain both variable and fixed cost elements with respect to the total output of the company?

Manufacturing overhead.

T- account credit side

Overapplied

Variable Costing

Product Costs: Direct Materials, Direct Labor, Variable Manufacturing Overhead Period Costs: Fixed Manufacturing Overhead, Variable Selling and Administrative Expenses, and Fixed Selling and Administrative Expenses.

Absorption Costing

Product Costs: Direct Materials, Direct Labor, Variable Manufacturing Overhead, and FIXED MANUFACTURING OVERHEAD Period Costs: Variable Selling and Administrative Expenses and Fixed Selling and Administrative Expenses

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.

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and:

Purchases of raw materials

Statements I, II, and III are all true.

Contribution Margin Definition

The amount remaining from sales revenues after all variable expenses have been deducted.

Both _______ and ____ require absorption costing for external reports

U.S. GAAP and IFRS

T- account debit side

Underapplied

Unit 6

CM Ratio

Unit CM/Unit Selling Price

Operating Income Equation

Units * # of Units

Variable Expense Ratio

Variable Expenses / Sales

In a job-order costing system, manufacturing overhead applied is recorded as a debit to

Work in Process inventory

An example of a committed fixed cost is:

a long-term equipment lease.

Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device. Rent on the administrative office space is

a period cost

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.

Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:

avoidable costs.

Direct costs:

can be easily traced to a particular cost object.

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:

completed during the period.

United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their:

contribution margin per unit of the constrained resource

Piekos Corporation incurred $90,000 of actual Manufacturing Overhead costs during June. During the same period, the Manufacturing Overhead applied to Work in Process was $92,000. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a:

credit to Manufacturing Overhead of $92,000

During July at Loeb Corporation, $83,000 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 $4,000. The journal entry to record the requisition from the storeroom would include a:

debit to Work in Process of $79,000Correct

Overapplied manufacturing overhead would result if:

manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production.

Margin of Safety Percentage

margin of safety in dollars / total sales

Dizzy Amusement Park is open from 8:00 am till midnight every day of the year. Dizzy charges its patrons a daily entrance fee of $30 per person which gives them unlimited access to all of the park's 35 rides. For liability insurance, Dizzy pays a set monthly fee plus a small additional amount for every patron entering the park. The cost of liability insurance would best be described as a:

mixed cost

Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole?

Accounting II:

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