ACCT 3232 Exam 2

The service department that provides the most service to other service departments.

. If two service departments service the same number of departments, which service department's costs should be allocated first when using the step method? A. The service department that provides the most service to other service departments. B. The service department that provides the most service to the user departments. C. The service department with the least cost. D. The service department that provides the least service to other service departments. E. The service department that provides the least service to the user departments.

presents the plan for only one level of activity and does not adjust to changes in the level of activity.

A master budget: A. drops the current month or quarter and adds a future month or quarter as the current month or quarter is completed. B. presents a statement of expectations for a period of time but does not present a firm commitment. C. presents the plan for only one level of activity and does not adjust to changes in the level of activity. D. presents the plan for a range of activity so that the plan can be adjusted for changes in activity levels. E. divides the activities of individual responsibility centers into a series of packages which are ranked ordinally.

True

A production budget is not needed for a service organization. A. True B. False

start and complete a unit.

An equivalent unit of conversion costs is equal to the amount of conversion costs required to: A. start a unit. B. start and complete a unit. C. transfer a unit in. D. transfer a unit out.

Overstated; Overstated

An error was made by ROC Company in computing the percentage-of-completion of the current year's ending Work-in-Process Inventory. The error resulted in the assignment of a lower percentage of completion to each component of the inventory than actually was the case. There was no beginning Work-in-Process Inventory. What is the effect of this error on (1) cost assigned to cost of goods completed for the period and (2) the computation of costs per equivalent unit? A. Understated; Understated B. Understated; Overstated C. Overstated; Understated D. Overstated; Overstated

$36 Maximum price is the outside market price for the buying division: $36

Chipper Division of Acme Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 sells for $40, has a variable cost of $22, and a fixed cost per unit of $10. Chipper has a capacity to produce 100,000 units per period. Jones Division currently purchases 10,000 units of part Z-25 from Chipper for $40. Jones has been approached by an outside supplier willing to supply the parts for $36. If Acme uses a negotiated transfer pricing system, what is the maximum transfer price that should be charged for this transaction? A. $40. B. $36. C. $32. D. $22.

$22 Minimum price is the outlay cost plus any opportunity costs: $22

Chipper Division of Acme Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 sells for $40, has a variable cost of $22, and a fixed cost per unit of $10. Chipper has a capacity to produce 100,000 units per period. Jones Division currently purchases 10,000 units of part Z-25 from Chipper for $40. Jones has been approached by an outside supplier willing to supply the parts for $36. If Acme uses a negotiated transfer pricing system, what is the minimum transfer price that should be charged for this transaction? A. $40. B. $36. C. $32. D. $22.

costs associated with beginning work-in-process plus the manufacturing costs added this period.

Costs to account for include: A) the manufacturing costs added this period only. B) costs associated with beginning work-in-process plus the manufacturing costs added this period. C) costs associated with ending work-in-process and beginning work-in-process, plus the manufacturing costs added this period. D) costs associated with ending work-in-process plus the manufacturing costs added this period. E) None of the above.

Flex-Tite Sales Budget For the Year Ended December 31 (in units) Expected sales 948,000 units Plus: Desired ending inventory (1/12 × 948,000 × 138%) 109,020 units Subtract: Planned production 958,000 units =Beginning inventory 99,020 units

Flex-Tite manufactures plastic parts. The inventory policy at Flex-Tite is to hold inventory equal to 138% of the average monthly sales for its main product. Sales for the following year are expected to be 948,000 units. Based on the inventory policy, the budget calls for the production of 958,000 units. Required: What is the beginning inventory of the component?

final sales price reduced by cost to complete after split-off.

For purposes of allocating joint costs to joint products, the estimated net realizable value at split-off is equal to: A. final sales price reduced by cost to complete after split-off. B. sales price less a normal profit margin at the point of sale. C. separable product cost plus a normal profit margin. D. total sales value less joint costs at point of split-off.

should be ignored in determining whether to sell at split-off or process further.

