acct test practice 3
Largo, Inc., which uses a volume-based cost system, produces cat condos, and has a gross profit margin of 50%. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. How much does each cat condo sell for?
$90
The activity proportion method uses ___ to assign overhead costs to products
%
Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to sell 16,000 units in May. What is budgeted ending inventory for March? 1,030 1,300 1,330 1,650
1300
Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Meadow plans to sell 16,000 units in May. How many units will be sold in April? 12,380 13,000 13,570 13,620
13000
Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July? A.13,800 B.15,300 C.16,200 D.16,300
B.15,300
Which of the following statements is true about the use of managerial accounting information in nonprofit organizations?
Because managers of nonprofit organizations need timely and relevant information to make decisions, managerial accounting is vital to these organizations
Which of the following statements are true?
Before implementing ABC, a company should weigh the benefits against the costs. The support of upper management is required for successful ABC implementation.
Which of the following would be used to record the labor cost that is not traceable to a specific job? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
C. Manufacturing Overhead would be debited Actual indirect labor costs are accumulated on the debit side of the Manufacturing Overhead account.
Which of the following would be used to record the depreciation of manufacturing equipment? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.
Which of the following would be used to record the factory supervisor's salary? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.
Which of the following is not a step in the managerial decision-making process?
Calculate the payback period.
A primary financial budget is the Production budget. Cash budget. Inventory budget. Selling and administrative budget.
Cash Budget
Which of the following is not a step in the managerial decision-making process?
Choose the appropriate hurdle rate.
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration If you earn a scholarship that covers 95% of your tuition costs at the college (but cannot be applied to other learning opportunities), which option would you choose (based on net enrollment cost)?
College course The net cost of the college course is $150 [$3,000 × (1 - 0.95) = $150], making it considerably less expensive than the community course.
Which of the following would be used to apply manufacturing overhead to production for the period? A. Credit to Raw Materials Inventory B. Credit to Work in Process Inventory C. Debit to Manufacturing Overhead D. Credit to Manufacturing Overhead
D. Credit to Manufacturing Overhead When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.
Which of the following would be used to apply manufacturing overhead to production for the period? Credit to Raw Materials Inventory. Credit to Work in Process Inventory. Debit to Manufacturing Overhead. Credit to Manufacturing Overhead.
Credit to Manufacturing Overhead.
Meadow Company produces hand tools. A sales budget for the next four months is as follows. March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Companys ending finished goods inventory policy is 10% of the following months sales. What is budgeted ending finished goods inventory for May? A) 1,000 B) 1,300 C) 1,600 D) 2,100
D
The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision. A) Direct labor cost involved in making the component B) The purchase price of the component of it is a bought C) Variable manufacturing overhead involved in making the component D) The selling price of the product
D
Which of the following budgets shows how many units will be produced each period? A) Direct Materials budget B) Direct labor budget C) Sales Budget D) Production Budget
D
Which of the following costs is not relevant in a special-order decision? A) Direct Labor B) Direct Materials C) Variable Overhead D) Fixed Overhead
D
Parker Corp expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter? A. $32,000 B. $96,000 C. $115,200 D. $116,480
D. $116,480
Grover has forecast sales to be of sale, and 40% the month following. What are budgeted cash receipts in April? A. $105,000 B. $141,000 C. $150,000 D. $144,000
D. $144,000
A job cost sheet will record the direct materials and direct labor used by the job but not the manufacturing overhead applied.
False A job cost sheet summarizes all of the costs incurred on a specific job, not just direct materials and direct labor.
Activity Based Costing divides activities into two categories: unit-level activities and facility level activities.
False Activity Based Costing divides activities into four categories: facility-level, product-level, batch-level, and unit-level activities.
Which of the following is not a benefit of budgeting? It forces managers to look to the future It plays an important role in communication within the organization It serves an important role in motivating and rewarding employees It builds organizational slack
It builds organizational slack
Which of the following statements is true about the strategic plan?
It is management's vision of what they desire the organization to achieve over the long term.
Which of the following balanced scorecard perspectives measures an organization's ability to change?
Learning and growth
The balanced scorecard includes both leading and lagging indicators. Which of the following correctly places each indicator on the spectrum of most leading to most lagging?
Learning and growth → Internal business process → Customer → Financial
The approach to cost management that calls for setting cost reduction goals across numerous stages such as product introduction, growth, maturity, and decline is:
Life cycle cost management.
______are the specific goals that managers want to achieve over a 5 to 10 year horizon. Strategic plans Long-term objectives Short-term objectives Tactics
Long-Term Objectives
_____________ are the specific goals that managers want to achieve over a 5- to 10-year horizon.
Long-term objectives
Which of the following is considered a disadvantage of decentralization?
Lower-level managers may have an opportunity to make decisions in their own best interest without considering the overall health of the company.
All of the following are non-volume-based cost drivers except number of ___. -inspections -machine hours -design changes -setups
Machine Hours
Which of the following is NOT a volume-based cost driver? -Machine setups -Sales Revenue -Direct Material Costs -Direct Labor Dollars
Machine Setups
Which of the following is an ABC cost driver? -Direct Material Costs -Sales Revenue -Direct Labor Dollars -Machine Setups
Machine Setups
Which of the following is NOT a volume-based cost driver?
Machine setups
Which of the following types of decisions involves deciding whether to perform a particular activity in-house or purchase it from an outside supplier?
Make-or-buy
Which of the following statements are true?
Managing and reducing costs is the true benefit of ABC. Implementing an ABC system is not a trivial task.
When manufacturing overhead is applied to production, which of the following accounts is credited? Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Manufacturing Overhead
Manufacturing Overhead
Which of the following would be used to record the labor cost that is not traceable to a specific job?
Manufacturing Overhead
Which of the following would be used to record the labor cost that is not traceable to a specific job? Raw Materials Inventory would be debited. Work in Process Inventory would be debited. Manufacturing Overhead would be debited. Manufacturing Overhead would be credited.
Manufacturing Overhead would be debited.
Which of the following is not a method used to determine transfer prices?
The balanced scorecard method There are three different ways to determine transfer prices: the market price method, the cost-based method, and negotiation.
Which of the following statements is correct about the break-even point?
The break-even point quantifies the number of units that must be sold to cover total costs with zero profit.
Which of the following statements is not correct about using the balanced scorecard for sustainability accounting?
The company could focus exclusively on short-term metrics, creating sustainability in its operations.
Which of the following is not relevant to a sell-or-process further decision?
The cost of processing the product "as is."
Which of the following is an example of a variable cost for a manufacturing firm?
The cost of raw materials
Which of the following is a direct cost of manufacturing a table made of wood and glass, for a firm that manufactures furniture?
The cost of the wood in the table
Which of the following would not be directly related to a volume-based allocation measure?
The number of activities.
Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?
The only difference is how the methods assign indirect costs to products.
Which of the following is not a source that can be used in preparing the sales budget? Prior sales. The production budget. Industry trends. Marketing activities.
The production Budget
Who would typically be responsible for the direct material quantity variance?
The production manager
Which of the following responsibility centers will use a segmented income statement as an evaluation tool?
The profit center
Which of the following statements is correct about relevant range?
The relevant range helps managers make decisions based on normal operations, but the relevant range is not prescriptive beyond the range.
The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision?
The selling price of the product
The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision?
The selling price of the product The price Hampton charges for the product will not change across decision alternatives, so it is not relevant.
Which of the following statements is not correct about how an ABC system might be adapted to provide managers with sustainability-related information that would affect the triple bottom line?
The system can only capture and report cost information, so it only affects the "profit" part of the triple bottom line.
Which of the following statements is true about variances?
There is not necessarily any correlation between the sign of the result (positive or negative) and whether the variance is positive or negative
Which of the following is not true of activity cost drivers?
They are strictly volume-based allocation measures.
What are the decision alternatives in a special-order decision?
To accept or reject the offer.
What are the decision alternatives in a special-order decision?
To accept or reject the offer. Special-order decisions involve an offer outside the scope of normal sales; managers must decide whether to accept or reject the offer.
Which of the following statements is false?
To be relevant, a cost must be an opportunity cost.
Which of the following statements is false?
To be relevant, a cost must be an opportunity cost. It is not true that to be relevant a cost must be an opportunity cost. Cash costs can also be relevant.
Portland, Inc. has formed four activity cost pools: Product Design, Machining and Production, Machine Setup, and Inspection. Gina Taylor, Production Manager at Portland, oversees processes that are considered part of Machining and Production, Machine Setup, and Inspection. Taylor's salary should be:
allocated among Machining and Production, Machine Setup, and Inspection.
When units are completed, the cost associated with the job is credited to which account? Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Cost of Goods Sold
Work in proces
which is true about employee motivation
a budget that is tight but attainable is more likely to motivate
The responsibility center in which the manager does not have responsibility and authority over revenues is:
a cost center.
A relevant cost is:
a cost that differs across decision alternatives.
A relevant cost is:
a cost that differs across decision alternatives. A relevant cost is one that will change depending on which alternative a manager selects.
An activity cost driver is:
a measure of the underlying activity that occurs in each activity cost pool.
The first step in implementing an ABC system is to identify the organization's major ___
activities
A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.
activity based
A technique that attempts to assign overhead costs to products based on the actions they require is called
activity based costing
A predetermined overhead rate in an activity-based costing system is called a(n)
activity rate
A predetermined overhead rate in an activity-based costing system is called a(n) ______ _______
activity rate
In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?
activity rate
The formula to apply overhead to products is ______
activity rate times activity
The formula to apply overhead to products is ______.
activity rate times activity
A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.
activity-based
Improving operations and reducing costs is the focus of ________ - _______ management
activity-based
The decision-making approach that focuses on factors that will change between alternatives is sometimes called all of the following except:
actual costing.
The Cost of Goods Manufactured Report includes all of the following except: direct materials used. direct labor. actual manufacturing overhead. applied manufacturing overhead.
actual manufacturing overhead.
The margin of safety is the difference between:
actual sales and break-even sales
Budgeted production is calculated by adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory. adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted ending work in process inventory. adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted beginning work in process inventory.
adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory
In a traditional volume-based cost system, total manufacturing costs are calculated by:
adding manufacturing overhead cost, direct materials cost, and direct labor cost.
Non-volume-based cost drivers ______
allow more indirect costs to be allocated to products are used in ABC systems
A predetermined overhead rate in an activity-based costing system is called ______.
an activity rate
An out-of-pocket costs is:
an actual outlay of cash
A cost object is:
an item for which managers are trying to determine the cost
A make-or-buy decision is the same as:
an outsourcing decision Both terms—make-or-buy and outsourcing—are used to describe decisions about whether to perform an activity in-house or purchase it from an outside supplier.
