ACCT 252 - Exam 2

Juanita Corporation uses a job-order costing system and applies overhead on the basis of direct labor cost. At the end of October, Juanita had one job still in process. The job cost sheet for this job contained the following information: Direct Materials....$480 Direct Labor.............$150 Manufacturing Overhead Applied...$600 An additional $100 of labor was needed in November to complete this job. For this job, how much cost should Juanita have transferred to finished goods inventory in November when it was completed?

$1,730

Harrell Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year the company estimated its total manufacturing overhead cost at $400,000 and its direct labor-hours at 100,000 hours. The actual overhead cost incurred during the year was $350,000 and the actual direct labor-hours incurred on jobs during the year was 90,000 hours. The manufacturing overhead for the year would be:

$10,000 overapplied

Dagnon Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $299,130. At the end of the year, actual direct labor-hours for the year were 17,400 hours, manufacturing overhead for the year was overapplied by $13,850, and the actual manufacturing overhead was $294,130. The predetermined overhead rate for the year must have been closest to: $17.70 $17.19 $18.22 $16.90

$17.70

Mardist Corporation has sales of $100,000, variable expenses of $75,000, fixed expenses of $30,000, and a net loss of $5,000. How much would Mardist have to sell to achieve a profit of 10% of sales?

$200,000

North Company sells a single product. The product has a selling price of $30 per unit and variable expenses of 70% of sales. If the company's fixed expenses total $60,000 per year, then it will have a break-even of:

$200,000

Riven Corporation has a single product whose selling price is $10. At an expected sales level of $1,000,000, the company's variable expenses are $600,000 and its fixed expenses are $300,000. The marketing manager has recommended that the selling price be increased by 20%, with an expected decrease of only 10% in unit sales. What would be the company's net operating income if the marketing manager's recommendation is adopted?

$240,000

Pilkinton Corporation has provided its contribution format income statement for July. The company produces and sells a single product. Sales (9900 units)..... $772,200 Variable Expenses......$396,000 Contribution Margin......$376,200 Fixed Expenses.....$328,900 Net Operating Income.....$47,300 If the company sells 10,300 units, its total contribution margin should be closest to:

$391,400

Dasilva Company had only one job in process on May 1. The job had been charged with $1,400 of direct materials, $6,192 of direct labor, and $5,712 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined overhead rate of $11.90 per direct labor-hour. During May, the activity was recorded: Raw Materials (direct materials): Beginning Balance............................$8500 Purchased During the month....$48000 Used in Production..........................$51800 Labor: Direct labor hours (during month)....1900 Direct labor cost incurred...............$24510 Actual Manufacturing Overhead costs Incurred....................................................$21000 Inventories: Raw Materials, May 30......................???? Work in Process, May 30.................$19536 Work in process inventory on May 30 contains $4,773 of direct labor cost. Raw materials consist solely of items that are classified as direct materials. The balance in the raw materials inventory account on May 30 was: $4,700 $43,300 $3,800 $39,500

$4700

Acer Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated Manufacturing Overhead.....$224,550 Estimated Machine Hours.....4500 Actual Manufacturing Overhead.....$224,500 Actual Machine Hours......4440 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The predetermined overhead rate is closest to: $49.23 $49.90 $49.78 $50.45

$49.90

If a company increases advertising by $500,000, this will cause net operating income to increase if the resulting increase in sales dollars is greater than:

$500,000 divided by the contribution margin ratio.

Job 607 was recently completed. The following data have been recorded on its job cost sheet: Direct Materials.......$3405 Direct Labor Hours......54 Direct Labor Wage Rate.....$13/hour Machine-hours......158 The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 607 would be: $4,107 $6,319 $3,432 $4,863

$6319

Last year, Black Company reported sales of $640,000, a contribution margin of $160,000, and a net loss of $40,000. Based on this information, the break-even point was:

$800,000

Coggin Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. In April the company completed job F68F that consisted of 24,000 units of one of the company's standard products. No other jobs were in process during the month. The job cost sheet for job F68F shows that the total cost for the job was $1,408,800. During the month, the actual manufacturing overhead cost incurred was $464,400 and the manufacturing overhead cost applied to job F68F was $460,800. And during the month, 15,000 completed units from job F68F were sold. No other products were sold. The cost of goods sold that would appear on the income statement for April is closest to:

$884,100

To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following?

(Selling price per unit - Variable expense per unit)/Selling price per unit.

The Work in Process inventory account of a manufacturing company shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

50%

Which of the following situations always results in underapplied overhead?

Actual overhead is greater than applied overhead

Compute Cost of Goods Sold

Beginning Inventory + Cost of Goods Manufactured - FG Inventory

Data concerning Damberger Corporation's single product appear below: Selling Price...................$150 100% Variable Expenses........$90 60% Contribution Margin....$60 40% The company is currently selling 5,000 units per month. Fixed expenses are $243,000 per month. The marketing manager believes that an $11,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Decrease of $200

Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves?

Direct labor-hours

A company with sales of $100,000, variable expenses of $70,000, and fixed expenses of $50,000 will reach its break-even point if sales are increased by $20,000.

False

A contribution approach income statement can usually be easily prepared from the information contained in a corporation's published income statement.

False

All other things equal, the margin of safety in a company with high fixed costs and low variable costs will tend to be higher than the margin of safety in a similar company that has low fixed costs and high variable costs

False

All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high variable costs and low fixed costs than in a company with high fixed costs and low variable costs.

False

If the actual manufacturing overhead costs for a period exceed the manufacturing overhead costs applied, then overhead would be considered to be overapplied

False

Process costing is used in those situations where many different products or services are produced each period to customer specifications.

False

The actual manufacturing overhead incurred at Huberty Corporation during January was $73,000, while the manufacturing overhead applied to jobs was $78,000. The company's Cost of Goods Sold was $349,000 prior to adjusting for any underapplied or overapplied overhead. Which of the following statements is true?

Manufacturing overhead was overapplied by $5,000; Cost of Goods Sold after adjusting for any underapplied or overapplied overhead is $344,000

A company has provided the following data: Sales.....3,000 units Sales Price.....$70 per unit Variable Costs.....$50 per unit Fixed Costs.... 25,000 If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net operating income will:

increase by $11,000.

Once the break-even point is reached:

net operating income will increase by the unit contribution margin for each additional item sold.

Last year, Twins Company reported $750,000 in sales (25,000 units) and a net operating income of $25,000. At the break-even point, the company's total contribution margin equals $500,000. Based on this information, the company's:

variable expense per unit is $9.

A process cost system is employed in those situations where:

where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.

On a cost-volume-profit graph, the break-even point is located:

where the total revenue line intersects the total expenses line.

If company A has a higher degree of operating leverage than company B, then:

company A's profits are more sensitive to percentage changes in sales.

Which of the following companies would be most likely to use a job-order costing system rather than a process costing system?

Shipbuilding

All other things the same, a decrease in variable expense per unit will reduce the break-even point.

True

The contribution margin ratio measures the effect on the total contribution margin of a given change in total sales.

True

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies.

True

The process of assigning overhead cost to jobs is known as applying overhead.

True

The profit in cost-volume-profit equations is the same as the net operating income on a contribution income statement.

True

The use of predetermined overhead rates in a job-order cost system makes it possible to estimate the total cost of a given job as soon as production is completed.

True