Great Sweets Candy Company produces various types of candies. Several candies could be sold at the split-off point or processed further and sold in a different form after further processing. The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly, which are allocated based on pounds produced. The joint processing costs in this operation: A. should be allocated to products to determine whether they are sold at split-off or processed further. B. should be ignored in determining whether to sell at split-off or process further. C. should be ignored in making all product decisions. D. are never included in product cost, as they are misleading to all management decisions.

market price.

If an intermediate market exists, the general rule is that the optimal transfer price should be the: A) outlay cost for producing the goods. B) opportunity cost of not selling to the outside market. C) market price. D) variable costs associated with producing the product. E) none of the above.

FIFO costing

If computational and record-keeping costs are about the same under both FIFO and weighted-average costing, which method, if any, will generally be preferred? A) Weighted-average costing B) FIFO costing C) Both methods offer the same degree of information. D) The answer cannot be determined with so little information. E) None of the above.

more than the units started during the period.

If the units in the beginning Work-in-Process Inventory are greater than the units in the ending Work-in-Process Inventory, then the units transferred out are: A. more than the units started during the period. B. equal to the equivalent units of production. C. less than the units started during the period. D. equal to the actual work done during the period.

purchasing agent.

In general, the direct labor efficiency variance is the responsibility of the: A. purchasing agent. B. company president. C. production manager. D. industrial engineering. E. marketing department.

The percentage of completion

In order to compute equivalent units of production, which of the following must be reasonably estimated? A) Units completed B) The percentage of completion C) Direct material cost D) Units started and completed E) None of the above

current costs plus cost of beginning Work-in-Process Inventory.

In the computation of the manufacturing cost per equivalent unit, the weighted-average method of process costing considers: A. current costs only. B. current costs plus cost of beginning Work-in-Process Inventory. C. current costs plus cost of ending Work-in-Process Inventory. D. current costs less cost of beginning Work-in-Process Inventory.

DM+DL+VMOH 10+6+11=27

Part 43X costs the Southern Division of Norris Corporation $29 to make - direct materials are $10, direct labor is $6, variable manufacturing overhead is $11, and fixed manufacturing overhead is $2. Southern Division sells Part 43X to other companies for $38. The Northern Division of Norris Corporation can use Part 43X in one of its products. The Southern Division has enough idle capacity to produce all of the units of Part 43X that the Northern Division would require. What is the lowest transfer price at which the Southern Division should be willing to sell Part 43X to the Northern Division? $27. $36. $29. $38.

high production volume and homogeneous products.

Process costing is characterized by: A) high production volume and heterogeneous products. B) high production volume and homogeneous products. C) low production volume and heterogeneous products. D) low production volume and homogeneous products. E) None of the above.

True

Separable costs are incurred beyond the split off point that are assignable to each of the specific products identified at the split off point. A. True B. False

eventually applied by the user departments to the units produced. (Service department costs are considered product costs since they are part of the production process.)

Service department costs are: reported as selling and administrative expenses on the income statement. generally treated as period costs rather than product costs. eventually applied by the user departments to the units produced. seldom found in manufacturing organizations

100%-20=80% 100%-5=95% 100%+10=110% 840000x5x80%x95%x110%= 3,511,200

Stubs-R-Us is a local event ticket broker. Last year, the company sold 840,000 tickets with an average commission of $5. Because of the general economic climate, Stubs expects ticket volume to decline by 20 percent. In addition, employees at a local insurance company headquarters accounted for 5 percent of Stubs' volume. The headquarters relocated to another state and all the employees closed their accounts. Offsetting these factors is the observation that the average commission per sale is likely to increase by 10 percent because the average ticket prices are expected to be larger in the coming year. Required: Estimate commission revenues for Stubs-R-Us for the coming year.