A make-or-buy decision is the same as:
an outsourcing decision.
The accounting rate of return is calculated as:
annual net income divided by initial investment
Costs incurred to identify defective products before they get to the customer are called ______ costs.
appraisal
Appraisal or inspection costs are costs that:
are incurred to identify defective products before products are shipped to the custome
Prevention costs are costs that:
are incurred to prevent quality problems from occurring in the first place.
Life cycle cost management takes into consideration the fact that costs and revenues:
are not constant across different stages of the product's life cycle.
Indirect costs ______.
are not easily traced to products or services
indirect costs _______
are not easily traced to products or services
Non-volume-based cost drivers ______.
are used in ABC systems allow more indirect costs to be allocated to products
External failure costs occur _________ a defective product makes its way to the customer, while internal failure costs occur ______ a defective product makes its way to the customer.
after, before
Budgeted cost of goods manufactured reflects:
all the costs required to manufacture the product, but not to sell it
The purpose of Stage 1 allocations is to:
assign indirect manufacturing costs to activity cost pools.
Using non-volume-based activity drivers allows activity-based costing to:
assign more indirect costs to products whose complexity is higher.
The final step in activity-based costing is ______
assigning indirect costs to products or services
The final step in activity-based costing is ______.
assigning indirect costs to products or services
At a minimum, an ABC system should have ______
at least one non-unit-level activity cost pool
At a minimum, an ABC system should have ______.
at least one non-unit-level activity cost pool
A group-level activity for a service company is the same as a(n)______ -level activity for a manufacturing company.
batch
Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ___-level activities.
batch
What types of activities are performed each time a group of units is processed, regardless of how many units are in the group?
batch
An activity that is performed for a group of units all at once is a(n):
batch-level activity.
Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:
batch-level activity.
Costs at the batch level depend on the number of ______
batches processed
Costs at the batch level depend on the number of ______.
batches processed
In target costing, the target cost should be determined:
before manufacturing ever starts.
basic form of the cash budget
beg cash balance+budgeted cash collections-budgeted cash payments+/-cash borrowed or repaid= ending cash balance
Comparing the performance within an organization to that of other similar organizations is called _____
benchmarking
When disposed of, overapplied manufacturing overhead will:
decrease Cost of Goods Sold.
When disposed of, overapplied manufacturing overhead will: increase Cost of Goods Sold. increase Finished Goods. decrease Cost of Goods Sold. decrease Finished Goods.
decrease Cost of Goods Sold.
NOT a component of the cash budget
depreciation expense
Costs that change across decision alternatives are:
differential costs.
Costs that change across decision alternatives are:
differential costs. Differential costs is another term for relevant costs, which change depending on the alternative selected by the manager.
Costs that can be traced to a specific cost object are:
direct costs.
A ______________ is one that can be attributed to a specific segment of the business.
direct fixed cost
Conversion costs consist of: all costs of production. raw materials and direct labor. direct labor and manufacturing overhead. raw materials and manufacturing overhead.
direct labor and manufacturing overhead.
Prime costs are defined as:
direct labor plus direct materials
The price variance for direct labor is called the:
direct labor rate variance
The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased is the:
direct materials price variance
The difference between the actual quantity and the standard quantity, multiplied by the standard price is the:
direct materials quantity variance
The formula SP × (SQ - AQ) is the:
direct materials quantity variance
Total quality management aims to improve quality by doing all of the following except:
eliminating non-value-added costs.
which component of the cash budget is shown as a line item on the budgeted balance sheet
ending cash balance
A predetermined overhead rate is calculated by dividing:
estimated manufacturing overhead cost by estimated total cost driver.
A predetermined overhead rate is calculated by dividing: actual manufacturing overhead cost by estimated total cost driver. estimated total cost driver by estimated manufacturing overhead cost. estimated manufacturing overhead cost by actual total cost driver. estimated manufacturing overhead cost by estimated total cost driver.
estimated manufacturing overhead cost by estimated total cost driver.
The worst type of quality costs for a firm are ______ costs.
external failure
Warranty and recall costs and product replacement are ______ costs.
external failure
Activities that occur regardless of how many products are produced or how many batches are run or units made are ___ - ___ activities
facility Level
Activities that occur regardless of how many products are produced or how many batches are run or units made are_____ - ______ activities
facility level
An activity that is performed to benefit the organization as a whole is a(n):
facility-level activity.
True or false: ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information.
false
True or false: Activity-based costing is appropriate for every company.
false
True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.
false
When target costing is used, the target cost is determined by:
finding the difference between the market price and the amount of profit needed to satisfy stakeholders.
NOT an example of a cost to include in a selling and administrative expense budget
fixed MOH
A cost is $50,000 when 25,000 units are produced, and $50,000 when 50,000 units are produced. This is an example of a(n):
fixed cost.
Be cautious of __________ expressed on a per-unit basis when weighing make-or-buy decisions. The total value (instead of the per unit value) is relevant to the decision.
fixed costs Total fixed costs (and whether or not they change based on the decision) are relevant, not necessarily fixed costs per unit.
All of the following are non-value-added activities except ______, which is a value-added activity.
free delivery service to customers
If the ROI of a project is greater than the hurdle rate, the residual income will be:
greater than zero
If the ROI of a project is greater than the hurdle rate, the residual income will be:
greater than zero.
Sales price per unit - manufacturing cost per unit = ______ per unit.
gross profit per unit
A local tour company offers charter buses to corporations who have conventions or meetings in the city. Under activity-based costing, renting a bus to a corporation is a(n)________ -level activity.
group
A relevant cost is a cost that:
has the potential to influence a decision
The purpose of the cash budget is to be used as a basis for the operating budgets. provide external users with an estimate of future cash flows. help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs. summarize the cash flowing into and out of the business during the past period.
help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs
the purpose of a cash budget
help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs
The cost estimating approach that uses the two most extreme activity observations is the:
high-low method.
When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.
high; low
When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.
high;low
Cost structure refers to:
how a company uses variable versus fixed costs to perform operations
The first step in the managerial decision making process is to:
identify the decision problem.
A top-down approach to budgeting is one that is participative. motivational. imposed. tight.
imposed
a top-down approach to budgeting is one that is
imposed
Activity-based management focuses on ______.
improving operations increasing efficiency
When disposed of, underapplied manufacturing overhead will: increase Cost of Goods Sold. increase Finished Goods. decrease Cost of Goods Sold. decrease Finished Goods.
increase Cost of Goods Sold.
To foster continuous improvement, standards should ________________ over time.
increase in difficulty
Product costs are:
inventoried until the units are sold
The responsibility center in which the manager has responsibility and authority over revenues, costs and assets is the:
investment center.
A just-in-time (JIT) system ______
is a demand-pull system is used to help reduce costs
If cash flows are not equal each year, the payback period:
is calculated by subtracting each year's cash flows from the initial investment until zero is reached
participative budgeting is an approach to budgeting that
is more likely to motivate people
Participative budgeting is an approach to budgeting that is top-down in nature. allows top management to set the budget. discourages budget slack. is more likely to motivate people to work towards the organization's goals than a top-down approach.
is more likely to motivate people to work towards the organization's goals than a top-down approach
which is NOT a benefit of budgeting
it build organizational slack
A system that pulls materials and products through the manufacturing system based on customer demand is called _____
just-in-time
Managerial decision makers must often consider non-economic factors as well. For example, when considering whether to eliminate a product line, managerial accountants with an emphasis on sustainability should consider the employee job loss implications as well. This represents sustainability within a:
keep-or-drop decision.
Overhead costs are underapplied if the amount applied to Work in Process is:
less than actual overhead incurred.
Overhead costs are underapplied if the amount applied to Work in Process is: greater than estimated overhead. less than estimated overhead. greater than actual overhead incurred. less than actual overhead incurred.
less than actual overhead incurred.
In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate ______
life cycle costs
specific goals that managers want to achieve over a 5-10 year horizon
long-term objectives
All of the following are non-volume-based cost drivers except number of ______
machine hours
Which of the following is NOT a volume-based cost driver?
machine setups
The most common method for disposing of over or underapplied overhead is to:
make a direct adjustment to Cost of Goods Sold.
The most common method for disposing of over or underapplied overhead is to: recalculate the overhead rate for the period. recalculate the overhead rate for the next period. make a direct adjustment to Work in Process Inventory. make a direct adjustment to Cost of Goods Sold.
make a direct adjustment to Cost of Goods Sold.
Managerial decision makers must often consider non-economic factors as well. For example, when considering whether to outsource to another country, in addition to considering the cost of that decision, managerial accountants with an emphasis on sustainability should consider the human capital impact as well. This represents sustainability within a:
make-or-buy decision.
Under activity based management, cost management is achieved by:
managing the underlying activities.
Conversion costs can be defined as
manufacturing costs minus direct materials
Prime costs are the same as:
manufacturing costs minus manufacturing overhead
To compute the per-unit manufacturing cost, add ___ ___to direct materials and direct labor.
manufacturing overhead
To compute the per-unit manufacturing cost, add ______ _______ to direct materials and direct labor.
manufacturing overhead
To calculate manufacturing overhead cost per unit using ABC, divide the total ______
manufacturing overhead cost by the number of units produced
To calculate manufacturing overhead cost per unit using ABC, divide the total ______.
manufacturing overhead cost by the number of units produced
Once Stage 2 allocation has been completed it is possible to compute total ______.
manufacturing overhead per product
The transfer pricing method that uses the price the company would charge external customers is the:
market price method. The market price is the price that a company would charge to external customers; using that price for internal sales is the market price method of transfer pricing
When negotiating a transfer price, the highest price the buyer will be willing to pay is the _____________, while the lowest price the seller will be willing to accept is the _______________.
market price; variable cost
The number of units included in the production budget:
may differ from the number of units in the sales budget, depending on ending inventory goals.
Inspection costs ______.
may lead to internal failure costs
If the total activity cost were unknown, it could be calculated by:
multiplying the total activity driver by the activity rate.
Residual income is the difference between:
net operating income and the minimum acceptable profit.
The method that compares the present value of a project's future cash flows to the initial investment is:
net present value
The gross margin does not take into account:
non-manufacturing cost.
A ______ cost driver is not strictly related to the number of units produced or customers served
non-volume based
The gross margin does not take into account:
nonmanufacturing cost.
External failure costs are costs that:
occur when a defective product makes its way into the hands of the customer.
Activity-based costing ______
offers some advantages over costing systems
Return on investment can be calculated as:
operating income/average invested assets
Return on investment can be calculated as:
operating income/average invested assets.
Profit margin can be calculated as:
operating income/sales revenue.
The cost of not doing something is a(n):
opportunity cost.