Cash Balance= (Salesx80%)+Disbursement for costs and expense-disbursements for income taxes-Purchases of fxed assests+Proceeds from issuance of common stock+Proceeds from short-term borrowings-Payments on short-tern borrowings ($2,050,000 × 0.80) - $1,400,000 - $110,000 -$600,000 + $700,000 + $120,000 - $70,000 = $280,000

Tennison Corporation had the following transactions in its first year of operations: Sales (80% collected in year) $ 2,050,000 Bad debt write-offs 80,000 Disbursements for costs and expenses 1,400,000 Disbursements for income taxes 110,000 Purchases of fixed assets 600,000 Depreciation of fixed assets 100,000 Proceeds from issuance of common stock 700,000 Proceeds from short-term borrowings 120,000 Payments on short-tern borrowings 70,000 What is the cash balance at year end?

(17400+5600)=23000 17400+(5600x.25)=18000 53750/23000=2.34 55755/18000=2.97 $17,400 × (2.34 + 2.97) = $92,266

The Lakeside Company uses a weighted-average process costing system. The following data are available: Beginning inventory -0- Units started in production 23,000 Units finished during the period 17,400 Units in process at the end of the period (complete as to materials, ¼ complete as to labor and overhead) 5600 Cost of materials used 53,750 Labor and overhead costs 55,755 Total cost of the 17,400 units finished is:?

flexible budget allows management latitude in meeting goals whereas a master budget is based upon a fixed standard.

The basic difference between a master budget and a flexible budget is that a: A. flexible budget considers only variable costs but a master budget considers all costs. B. flexible budget allows management latitude in meeting goals whereas a master budget is based upon a fixed standard. C. master budget is for an entire production facility but a flexible budget is applicable to single departments only. D. master budget is based on one specific level of production and a flexible budget can be prepared for any production level within a relevant range.

Finished Goods inventory levels

The number of units in the sales budget and the production budget may differ because of a change in: A. WIP inventory levels B. Finished Goods inventory levels C. Direct Materials inventory levels D. Changes in COGS

market prices.

The optimal transfer price when there are intermediate markets is: A. full cost. B. outlay costs. C. variable cost. D. market prices. E. negotiated market prices.

All of the above.

The production cost report summarizes: A) a. the costs charged to the department. B) b. how the costs were assigned to the output. C) the equivalent units of production by the department. D) physical transfers for the department. E) All of the above.

cost centers

Transfer prices would not be used by: A. production centers. B. investment centers. C. profit centers. D. cost centers

Budgeted direct labor-hours 8,900 Variable manufacturing overhead rate 2.20 Variable manufacturing overhead (8900x2.20) $ 19,580 Fixed manufacturing overhead 108,440 Total manufacturing overhead 128,020 Less depreciation 9,710 Cash disbursement for manufacturing overhead 118,310

Trini Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,900 direct labor-hours will be required in May. The variable overhead rate is $2.20 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $108,440 per month, which includes depreciation of $9,710. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: $19,580. $128,020. $98,730. $118,310.

Standard cost sheet

What is the name of the form, document, or record that provides providing standard quantities of inputs used to produce a unit of output and the standard prices for the inputs? A) Job cost sheet B) Cost of production report C) Standard cost sheet D) Variance report E) None of the above.

Flexible budget

What is the term used to describe a budget that indicates revenues, costs, and profits for different levels of activity? Master budget Production budget Flexible budget Static budget None of these.

Variance

What is the term used to describe the difference between a planned result and the actual outcome? A) Flexible budget B) Operating budget C) Variance D) Financial budget E) None of the above.

Transfer price

What is the term used to describe the value assigned to the goods or services sold or rented from one unit of an organization to another? A) Variable cost B) Fixed cost C) Transfer price D) Full service cost E) None of the above.

Outlay cost

What should be added to the opportunity cost of the resource at the point of transfer to obtain the general principle transfer price that leads managers to make decisions in a firm's best interest? A) a. Sunk cost B) Transfer cost C) Outlay cost D) Variable cost E) None of the above.

All of the above.

Which of the following are item(s) required by the FASB to be disclosed regarding segment reporting? A) Segment revenue from internal customers B) Segment revenue from external customers C) Segment operating profit or loss D) All of the above. E) Only choices b and c.

It reduces the need for tracking actual cost activity.

Which of the following is not a benefit of budgeting? It reduces the need for tracking actual cost activity. It sets benchmarks for evaluation performance. It uncovers potential bottlenecks. It formalizes a manager's planning efforts.

Dollars of labor.

Which of the following is not a physical measure that can be used for allocating joint costs using the physical quantities method? Ounces of gold. Feet of lumber. Tons of steel. Dollars of labor.

Both A and B are true.

Which of the following statements is(are) true? (A) If a transfer has no effect on divisional profit, managers will be indifferent between making the transfer or not. (B) If an intermediate market exists but divisions are prohibited from buying or selling from the outside, the intermediate market can be ignored in determining the optimal transfer price. Only A is true. Only B is true. Both A and B are true. Neither A nor B is true.

Any given company will use either a job order costing system, a process costing system, or a operation costing system.

Which of the following statements regard operations costing is not correct? A) Any given company will use either a job order costing system, a process costing system, or a operation costing system. B) Operation costing is a hybrid of job and process costing. C) Operation costing is used in manufacturing goods that have some common characteristics plus some individual characteristics. D) Operation costing combines the aspect of job costing that assigns materials separately to jobs (also called work orders or batches in operation costing) with the aspect of process costing that assigns conversion costs equally to each operation. E) All of the above are correct statements.

Foreign companies that sell goods to their U.S. subsidiaries at inflated transfer prices artificially increase the profit of the U.S. subsidiaries.

Which of the following statements regarding multinational transfer pricing is not correct? A) In international (or interstate) transactions, transfer prices can affect tax liabilities, royalties, and other payments because of different laws in different countries B) Because tax rates vary among countries, companies have incentives to set transfer prices that will increase revenues (and profits) in low-tax countries and increase costs (thereby reducing profits) in high-tax countries. C) Foreign companies that sell goods to their U.S. subsidiaries at inflated transfer prices artificially increase the profit of the U.S. subsidiaries. D) International taxing authorities look closely at transfer prices when examining the returns of companies engaged in related-party transactions that cross national boundaries. E) All of the above are correct statements.

If a service department is eliminated, the additional cost savings that may arise because of that department's demands on another service department cannot be estimated by the reciprocal method.

Which of the following statements regarding the use of the reciprocal method is not correct? A) The reciprocal method can be used in outsourcing decisions. B) If there are no reciprocal services among the service departments, the estimate of cost savings from eliminating a particular department equals the cost of the service department that is avoidable. C) If there are reciprocal services, the manager has to consider the effect of eliminating one of the service departments on the service requirements of the remaining service departments. D) If a service department is eliminated, the additional cost savings that may arise because of that department's demands on another service department cannot be estimated by the reciprocal method. E) All of the above are correct statements.

Intermediate cost center

Which of the following terms is used to describe a cost center whose costs are charged to other departments? A) Initial cost center B) Intermediate cost center C) Final cost center D) Proprietary cost center E) None of the above.

By-products

Which of the following terms is used to describe outputs of joint production processes that are relatively minor in quantity or value? A) By-products B) Joint products C) Split products D) Reciprocal products E) None of the above.

Split-off point

Which of the following terms is used to describe the stage of processing that separates two or more products? A) Joint cost B) Split-off point C) Net realizable value D) Allocation stage E) None of the above.

Split-off point (The stage of processing at which two products are separated is called the split-off point. Processing costs incurred prior to the split-off point are the joint costs.)

Which of the following terms is used to describe the stage of processing that separates two or more products? Joint cost Allocation stage Net realizable value None of these. Split-off point

An oil drilling company

Which of the following would most likely use process costing? A clothing manufacturer A law firm A dry cleaner An oil drilling company

A No. 2 Pencil Factory

Which of the following would most likely use process costing? A retail shoe store A custom furniture builder A No. 2 Pencil Factory A CPA firm

D. Neither (B) nor (C) should be included in the budget.

Which of the following would not be included in a manufacturing overhead budget? A. Cash paid for supplies B. Depreciation C. Cost of Goods Sold D. Neither (B) nor (C) should be included in the budget. E. (A), (B), and (C) should all be included in the budget.