Which of the following is not another term for relevant costs?
opportunity costs
Which of the following is not another term for relevant costs?
opportunity costs Opportunity costs may be relevant, but the two are not synonymous. Differential, incremental, and avoidable costs are all synonymous to relevant costs.
The foregone benefit of choosing one alternative over another is measured by:
opportunity costs. An opportunity cost is the foregone benefit of choosing one alternative over another.
creating a budget is an important part of which phase of the planning and control process?
organizing
Cost of goods sold is the amount of cost transferred:
out of Finished Goods Inventory and into Cost of Goods Sold.
Cost of goods manufactured is the amount of cost transferred:
out of Work in Process Inventory and into Finished Goods Inventory.
Indirect costs are also referred to as ___ costs
overhead
Total manufacturing overhead under activity-based costing consists of all ______
overhead assigned during Stage 2 allocations
Total manufacturing overhead under activity-based costing consists of all ______.
overhead assigned during Stage 2 allocations
The total time to recover an original investment is the:
payback period
The activity proportion method uses ______ to assign overhead costs to products.
percentages, %, or proportions
Comparing ______ is the basis of benchmarking
performance within the same industry
forward-looking phase of planning and control cycle
planning
To keep quality problems from happening, companies incur _____ costs
prevention
A spending variance is made up of:
price variance and quantity variance
Activities incurred for each product produced and not dependent on the number of units or batches are ________ -level activities.
product
Activities performed to design a new type of service to be offered are ______-level activities.
product
Research and development is a(n) ________ -level activity
product
Activities incurred for each product produced and not dependent on the number of units or batches are
product level activities
The duration of a product from its infancy through its eventual decline is represented by the _____ _______ ________
product life cycle
Research and development is a(n)
product-level activity
An activity that is performed to support a specific product line is a(n):
product-level activity.
how many units will be produced each period
production budget
which budget would NOT exist for a merchandising firm
production budget
NOT a source that can be used in preparing the sales budget
production buudget
If a company is planning to build inventory, production should exceed sales. sales should exceed production. production should equal sales. production should equal inventory.
production should exceed sales
if a company is planning to build inventory
production should exceed sales
The responsibility center in which the manager has responsibility and authority over revenues and costs, but not assets, is the:
profit center. A profit center manager has responsibility only for revenues and costs. Investment center managers have responsibility for revenues, costs, and the investment of assets.
Unit-level activities are ______
proportional to the number of units produced performed for specific customers
Implementing an ABC system ______
provides information for cost management
Implementing an ABC system ______.
provides information for cost management
budgeted COGS includes
raw materials, direct labor, manufacturing overhead
Non-volume-based cost drivers may be more appropriate for activities ______
related to the entire facility that are performed for each batch related to individual products
The part of the organization for which managers are responsible is called a:
responsibility center
The part of the organization for which managers are responsible is called a:
responsibility center.
internal failure costs
result from defects discovered during inspection are preferred over external failures
Internal failure costs are costs that:
result from defects that are caught before the product is shipped to the customer.
The responsibility center in which the manager does not have responsibility and authority over costs is the:
revenue center.
The final step in the decision making process is to:
review the results of the decision.
Gross profit margin calculates gross margin as a percentage of
sales
Gross profit margin calculates gross margin as a percentage of ______
sales
starting point for the master budget
sales budget
sequence of budgets
sales budget->production budget->DM budget->budgeted income statement
Investment turnover can be calculated as:
sales revenue/average invested assets
Investment turnover can be calculated as:
sales revenue/average invested assets.
A graph of that provides a visual representation of the relationship between total cost and activity level is called a:
scattergraph
The most common method of evaluating a profit center manager is the:
segmented income statement.
which budget does NOT provide info for the budgeted balance sheet
selling and administrative expense budget
A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a ______-level activity
service
Under activity-based costing, a degree program at a university is considered a(n)_______ -level activity.
service
Non-value-added activities ______.
should be eliminated whenever possible do not enhance the product or service
In a standard cost system, overhead is applied per unit by multiplying the ___________ overhead rate times the ____________ quantity of the cost driver.
standard, standard
NOT a component of the master budget
statement of return on investment
A budget that is based on a single estimate of sales volume is called a:
static budget
Which of the following is NOT a value-added activity?
storing inventory
the vision of what managment wants the organization to achieve over the long term
strategic plan
A network of organizations and activities that move goods and services from suppliers to customers is a(n) ______
supply chain
The network of organizations and activities needed to move goods and services from suppliers to customers is called a(n) _____
supply chain
specific actions managers use to achieve their objectives
tactics
A proactive approach managers use to determine what costs should be is called ______
target costing
The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called ______ _______ or cost planning
target costing
A volume-based cost system is likely to assign more manufacturing overhead costs to products:
that sell more units than others.
When making screening decisions using the net present value method, a project is acceptable if:
the NPV is positive
One side benefit of JIT is that:
the accounting system is simplified.
Indirect costs can be assigned to products or services using ______
the activity proportion method the activity rate method
Indirect costs can be assigned to products or services using ______.
the activity rate method the activity proportion method
The linearity assumption is:
the assumption that the relationship between fixed costs and variable costs can be approximated by a straight line.
budgeted income statement is a combination of
the direct materials budget, direct labor budget, manufacturing overhead budget
An opportunity cost is:
the foregone benefit of the path not taken.
When a firm has limited direct labor hours, it should prioritize the product with
the highest contribution margin per direct labor hour.
A volume-based allocation measure would vary proportionately with:
the number of units produced.
The relevant range is:
the range of activity over which we expect our assumptions about cost behavior to hold true.
Investment turnover is defined as:
the ratio of sales revenue to average invested assets
Investment turnover is defined as:
the ratio of sales revenue to average invested assets.
An irrelevant cost:
will not influence a decision
At the break-even point, the margin of safety will be:
zero
The budgeted income statement is a combination of All the operating budgets. All the operating budgets plus the budgeted balance sheet. The direct materials budget, the direct labor budget, and the manufacturing overhead budget. The production budget, the cost of goods sold budget, and the selling and administrative expense budget.
All the operating budgets
The budgeted income statement is a combination of:
All the operating budgets.
Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?
An ABC system will assign more manufacturing overhead costs to the product than a volume-based system.
Which of the following best defines a batch-level activity?
An activity that is performed for a group of units all at once
Which of the following best defines a product-level activity?
An activity that is performed to support a specific product line
Which of the following best defines a facility-level activity?
An activity that is performed to support the entire company
Which of the following statements is true?
An existing ABC system can report sustainability-related information.
Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?
An instructor agrees to add an additional student to a class.
Which of the following types of reports is more characteristic of managerial accounting than financial accounting?
An internal report used by management
Which of the following cannot be an out-of-pocket cost?
An opportunity cost
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Which of the following is not relevant to the decision?
Apartment rent Your lodging will not change based on which Excel course you choose. Thus, the amount you pay in apartment rent is irrelevant to the decision.
Which of the following statements are true?
Appraisal costs identify defective products before they get to the customer. Appraisal costs are also known as inspection costs.
The final step in ABC is ___. -Assigning indirect costs to products or services -Selecting cost drivers for each activity cost pool -Identifying and classifying activities -Assigning indirect costs to each activity pool
Assigning indirect costs to products or services
A detailed plan that translates the companys objectives into financial terms, identifying the resources and expenditures that will be required over the planning horizon is a A) Strategic Plan B) Budget C) Tactic D) Long-Term Objective
B
A relevant cost is A) The foregone benefit of choosing to do one thing instead of another B) A cost that differs across decision alternatives C) A cost that has already been incurred D) A cost that is the same regardless of the alternative the manager chooses
B
Budgeted cost of goods sold should include which of the following? A) Raw materials and direct labor B) Raw materials, direct labor, and manufacturing overhead C) Raw materials, direct labor, manufacturing overhead, and selling expenses D) Raw materials, direct labor, manufacturing overhead, Selling Expenses, and administrative expenses
B
The basic form of the cash budget is A) Budgeted cash collections - budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance B) Beginning cash balance + Budgeted cash collections - budgeted cash payments +/- cash borrowed or repaid = ending cash balance C) Beginning cash balance - Budgeted cash collections + Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance D) Beginning cash balance + Budgeted cash collections - budgeted cash payments = cash borrowed or repaid
B
The starting point for preparing the master budget is the A) Inventory Policy B) Sales Budget C) Production Budget D) Budgeted balance sheet
B
Which of the following is true of a firm that has reached the limit on its resources? A) It has idle capacity B) Opportunity costs are now relevant C) It has no relevant costs D) It has excess capacity
B
Which of the following types of decisions involves deciding whether to perform a particular activity in house or purchase it from an outside supplier? A) Special order B) Mak or Buy C) Continue or discontinue D) Sell or process further
B
______ are the specific goals that managers want to achieve over a 5 to 10 year horizon A) Strategic plans B) Long-Term objectives C) Short term objectives D) Tactics
B
Santos Inc had the following information for the preceding year: Raw Materials: BE (1/1): $40,000 EE (12/31): $30,000 Work in Process Inventory: BE: $35,000 EE: $? Finished Goods Inventory: $30,000 $? Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the ending Finished Goods Inventory balance on 12/31? A. $20,000 B. $11,000 C. $50,000 D. $54,000
B. $11,000 $544,000 = $30,000 + $525,000 - ending Finished Goods Inventory. Ending Finished Goods Inventory = $30,000 + $525,000 - $544,000 = $11,000.
The cost of quality training is an example of what type of quality cost?
Prevention costs
Which of the following is true about product and period costs?
Product costs are usually manufacturing costs, and period costs are usually nonmanufacturing costs.
Which of the following budgets shows how many units will be produced each period? Direct materials budget Direct labor budget Sales budget Production budget
Production Budget
Which of the following budgets would not exist for a merchandising firm?
Production budget
Which of the following budgets would not exist for a merchandising firm? Sales budget Purchases budget Production budget Selling and administrative expense budget
Production budget
It costs Camp, Inc. $35 per unit to manufacture 1,000 units per month of a product that it can sell for $50 each. Alternatively, Camp could process the units further into a more complex product, which would cost an additional $30 per unit. Camp could sell the more complex product for $75 each. How would processing the product further affect Camp's profit?
Profit would decrease by $5,000
Standard cost systems depend on which two types of standards?
Quantity and price standards
Which of the following is not a limitation of return on investment?
ROI is a commonly used measure for financial performance.
Which of the following statements contrasting residual income with return on investment is correct?
ROI may lead to goal incongruence while residual income does not.
When materials are purchased, which of the following accounts is increased?
Raw Materials Inventory
Budgeted cost of goods sold should include which of the following?
Raw materials, direct labor, and manufacturing overhead
Budgeted cost of goods sold should include which of the following? Raw materials and direct labor. Raw materials, direct labor, and manufacturing overhead. Raw materials, direct labor, manufacturing overhead, and selling expenses. Raw materials, direct labor, manufacturing overhead, selling expenses, and administrative expenses.
Raw materials, direct labor, and manufacturing overhead
The starting point for preparing the master budget is the inventory policy. sales budget. production budget. budgeted balance sheet.
Sales Budget
Which of the following sequences is correct? Sales budget - production budget - direct materials budget - budgeted income statement Budgeted income statement - direct materials budget - production budget - sales budget Cash receipts budget - sales budget - production budget - budgeted income statement Inventory budget - production budget - sales budget - selling and administrative budget
Sales budget - production budget - direct materials budget - budgeted income statement
Which of the following is NOT part of the manufacturing cost per unit?
Sales commission
Which of the following types of decisions involves deciding whether to sell a product as is or continue to refine it so that it can be sold at a higher price?
Sell-or-process further
Which of the following budgets do not provide information needed for the budgeted balance sheet? Materials purchases budget Production budget Selling and administrative expense budget Cash budget
Selling and Administrative expense budget
Hair salons and law firms are examples of which of the following type of organization?
Service companies
Which of the following is not a perspective used by the balanced scorecard?
Short-term
Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?
Special-order
Which of the following is not a component of the master budget? Operating budget Budgeted income statement Budgeted balance sheet Statement of return on investment
Statement of return on ivestment
A____ is the vision of what management wants the organization to achieve over the long term. Strategic plan Long-term objective Short-term objective Tactic
Strategic Plan
A _____________ is the vision of what management wants the organization to achieve over the long term.
Strategic plan
Which of the following is not something that should be compiled for each dimension of the balanced scorecard?
Strategic vision
_________are the specific actions managers use to achieve their objectives. Strategic plans Long-term objectives Short-term objectives Tactics
Tactics
What is the term for the most constrained resource?
The Bottleneck
Which of the following might you find in a job description for a managerial accountant in a manufacturing company?
The Managerial Accountant will conduct internal analysis on the health of the company, suggest variances to emphasize in evaluations, and review unusual results.
Making a single sale at a department store is an example of a ______-level activity.
customer
Grover has forecast sales to be $and 40% the month following. What are budgeted cash receipts in March? A. $131,000 B. $135,000 C. $94,500 D. $91,700
A. $131,000
Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are use for machining, while 2,000 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?
$1,000
Washington, Inc. produces two different products (Product C and Product 2) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows: product c . product 2 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the activity rate for Inspection?
$1,500 per batch
Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials price variance?
$1,750 unfavorable
Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Machining cost assigned to Product 5?
$100,000
Orchard has forecast sales to be $250,000 in February, $270,000 in March, $300,000 in April, and $280,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31? $196,000 $117,600 $112,000 $168,000
$112,000
When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its total fixed cost when it sells 54,000 units?
$115,200
Parker Corp expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter? $32,000 $96,000 $115,200 $116,480
$116480
After selling 4,300 units during the period, Dole Corp. prepared a flexible budget that included $22,962 for direct materials, $36,120 for direct labor, $19,350 for variable overhead, and $46,440 for fixed overhead. Dole originally planned its master budget based on sales of 4,000 units. What would total costs have been on the master budget?
$119,400
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Machining cost assigned to Product A?
$125,000
Grover has forecast sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 70% of sales. All sales are on made on credit and sales are collected 60% in the month of sale, and 40% the month following. What are budgeted cash receipts in March? $131,000 $135,000 $94,500 $91,700
$131,000
Grover has forecast sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What are budgeted cash receipts in April? $105,000 $141,000 $150,000 $144,000
$144,000
Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1,000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?
$15 + $5 + [($4 × 1,000)/400] + [($20 × 40)/400] = $32.
Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is $___ TO CALCULATE: 200-(200*15%)
$170
Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?
$171,000
Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $270,000, while the cost of Inspection is $38,000. Product 5 uses 35% of total machine hours and 50% of total batches. What is the total Machining cost assigned to Product Z?
$175,500 Multiply the percentage of total machine hours used by Product Z by the total cost of machining: 65% × $270,000 = $175,500. (If product 5 uses 35% of the machine hours, then the remaining 65% of the hours must have been used on Product Z.)
A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)?
$680 $850 - ($850 × 20%) = $680.
Washington, Inc. produces two different products (Product C and Product 2) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows: product c . product 2 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the activity rate for Machining?
$187.50 per machine hour
Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. TO CALCULATE: 625000/(8000x4)
$19.53
Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.
$19.53 Rationale: $625,000/(8,000 × 4) = $19.53
SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $___ TO CALCULATE: 500000/250000
$2
Yuma, Inc. manufactures teddy bears and dolls. Currently, Yuma makes 2,000 teddy bears each month. Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor. Yuma uses two activities in manufacturing the teddy bears: Sewing and Processing. The cost associated with Sewing is $15,000 a month, allocated on the basis of direct labor hours. The cost associated with Processing is $10,000 a month, allocated on the basis of batches. Teddy bears use 1/2 of the direct labor hours, and 35% of total batches. What is the total manufacturing cost for one teddy bear?
$2.00 + $0.50 + [($15,000 × 1/2)/2,000] + [($10,000 × 35%)/2,000] = $8.00.
Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ___. TO CALCULATE: 2100000/1000000
$2.10
Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ______
$2.10 $2,100,000/1,000,000 = $2.10 per machine hour
Last month Carlos Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Carlos to break even?
$200,000
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______
$200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour
Audrey has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What is the budgeted Accounts Receivable balance on May 31? $155,000 $213,000 $127,800 $186,000
$213,000
Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Inspection cost assigned to Product 5?
$22,500
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Inspection cost assigned to Product A?
$22,500
Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6-year life. There is no salvage value for the equipment. If the hurdle rate is 8%, what is the approximate net present value? Ignore income taxes.
$24,580
Manufacturing overhead was estimated to be $489,600 for the year along with 20,400 direct labor hours. Actual manufacturing overhead was $470,220, actual labor hours were 21,800. The predetermined manufacturing overhead rate per direct labor hour would be:
$24.00 $489,600 / 20,400 = $24.00
Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory will stay constant. Direct Materials $4.00 per unit Direct Labor $7.20 per unit Manufacturing Overhead $10.00 per unit Selling and Administrative expense $8.00 per unit What is budgeted cost of goods sold for March? $20,367 $21,200 $25,440 $35,040
$25,440
Dade Corp. has residual income of $10,000. If operating income equals $30,000 and the minimum required rate of return is 8%, what are average invested assets?
$250,000
Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. Direct Materials-$5200 Direct Labor- $9,360 Manufacturing Overhead-$13,000 Selling and Administrative expense $10,400 What is budgeted cost of goods sold for March? $14,560 $24,960 $27,560 $37,960
$27,560
An activity that is performed to benefit the organization as a whole is a(n)
Facility or companywide activities are performed to benefit the organization as a whole.
Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: Product V3 Product G8 Total Machine hours 1,000 3,000 4,000 Number of batches 45 15 60 The activity rate for Machining is $67.50 per machine hour. What is the total cost of Machining?
$270,000
Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: product v3 . product g8 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 15 . 60 The activity rate for Machining is $67.50 per machine hour. What is the total cost of Machining?
$270,000
Elm uses the high-low method of estimating costs. Elm had total costs of $250,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $390,000. Elm would estimate variable cost per unit as:
$28.00
Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours? TO CALCULATE: 1.35000/5000=Per direct labor hour 2. PDLH*40
$280
Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?
$280 Rationale: Predetermined overhead rate = $35,000/5,000 or $7 per direct labor hour × 40 hours = $280.
Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?
$280 = 35,000/5000 or 7$ per direct labor hours x 40 hours
Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be $113,400. $204,750. $261,450. $285,750.
$285,750
Boxwood Inc has forecast purchases on account to be $620,000 in March, $740,000 in April, $840,000 in May, and $980,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What is the budgeted Accounts Payable balance for June 30? $588,000 $686,000 $294,000 $252,000
$294,000
Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? $267,000 $296,000 $161,250 $241,500
$296,000
Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials quantity variance?
$3,250 unfavorable
Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? $303,800 $231,000 $121,500 $161,000
$303,800
Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? $24,675 $225,680 $303,800 $305,970
$305,970
Atlantic, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales of 1,000 units, and raw materials inventory will stay constant. Direct Materials $6.00 per unit Direct Labor $10.80 per unit Variable Manufacturing overhead $7.50 per unit Fixed Manufacturing Overhead $7,500 What is budgeted cost of goods sold for March? $16,800 $24,300 $31,800 $43,800
$31,800
Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?
$32
Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July? $24,500 $39,500 $35,000 $30,500
$35,000
Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses the number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?
$359,000
A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $_______ in total overhead
1200
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Machining cost assigned to Product X?
$375,000
Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. Direct Materials $6.00 per unit Direct Labor $10.80 per unit Variable Manufacturing overhead $7.50 per unit Fixed Manufacturing Overhead $7,500 What is budgeted cost of goods sold for March? $30,551 $31,800 $36,660 $38,160
$38160
Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Machining cost assigned to Product Z?
$400,000
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be:
$420,000.
Hadley, Inc. manufactures a product that uses $15 in direct materials and $5 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $12. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $25. What is the total manufacturing cost per unit for Hadley under the ABC system?
$45
Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: Product V3 Product G8 Total Machine hours 1,000 3,000 4,000 Number of batches 45 15 60 The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?
$45,000
Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: product v3 . product g8 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 15 . 60 The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?
$45,000
Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July? $389,500 $267,000 $457,000 $415,000
$457,000
Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? $29,400 $41,000 $46,400 $17,000
$46,400
Skybird has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: Fixed Manufacturing Costs-$17,000 Fixed Selling Costs-$10,000 Fixed Administrative Costs-$8300 Variable Manufacturing Costs-$6 per unit produced Variable Selling Costs-$3 per unit sold What is budgeted manufacturing overhead cost for July? $32,000 $41,000 $46,400 $17,000
$46,400
Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? $29,400 $47,000 $46,400 $17,000
$46,400
Ivory Inc has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? $441,000 $469,000 $343,000 $294,000
$469,000
Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, and actual direct labor hours were 19,000. The amount of manufacturing overhead applied to production would be:
$475,000.
Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the direct labor efficiency variance?
$5,737.50 favorable
Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: Fixed Manufacturing Costs-$17,000 Fixed Selling Costs-$10,000 Fixed Administrative Costs-$8300 Variable Manufacturing Costs-$6 per unit produced Variable Selling Costs-$3 per unit sold What is budgeted manufacturing overhead cost for August? $50,000 $47,000 $33,000 $32,000
$50,000
What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced?
Facility-level
Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. Direct Materials $8,000 Direct Labor $14,400 Manufacturing Overhead $20,000 Selling and administrative expense $16,000 What is budgeted cost of goods sold for March? $40,734 $42,400 $48,880 $50,880
$50,880
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $___ per setup.
$500
Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September? $30,000 $67,500 $32,500 $52,500
$52,500
Manufacturing overhead was estimated to be $477,000 for the year along with 26,500 direct labor hours. Actual manufacturing overhead was $364,375, actual labor hours were 29,100. The amount of manufacturing overhead applied to production would be:
$523,800 Calculate the predetermined overhead rate of $18.00 by dividing total estimated manufacturing overhead by the estimated total cost driver for the year. ($477,000 / 26,500 = $18.00) Multiply the predetermined manufacturing overhead rate ($18.00) to the actual number of direct labor hours (29,100) to calculate applied manufacturing overhead. ($18.00 × 29,100 = $523,800).
Dane Inc has forecast purchases on account to be $465,000 in March, 555,000 in April, $630,000 in May, and $735,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for April? $528,000 $577,500 $388,500 $189,000
$528,000
Arbor Co. has forecast sales to be $400,000 in May, $475,000 in June, $575,000 in July and $700,000 in August. Forty percent of sales are cash, the remainder is on credit. Credit sales are collected 60% in the month of sale, the remaining the following month. What are budgeted cash collections for July? $230,000 $334,000 $459,000 $551,000
$551,000
Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August?
$56,600
Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? $56,600 $17,000 $53,000 $38,600
$56,600
Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? $56,600 $17,000 $39,600 $62,000
$56,600
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $190 per machine hour, and the activity rate for Inspection is $530 per batch. The activity drivers are used as follows: Product A Product X Total Machine hours 1,300 3,100 4,400 Number of batches 55 24 79 What is the amount of Machining cost assigned to Product X?
$589,000 Multiply the number of machine hours for Product X by the activity rate per machine hour: 3,100 × $190 = $589,000
Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? $592,000 $620,000 $310,000 $483,334
$592,000
A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______
$6,000 $2 × 3,000 = $6,000
A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______.
$6,000 Rationale: $2 × 3,000 = $6,000
Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September? $742,500 $643,500 $4,387,500 $292,500
$643500
A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)? TO CALCULATE 850-(850*20%)
$680
True or false: When a manufacturing overhead cost relates to multiple activities, the cost should be allocated to the activity that has the highest total overhead cost.
False
Linden, Inc. uses a 8,150 square foot factory space that it rents for $3,900 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 4,500 square feet of the factory are used for machining, while 1,450 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 750 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?
$694 Divide the amount of square feet used by Preparation and Setup by the factory's total square feet, and multiply the result by the total cost of all manufacturing activities. (1,450 / 8,150) × $3,900 = $694
Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Inspection cost assigned to Product Z?
$7,500
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Inspection cost assigned to Product X?
$7,500
Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.
$73,160 to Model XLT and $44,840 to Model TXT 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT
Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.
$73,160 to Model XLT and $44,840 to Model TXT Rationale: 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT
Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product. TO CALCULATE: 1. 620/1000=x & 380/1000=y 2. x*118000 & y*118000
$73160 to Model XLT & $44840 to Model TXT
Killian Corp. has a residual income of $30,000 on invested assets of $450,000. If the hurdle rate is 10%, what is the operating income?
$75,000
Sherman, Inc. manufactures chainsaws that sell for $200. Each chainsaw uses $19 in direct materials and $5 in direct labor per unit. Sherman has two activities: Machining, which is applied at the rate of $5 per machine hour, and Finishing, which is applied at the rate of $28 per batch. This month, Sherman made 200 chainsaws, using 1,868 machine hours in 45 batches. What is the total manufacturing cost for one chainsaw?
$77 Total manufacturing costs include direct materials, direct labor, and overhead: $19 + $5 + [($5 × 1,868) / 200] + [($28 × 45) / 200] = $77.
Miami Corp. has an operating income of $120,000, average invested assets of $600,000, and a cost of capital of 7%. What is the residual income?
$78,000
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______.
$8 per customer call and $15 per development hour Rationale: $200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour.
Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What is Robin's total manufacturing cost?
$81,600
Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?
$85,000
Parsley Inc, a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be? $58,500 $142,500 $81,000 $85,500
$85,500
Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much is total labor cost during the three months July through September? $69,300 $327,670 $846,300 $859,320
$859,320
Laredo, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?
$9,000
Which of the following is not a characteristic of managerial accounting?
Information is used by external parties
Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are used for machining, while 2,000 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?
(2,000/5,000) × $2,500 = $1,000.
Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?
(30% × $500,000) + (70% × $30,000) = $171,000.
Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?
(70% × $500,000) + (30% × $30,000) = $359,000.
Under the weighted average method of process costing, which of the following formulas is used to calculate the cost per equivalent unit? (Ending Inventory + Current Costs)/Physical Units (Beginning Inventory + Current Costs)/Physical Units (Ending Inventory + Current Costs)/Equivalent Units (Beginning Inventory + Current Costs)/Equivalent Units
(Beginning Inventory + Current Costs)/Equivalent Units
The formula for target units is:
(Total variable costs + Total fixed costs)/Unit contribution margin
The profit equation is:
(Unit price × Q) - (Unit variable costs × Q) - Total fixed costs = Profit
Non-Volume based cost drivers ___ -are used in traditional costing systems -are related to the number of units products or customers served -are used in ABC systems -allow more indirect costs to be allocated to products
-are used in ABC systems -allow more indirect costs to be allocated to products
Non-volume-based cost drivers may be more appropriate for activities ___ -that are performed for each unit -that are performed for each batch -related to individual products -related to the entire facility
-that are performed for each batch -related to individual products
Indirect costs can be assigned to products or services using ______. -activity-based management -total quality management -the activity rate method -the activity proportion method -target costing
-the activity rate method -the activity proportion method
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. Usage of the activity drivers are as follows: What is the amount of Machining cost assigned to Product A?
1,000 × $125 = $125,000.
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Usage of the activity drivers are as follows: What proportion of Machining activity is used by Product 5?
1,200/6,000 = 20%.
Lea Company produces hand tools. Budgeted sales for March are 10,000 units. Beginning finished goods inventory in March is budgeted to be 1,300 units, and ending finished goods inventory is budgeted to be 1,400 units. How many units will be produced in March? 9,900 10,000 10,100 12,700
10100
A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $ ___ in total overhead.
1200
A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $______ in total overhead
1200
When cash flows are equal each year, the payback period is calculated as:
Initial investment/Annual net cash flow
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in April? 13,300 15,900 12,700 13,000
13300
Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July? 13,800 15,300 16,200 16,300
15300
Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is
170
SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $
2
SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_________
2
Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July?
2,550 square meters
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Machining activity is used by Product 5?
20%
Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What is Robin's total manufacturing overhead?
20,800
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted ending finished goods inventory for May? 1,000 1,300 1,600 2,100
2100
Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500000, while the cost of Inspection is $30000. Standard is assigned $150000 in Machining cost, and $22500 in Inspection cost. What proportion of Inspection activity is used by Luxury?
25%
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Inspection activity is used by Product Z?
25%
Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? 2,300 square meters 2,550 square meters 2,700 square meters 3,575 square meters
2550 square meters
Jillian Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September? 7,500 9,750 16,500 26,250
26250
Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.
30
Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ________ % of the total setup cost.
30 %
Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 7,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.
30%
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours were 21,000. The predetermined overhead rate would be A. $10.00 B. $1.05 C. $10.75 D. $10.24
A. $10.00 $200,000/20,000 = $10.00
Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Machining activity is used by Standard?
30%
Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in August? 7,150 square meters 3,575 square meters 7,075 square meters 3,425 square meters
3575 square meters
Johnson Inc. produces leather handbags. Johnson Inc. estimates it will use 3,500 square meters of leather in production in August, and 3,750 square meters of leather in production in September. Johnson Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? 3,425 square meters 3,500 square meters 3,575 square meters 4,625 square meters
3575 square meters
Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? 3,425 square meters 3,450 square meters 3,508 square meters 3,600 square meters
3600 square meters
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: What is the amount of Machining cost assigned to Product X? Product A: Machine hours 1,000 Number of batches 45 Product X: Machine hours 3,000 Number of batches 15
375,000
Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5-year life. If the salvage value of the equipment is estimated to be $75,000, what is the payback period? Ignore income taxes.
4.00 years
Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $90 each. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. What is the gross profit margin for the cat condos?
50.0%
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $ ___ per setup.
500
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $______ per setup
500
Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What are Robin's conversion costs?
57,600
Cooper Company has a direct material standard of 2 gallons of input at a cost of $7.50 per gallon. During July, Cooper Company purchased and used 13,000 gallons, paying $93,200. The direct materials quantity variance was $1,500 unfavorable. How many units were produced?
6,400 units
Robin Company has the following balances for the current month: Direct materials used $24,000 Direct labor $36,800 Sales salaries $19,200 Indirect labor $4,800 Production manager's salary $9,600 Marketing costs $14,400 Factory lease $6,400 What are Robin's prime costs?
60,800
Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.
625,000/ (8,000x4) = 19.53
Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August? 6,600 units 10,400 units 5,400 units 600 units
6600 units
Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses P × $500,000 = $150,000; P = 30%. a number of batches as an activity driver. The cost of Machining is $500000, while the cost of Inspection is $30000. Standard is assigned $150,000 in Machining cost and $22,500 in Inspection cost. What proportion of Machining activity is used by Luxury?
70%
Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Inspection activity is used by Standard?
75%
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Inspection activity is used by Product 5?
75%
Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? 750 square meters 1,050 square meters 1,825 square meters 300 square meters
750 square meters
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Machining activity is used by Product Z?
80%
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 beginning inventory is projected to be 1,400 units. How many units will be produced in March?
9,900
Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many unskilled labor hours will be budgeted for August? 7,000 9,100 15,400 24,500
9100
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? 10,000 9,900 13,000 10,100
9900
If a company is planning to build inventory A) Production should exceed sales B) Sales should exceed production C) Production should equal sales D) Production should equal inventory
A
The foregone benefit of choosing one alternative over another is measured by A) Opportunity costs B) Activity based costs C) Differential costs D) Capital Costs
A
Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales A) Special order B) Make or Buy C) Continue or discontinue D) Sell or process further
A
Which of the following statements about employee motivation is true?
A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.
Which of the following statements about employee motivation is true? A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable. A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable. A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve. Budgets are difficult to use for motivation.
A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.
Which of the following is a variable cost?
A cost that is $26,000 when production is 65,000, and $36,400 when production is 91,000.
When a traditional, volume-based costing system is used, which of the following products is most likely to suffer from cost distortion?
A low-volume, high-complexity product
Which of the following statements is true? A process costing system will have a single Work in Process Inventory account. A process costing system will have a separate Work in Process Inventory account for each of the major processes. A job costing system will have a separate Work in Process Inventory account for each of the major processes. A process costing system will have a separate Raw Materials Inventory account for each of the major processes.
A process costing system will have a separate Work in Process Inventory account for each of the major processes.
Which of the following statements best represents the controllability principle?
A profit center manager should be evaluated based on segment margin, not profit margin.
Which of the following statement is correct about the functions that fall within various responsibility centers?
A revenue center manager is responsible for fewer functions than a profit center manager is.
Which of the following companies would most likely use process costing? A soft drink company A law firm A custom garden equipment manufacturer A home remodeling company
A soft drink company
When is a volume-based cost system appropriate for a service company?
A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources
When is a volume-based cost system appropriate for a service company?
A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources.
Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. What is the predetermined overhead rate that Optimum will use for the current year? A. $1.50 per dollar of consultant labor cost. B. $1.35 per dollar of consultant labor cost. C. $0.67 per dollar of consultant labor cost. D. $1.45 per dollar of consultant labor cost.
A. $1.50 per dollar of consultant labor cost. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost.
Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. During the year, Optimum provided 42 hours of consulting services to Joan Clair for which Optimum pays an average of $20 per hour. What is the total cost of providing services to Joan? A. $2,100. B. $1,974. C. $2,058. D. $1,403.
A. $2,100. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost. Consultant labor cost for providing services to Joan is $840 (42 x $20). Overhead is applied at $1.50 per dollar of consultant labor cost = $840 x $1.50 = $1,260. Total cost of providing services to Joan = $840 + $1,260 = $2,100.
Santos Inc had the following information for the preceding year: Raw Materials: BE (1/1): $40,000 EE (12/31): $30,000 Work in Process Inventory: BE: $35,000 EE: $? Finished Goods Inventory: $30,000 $? Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the ending Work in Process Inventory balance on 12/31? A. $20,000 B. $11,000 C. $50,000 D. $54,000
A. $20,000 Current manufacturing costs = $200,000 + $150,000 + $160,000 = $510,000. Cost of goods manufactured = 525,000 = $35,000 + $510,000 - ending Work in Process Inventory, so ending Work in Process Inventory = $35,000 + $510,000 - $525,000 = $20,000.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The predetermined manufacturing overhead rate would be A. $20.00 B. $0.05 C. $20.75 D. $19.05
A. $20.00 $400,000/20,000 = $20.00.
McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the current manufacturing costs. A. $245,000 B. $255,000 C. $65,000 D. $68,000
A. $245,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000.
Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $303,800 B. $231,000 C. $121,500 D. $161,000
A. $303,800
Mendez Inc had the following information for the preceding year: Work in Process Inventory: BE: $? EE: $35,000 Finished Goods Inventory: $? $30,000 Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the beginning Finished Goods Inventory balance on 1/1? A. $49,000 B. $65,000 C. $50,000 D. $69,000
A. $49,000 $544,000 = Beginning Finished Goods Inventory + $525,000 - $30,000. Beginning Finished Goods Inventory = $544,000 + $30,000 - $525,000 = $49,000.
50. Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for August? A. $50,000 B. $47,000 C. $33,000 D. $32,000
A. $50,000
Dane Inc has forecast purchases on account to be $465,000 in March, 555,000 in April, $630,000 in May, and $735,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for April? A. $528,000 B. $577,500 C. $388,500 D. $189,000
A. $528,000
Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $53,000 D. $38,600
A. $56,600
Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $39,600 D. $62,000
A. $56,600
Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $592,000 B. $620,000 C. 310,000 D. $483,334
A. $592,000
Sawyer Company had the following information for the year: Direct materials used:$190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $9,000. What was cost of goods manufactured? A. $715,000 B. $708,000 C. $755,000 D. $706,000
A. $715,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 7,000 = $280,000. Cost of goods manufactured = $190,000 + $245,000 + $280,000 + $0 - $0 = $715,000.
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in April? A. 13,300 B. 15,900 C. 12,700 D. 13,000
A. 13,300
Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August? A. 6,600 units B. 10,400 units C. 5,400 units D. 600 units
A. 6,600 units
Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? A. 750 square meters B. 1,050 square meters C. 1,825 square meters D. 300 square meters
A. 750 square meters
Which of the following is incorrect regarding service firms? A. Each client or account is equivalent to a process in a process costing firm. B. The accounting system will track the time and resources spent serving a specific client or account. C. Managers of service firms need cost information to price their services, to budget and control costs, and to determine the profitability of different types of clients. D. The primary driver used to assign costs is billable hours.
A. Each client or account is equivalent to a process in a process costing firm. In service firms, each client or account is equivalent to a job in a manufacturing setting. All the other choices regarding service firms are correct.
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $5,000 B. Manufacturing Overhead would be credited for $15,000 C. Manufacturing Overhead would be debited for $5,000 D. Manufacturing Overhead would be debited for $15,000
A. Manufacturing Overhead would be credited for $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = $215,000 - $210,000 = $5,000, which is credited to Manufacturing Overhead.
Manufacturing overhead is applied to each job using which formula? A. Predetermined overhead rate x actual value of the allocation base for the job B. Predetermined overhead rate x estimated value of the allocation base for the job C. Actual overhead rate x estimated value of the allocation base for the job D. Predetermined overhead rate/actual value of the allocation base for the job
A. Predetermined overhead rate x actual value of the allocation base for the job This is the formula for applied manufacturing overhead.
Which of the following accounts is not affected by applied manufacturing overhead? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
A. Raw Materials Inventory Manufacturing overhead is applied to Work in Process inventory; the cost moves to Finished Goods when goods are completed, and Cost of Goods Sold when they are sold.
Which of the following represents the cost of materials purchased but not yet issued to production? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
A. Raw Materials Inventory Raw Materials Inventory represents the cost of materials purchased from suppliers but not yet used in production.
When direct materials are used in production, which of the following accounts is credited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
A. Raw Materials Inventory When direct materials are used in production, the cost is transferred from Raw Materials Inventory (with a credit) to Work in Process Inventory (with a debit).
When materials are purchased, which of the following accounts is debited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
A. Raw Materials Inventory When materials are purchased, they are initially recorded in Raw Materials Inventory with a debit to the account.
In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?
Activity rate
In recording the purchase of materials that are not traced to any specific job, which of the following is correct? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
A. Raw Materials Inventory would be debited When indirect materials are purchased, they are debited to raw materials inventory.
When disposed of, underapplied manufacturing overhead will A. increase Cost of Goods Sold. B. increase Finished Goods. C. decrease Cost of Goods Sold. D. decrease Finished Goods.
A. increase Cost of Goods Sold. If manufacturing overhead is underapplied, Cost of Goods sold should be adjusted upward since not enough overhead was put in during the period.
Cost of goods sold is the amount of cost transferred A. out of Finished Goods Inventory and into Cost of Goods Sold. B. out of Work in Process Inventory and into Cost of Goods Sold. C. out of Work in Process Inventory and into Manufacturing Overhead. D. out of Work in Process Inventory and into Finished Goods Inventory.
A. out of Finished Goods Inventory and into Cost of Goods Sold. When goods are sold, their cost is transferred out of Finished Goods Inventory and into Cost of Goods Sold.
The formula to apply overhead to products is
Activity Rate x Activity
How is activity-based management related to activity-based costing?
Activity based management bases improvements to operations and reductions in costs on activity based costing data.
Audrey has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What is the budgeted Accounts Receivable balance on May 31? A. $155,000 B. $213,000 C. $127,800 D. $186,000
B. $213,000
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount debited to the Manufacturing Overhead account would be A. $200,000 B. $215,000 C. $210,000 D. $225,750
B. $215,000 Actual manufacturing overhead costs of $215,000 are accumulated on the debit side of the Manufacturing Overhead account.
Overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual overhead was $225,000, and actual direct labor hours were 19,000. The amount debited to the manufacturing overhead account would be A. $250,000 B. $225,000 C. $213,750 D. $237,500
B. $225,000 Actual manufacturing overhead costs of $225,000 are debited to the Manufacturing Overhead account.
McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the cost of goods manufactured. A. $248,000 B. $242,000 C. $265,000 D. $235,000
B. $242,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000. Cost of goods manufactured = $15,000 + $245,000 - $18,000 = $242,000.
Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, actual direct labor hours were 19,000. The predetermined overhead rate would be A. $22.50 B. $25.00 C. $23.68 D. $26.32
B. $25.00 $500,000/20,000 = $25.00
Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $267,000 B. $296,000 C. $161,250 D. $241,500
B. $296,000
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount debited to the Manufacturing Overhead account would be A. $400,000 B. $415,000 C. $420,000 D. $435,750
B. $415,000 Actual manufacturing overhead costs are debited to the Manufacturing Overhead account.
Ivory Inc has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? A. $441,000 B. $469,000 C. $343,000 D. $294,000
B. $469,000
Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September? A. $742,500 B. $643,500 C. $4,387,500 D. $292,500
B. $643,500
Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to sell 16,000 units in May. What is budgeted ending inventory for March? A. 1,030 B. 1,300 C. 1,330 D. 1,650
B. 1,300
Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Meadow plans to sell 16,000 units in May. How many units will be sold in April? A. 12,380 B. 13,000 C. 13,570 D. 13,620
B. 13,000
34. Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? A. 2,300 square meters B. 2,550 square meters C. 2,700 square meters D. 3,575 square meters
B. 2,550 square meters
33. Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in August? A. 7,150 square meters B. 3,575 square meters C. 7,075 square meters D. 3,425 square meters
B. 3,575 square meters
Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many unskilled labor hours will be budgeted for August? A. 7,000 B. 9,100 C. 15,400 D. 24,500
B. 9,100
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? A. 10,000 B. 9,900 C. 13,000 D. 10,100
B. 9,900
Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $25,000 B. Cost of Goods Sold would be credited for $12,500 C. Cost of Goods Sold would be debited for $12,500 D. Cost of Goods Sold would be debited for $25,000
B. Cost of Goods Sold would be credited for $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500, which is credited to Cost of Goods Sold.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000 C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000
B. Cost of Goods Sold would be credited for $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000, which is credited to cost of goods sold.
Which of the following should a manager using activity-based management attempt to reduce or eliminate?
Insurance division to process liability insurance payments
Which of the following would be used to transfer the cost of completed goods during the period? A. Credit to Raw Materials Inventory B. Credit to Work in Process Inventory C. Debit to Manufacturing Overhead D. Credit to Manufacturing Overhead
B. Credit to Work in Process Inventory When a job is completed, its total manufacturing cost is transferred out of Work in Process Inventory with a credit and into Finished Goods Inventory with a debit.
Which of the following types of firms would most likely use job order costing? A. Happy-Oh Cereal Company B. Huey, Lewey & Dewie, Attorneys C. SoooSweet Beverage D. C-5 Cement Company
B. Huey, Lewey & Dewie, Attorneys Job order costing is used in companies that offer customized or unique products or services, such as a law firm.
All the costs assigned to an individual job are summarized on a A. Cost driver sheet. B. Job cost sheet. C. Materials requisition form. D. Labor time ticket.
B. Job cost sheet. The job cost sheet is a document that summarizes all of the costs incurred on a specific job.
The cost of materials used on a specific job is first captured on which source document? A. Cost driver sheet B. Materials requisition form C. Labor time ticket D. Process cost sheet
B. Materials requisition form The materials requisition form lists the quantity and cost of the direct materials used on a specific job.
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. Which of the following would be correct? A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000 C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000
B. Overhead is underapplied by $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = $215,000 - $210,000 = $5,000.
When units are completed, the cost associated with the job is credited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
B. Work in Process Inventory When a job is completed, its cost is transferred from Work in Process Inventory (with a credit) to Finished Goods Inventory (with a debit).
The cost of scrap and rework is an example of what type of quality cost?
Internal failure costs
When direct materials are used in production, which of the following accounts is debited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
B. Work in Process Inventory When direct materials are used in production, the cost is transferred from Raw Materials Inventory (with a credit) to Work in Process Inventory (with a debit).
Which of the following represents the accumulated costs of jobs as yet incomplete? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
B. Work in Process Inventory Work in Process Inventory represents the total cost of jobs that are still in process.
When materials are placed into production, A. Raw Materials Inventory is debited if the materials are traced directly to the job. B. Work in Process Inventory is debited if the materials are traced directly to the job. C. Manufacturing Overhead is debited if the materials are traced directly to the job. D. Raw Materials Inventory is credited only if the materials are traced directly to the job, otherwise manufacturing overhead is credited.
B. Work in Process Inventory is debited if the materials are traced directly to the job. When direct materials are placed into production, the cost is transferred from Raw Materials Inventory with a credit, and debited to Work in Process Inventory.
Which of the following would be used to record the labor cost that is traceable to a specific job? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
B. Work in Process Inventory would be debited As direct labor costs are incurred, they are debited to Work in Process Inventory.
Which of the following would be used to apply manufacturing overhead to production for the period? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Work in Process Inventory would be credited
B. Work in Process Inventory would be debited When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.
The basic form of the cash budget is: Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance Beginning cash balance - Budgeted cash collections + Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance Beginning cash balance + Budgeted cash collections - Budgeted cash payments = Cash borrowed or repaid
Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance
Which of the following relationships is correct? Beginning units in inventory + units started = units completed + ending units in inventory Units started = beginning units in inventory + units completed + ending units in inventory Units started - beginning units in inventory = units completed + ending units in inventory Ending units in inventory + beginning units in inventory = units started - units completed
Beginning units in inventory + units started = units completed + ending units in inventory
How is the cost of a batch-level activity similar to the cost of a unit-level activity?
Both increase as production volume increases.
A detailed plan that translates the company's objectives into financial terms, identifying the resources and expenditures that will be required over the planning horizon is a Strategic plan Budget Tactic Long-term objective
Budget
Which of the following is the primary tool used by cost centers to manage costs?
Budgetary control system The budget is a primary tool used by cost centers to manage costs.
Which of the following is not included in the operating budget? Budgeted balance sheet Sales budget Selling and administrative budget Raw materials purchases budget
Budgeted Balance Sheet
Budgeted direct labor hours are calculated as Budgeted production units × Direct labor requirements per unit + Ending inventory - Beginning inventory. Budgeted production units × Direct labor requirements per unit + Beginning inventory - Ending inventory. Budgeted production units × Direct labor requirements per unit. Budgeted sales units × Direct labor requirements per unit.
Budgeted production units x Direct Labor requirements per unit
Budgeted direct labor hours are calculated as:
Budgeted production units × Direct labor requirements per unit
Budgeted direct labor hours are calculated as A) Budgeted production units x Direct labor requirements per unit + ending inventory - beginning inventory B) Budgeted production units x Direct labor requirements per unit + beginning inventory -ending inventory C) Budgeted Production units x Direct labor requirements per unit D) Budgeted sales units x Direct labor requirements per unit
C
Budgeted production is calculated by A) Adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory B) Adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted ending work in process inventory. C) Adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory. D) Adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted beginning work in process inventory.
C
The Formula for budgeted raw materials purchases is A) Budgeted production units + Ending raw materials inventory - beginning raw materials inventory B) Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory C) Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory D) Materials needed for production + beginning raw materials inventory - Ending raw materials inventory
C
The purpose of the cash budget is to A) Be used as a basis for the operating budgets B) Provide external users with an estimate of future cash flows C) help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs D) Summarize the cash flowing into and out of the business during the past period
C
What are the decision alternatives in a special order decision? A) To make or buy the product B) To continue or discontinue the product C) To accept or reject the offer D) To sell-or-process further
C
When calculating raw materials purchases, the starting point should be A) Actual materials purchases from the previous year B) Budgeted sales C) Budgeted Production D) Budgeted cost of raw materials
C
When calculating the direct labor budget, the starting point should be A) Actual direct labor hours from the previous year B) Budgeted sales C) Budgeted Production D) Budgeted cost of direct labor
C
Which of the following budgets would not exist for a merchandising firm? A) Sale budget B) Purchases budget C) Production Budget D) Selling and administrative expense budget
C
Which of the following is not a component of the cash budget? A) Budgeted cash collections B) Budgeted cash payments C) Depreciation Expense D) Cash borrowed or repaid
C
Which of the following statements about employee motivation is true? A) A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable B) A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable C) A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve D) Budgets are difficult to use for motivation
C
Orchard has forecast sales to be $250,000 in February, $270,000 in March, $300,000 in April, and $280,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31? A. $196,000 B. $117,600 C. $112,000 D. $168,000
C. $112,000
Product costs are sometimes called:
Inventorial costs
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount credited to the Manufacturing Overhead account would be A. $200,000 B. $215,000 C. $210,000 D. $225,750
C. $210,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000, which would be credited to Manufacturing Overhead.
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be A. $200,000 B. $215,000 C. $210,000 D. $225,750
C. $210,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000.
Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $20,367 B. $21,200 C. $25,440 D. $35,040
C. $25,440
McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the unadjusted cost of goods sold. A. $133,000 B. $242,000 C. $252,000 D. $255,000
C. $252,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000. Cost of goods manufactured = $15,000 + $245,000 - $18,000 = $242,000. Cost of goods sold = $30,000 + $242,000 - $20,000 = $252,000.
Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $14,560 B. $24,960 C. $27,560 D. $37,960
C. $27,560
Sawyer Company had the following information for the year: Direct materials used: $190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $9,000. How much overhead was applied during the year? A. $245,000 B. $273,000 C. $280,000 D. $320,000
C. $280,000 Predetermined overhead rate = $320,000/8,000 = $40.00. Applied manufacturing overhead = $40.00 x 7,000 = $280,000.
Boxwood Inc has forecast purchases on account to be $620,000 in March, $740,000 in April, $840,000 in May, and $980,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What is the budgeted Accounts Payable balance for June 30? A. $588,000 B. $686,000 C. $294,000 D. $252,000
C. $294,000
Atlantic, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales of 1,000 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $16,800 B. $24,300 C. $31,800 D. $43,800
C. $31,800
Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July? A. $24,500 B. $39,500 C. $35,000 D. $30,500
C. $35,000
Jackson Company had the following information for the year: Direct materials used: $295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jackson Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $19,000. How much overhead was applied during the year? A. $245,000 B. $343,000 C. $360,000 D. $320,000
C. $360,000 Predetermined overhead rate = $320,000/8,000 = $40.00. Applied manufacturing overhead = $40.00 x 9,000 = $360,000.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount credited to the Manufacturing Overhead account would be A. $400,000 B. $415,000 C. $420,000 D. $435,750
C. $420,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000, which is credited to Manufacturing Overhead.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be A. $400,000 B. $415,000 C. $420,000 D. $435,750
C. $420,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000.
Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July? A. $389,500 B. $267,000 C. $457,000 D. $415,000
C. $457,000
49. Skybird has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for July? A. $32,000 B. $41,000 C. $46,400 D. $17,000
C. $46,400
Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $41,000 C. $46,400 D. $17,000
C. $46,400
Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $47,000 C. $46,400 D. $17,000
C. $46,400
Mendez Inc had the following information for the preceding year: Work in Process Inventory: BE: $? EE: $30,000 Finished Goods Inventory: $? $30,000 Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the beginning Work in Process Inventory balance on 1/1? A. $49,000 B. $65,000 C. $50,000 D. $69,000
C. $50,000 Current manufacturing costs = $200,000 + $150,000 + $160,000 = $510,000. Cost of goods manufactured = $525,000 = Beginning Work in Process Inventory + $510,000 - $35,000, so ending Work in Process Inventory = $525,000 + $35,000 - $510,000 = $50,000.
Lea Company produces hand tools. Budgeted sales for March are 10,000 units. Beginning finished goods inventory in March is budgeted to be 1,300 units, and ending finished goods inventory is budgeted to be 1,400 units. How many units will be produced in March? A. 9,900 B. 10,000 C. 10,100 D. 12,700
C. 10,100
Johnson Inc. produces leather handbags. Johnson Inc. estimates it will use 3,500 square meters of leather in production in August, and 3,750 square meters of leather in production in September. Johnson Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,500 square meters C. 3,575 square meters D. 4,625 square meters
C. 3,575 square meters
Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000 C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000
C. Cost of Goods Sold would be debited for $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = 215,000 - $210,000 = $5,000, which is debited to Cost of Goods Sold.
Which of the following represents the cost of jobs completed but not yet sold? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
C. Finished Goods Inventory Once goods are finished, their costs are transferred out of Work in Process Inventory and into Finished Goods Inventory until they are sold.
When units are completed, the cost associated with the job is debited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
C. Finished Goods Inventory When a job is completed, its cost is transferred from Work in Process Inventory (with a credit) to Finished Goods Inventory (with a debit).
When units are sold, the cost associated with the units is credited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
C. Finished Goods Inventory When units are sold, their cost is transferred from Finished Goods Inventory (with a credit) to Cost of Goods Sold (with a debit).
The source document that captures how much time a worker has spent on various jobs during the period is a A. Cost driver sheet. B. Materials requisition form. C. Labor time ticket. D. Job cost sheet.
C. Labor time ticket. A direct labor time ticket shows how much time a worker has spent on various jobs each week, as well as the cost of that time.
If a company uses a predetermined overhead rate, which of the following statements is correct? A. Manufacturing Overhead will be debited for estimated overhead B. Manufacturing Overhead will be credited for estimated overhead C. Manufacturing Overhead will be debited for actual overhead D. Manufacturing Overhead will be credited for actual overhead
C. Manufacturing Overhead will be debited for actual overhead Actual manufacturing overhead costs are accumulated on the debit side of the Manufacturing Overhead account.
Which of the following would be used to record the property taxes on a factory building? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.
Which of the following would be used to record the usage of indirect manufacturing resources? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited
C. Manufacturing Overhead would be debited All actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.
Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $12,500 B. Manufacturing Overhead would be credited for $25,000 C. Manufacturing Overhead would be debited for $12,500 D. Manufacturing Overhead would be debited for $25,000
C. Manufacturing Overhead would be debited for $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500, which is debited to Manufacturing Overhead.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $5,000 B. Manufacturing Overhead would be credited for $20,000 C. Manufacturing Overhead would be debited for $5,000 D. Manufacturing Overhead would be debited for $20,000
C. Manufacturing Overhead would be debited for $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000, which is debited to Manufacturing Overhead.
If materials being placed into production are not traced to a specific job, A. Raw Materials Inventory would be debited. B. Work in Process Inventory would be debited. C. Manufacturing Overhead would be debited. D. Manufacturing Overhead would be credited.
C. Manufacturing Overhead would be debited. When indirect materials are placed into production, the cost is transferred from Raw Materials Inventory with a credit, and debited to Manufacturing Overhead.
Overhead costs are overapplied if the amount applied to Work in Process is A. greater than estimated overhead. B. less than estimated overhead. C. greater than actual overhead incurred. D. less than actual overhead incurred.
C. greater than actual overhead incurred. Overhead cost is overapplied if the amount applied is more than the actual overhead cost.
Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. Which of the following would be correct? A. Overhead is underapplied by $25,000 B. Overhead is underapplied by $12,500 C. Overhead is overapplied by $12,500 D. Overhead is overapplied by $25,000
C. Overhead is overapplied by $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. Which of the following would be correct? A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000 C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000
C. Overhead is overapplied by $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000.
Which of the following types of firms would most likely use process costing? A. Superior Auto Body & Repair B. Crammond Custom Cabinets C. Sunshine Soft Drinks D. Jackson & Taylor Tax Service
C. Sunshine Soft Drinks Process costing is used by companies that make standardized or homogeneous products or services, such as a soft drink company.
Service firms: A. tend to use a lot of direct materials in addition to billable hours. B. tend to incur few indirect costs that cannot be traced to specific clients or accounts. C. assign indirect costs to individual clients or accounts based on an allocation base such as billable hours. D. use process costing to assign costs to individual clients or accounts.
C. assign indirect costs to individual clients or accounts based on an allocation base such as billable hours. Most service firms do not use a lot direct materials, tend to incur many indirect costs that cannot be traced to specific clients or accounts, and use job costing to assign costs to individual clients or accounts. Indirect costs are treated much like manufacturing overhead in a factory and are assigned using an allocation base such as billable hours.
When disposed of, overapplied manufacturing overhead will A. increase Cost of Goods Sold. B. increase Finished Goods. C. decrease Cost of Goods Sold. D. decrease Finished Goods.
C. decrease Cost of Goods Sold. If manufacturing overhead is overapplied, Cost of Goods sold should be adjusted downward since too much overhead was put in during the period.
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration If you enroll in the community class, you will be unable to work at your regular job on weekends for the eight weekend days when the class meets. If you typically earn $500 per weekend shift, which option would you choose (considering enrollment cost and opportunity cost)?
College course The opportunity cost (lost wages) is $4,000 ($500 × 8). The sum of opportunity cost and actual cost is $5,000 ($4,000 + $1,000), making the community course more expensive than the college course. The college course is the preferred alternative based on cost.
Which of the following is irrelevant to the decision to eliminate an unprofitable segment?
Common fixed costs Common fixed costs will be incurred even if a segment is eliminated, therefore they are irrelevant to the decision.
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Considering solely the enrollment cost of each alternative, which would you choose?
Community course If you consider only the cost of the two alternatives, you would choose the less expensive option. In this case, it is the community college.
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Pretend transportation (gas, mileage, and parking) cost $200 per class session at the library. If you consider solely the cost - including transportation - of each alternative, which would you choose?
Community course The cost of the community course including transportation is $2,600, the sum of the tuition ($1,000) and the per-class transportation cost ($200 × 8 = $1,600). $2,600 is still less than the cost of the college course, making it the preferred alternative based solely on cost.
Which of the following statements is correct?
Companies often provide products and services that have both common and unique characteristics, so they may use a blend of job order and process costing.
Which of the following types of decisions involves deciding whether to eliminate a particular division or segment of the business?
Continue-or-discontinue
Which of the following functions of management involves providing feedback for future plans?
Control
Which of the following is the backward-looking phase of the planning and control cycle? Planning Directing/Leading Organizing Control
Control
Which of the following is a mixed cost?
Correct A cost that is $32.00 per unit when production is 80,000, and $26.00 per unit when production is 128,000.
Which of the following statements is correct about the connection between cost centers and revenue?
Cost centers do not directly generate revenue from customers, but they may have an impact on revenue through customer satisfaction and overall quality.
Cost of goods completed is the same as: Cost of Goods Sold. Work in Process Inventory. Cost of Goods Manufactured. Finished Goods Inventory.
Cost of Goods Manufactured.
When units are sold, the cost associated with the units increases which account?
Cost of Goods Sold
Manufacturing overhead was estimated to be $397,100 for the year along with 20,900 direct labor hours. Actual manufacturing overhead was $418,600, and actual labor hours were 23,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct?
Cost of Goods Sold would be credited for $18,400 Calculate the predetermined overhead rate by dividing total estimated manufacturing overhead by total estimated direct labor hours. ($397,100 / 20,900 = $19.00). Apply manufacturing overhead by multiplying the predetermined overhead rate by the actual number of direct labor hours. ($19.00 × 23,000 = $437,000). The amount of overhead applied ($437,000) on the credit side of the manufacturing overhead account exceeded the actual overhead costs ($418,600) on the debit side of the manufacturing overhead account, so the overhead was overapplied with a credit balance of $18,400. ($437,000 - $$418,600 = $18,400) The most common way of correcting this is with a direct charge, in this case a debit to the manufacturing overhead account to close it out and an offsetting credit to cost of goods sold.
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct?
Cost of Goods Sold would be decreased by $5,000.
Which of the following is not a category used to reconcile the number of physical units using the weighted average method of process costing? Units started Ending units in inventory Cost of goods sold Units completed
Cost of goods sold
Which of the following is not a way to reduce the dysfunctional behaviors associated with budgeting? Create budget slack. Use different budgets for planning and for performance evaluation. Use a continuous or rolling budget approach. Use a zero-based budgeting approach.
Create Budget Slack
Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. During the year, Optimum provided 64 hours of consulting services to Robert Howard for which Optimum pays an average of $18 per hour. What is the total cost of providing services to Robert? A. $2,707. B. $2,822. C. $1,924. D. $2,880.
D. $2,880. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost. Consultant labor cost for providing services to Robert is $1,152 (64 x $18). Overhead is applied at $1.50 per dollar of consultant labor cost = $1,152 x $1.50 = $1,728. Total cost of providing services to Robert = $1,152 + $1,728 = $2,880.
Kilt Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Kilt Company used a predetermined overhead rate of $42 per direct labor hour for the year and estimated that direct labor hours would total 5,500 hours. Assume the only inventory balance is an ending Work in Process balance of $17,000. How much overhead was applied during the year? A. $231,000 B. $150,000 C. $166,000 D. $210,000
D. $210,000 $42.00 x 5,000 = $210,000.
Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. The amount credited to the Manufacturing Overhead account would be A. $250,000 B. $225,000 C. $213,750 D. $237,500
D. $237,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500, which is credited to Manufacturing Overhead.
Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be A. $113,400. B. $204,750. C. $261,450. D. $285,750.
D. $285,750.
Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $24,675 B. $225,680 C. $303,800 D. $305,970
D. $305,970
Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. What is budgeted cost of goods sold for March? A. $30,551 B. $31,800 C. $36,660 D. $38,160
D. $38,160
Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much is total labor cost during the three months July through September? A. $69,300 B. $327,670 C. $846,300 D. $859,320
D. $859,320
Ragtime Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Ragtime Company used a predetermined overhead rate of $35 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,000. What was adjusted cost of goods sold? A. $435,000 B. $426,000 C. $418,000 D. $409,000
D. $409,000 Applied manufacturing overhead = $35 x 5,000 = $175,000. Cost of goods manufactured = $110,000 + $150,000 + $175,000 + $0 - $17,000 = $418,000. Overapplied overhead = $175,000 - $166,000 = $9,000. Unadjusted cost of goods sold = $0 + $418,000 - $0 = $418,000. Adjusted cost of goods sold = $418,000 - $9,000 = $409,000.
Ragtime Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Ragtime Company used a predetermined overhead rate of $35 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,000. What was cost of goods manufactured? A. $260,000 B. $426,000 C. $435,000 D. $418,000
D. $418,000 Applied manufacturing overhead = $35 x 5,000 = $175,000. Cost of goods manufactured = $110,000 + $150,000 + $175,000 + $0 - $17,000 = $418,000.
Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, actual direct labor hours were 19,000. The amount of manufacturing overhead applied to production would be A. $500,000 B. $450,000 C. $427,500 D. $475,000
D. $475,000 Predetermined overhead rate = $500,000/20,000 = $25.00. Applied manufacturing overhead = $25.00 x 19,000 = $475,000.
Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. What is budgeted cost of goods sold for March? A. $40,734 B. $42,400 C. $48,880 D. $50,880
D. $50,880
Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September? A. $30,000 B. $67,500 C. $32,500 D. $52,500
D. $52,500
Arbor Co. has forecast sales to be $400,000 in May, $475,000 in June, $575,000 in July and $700,000 in August. Forty percent of sales are cash, the remainder is on credit. Credit sales are collected 60% in the month of sale, the remaining the following month. What are budgeted cash collections for July? A. $230,000 B. $334,000 C. $459,000 D. $551,000
D. $551,000
Sawyer Company had the following information for the year: Direct materials used:$190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $9,000. What was adjusted cost of goods sold? A. $715,000 B. $708,000 C. $706,000 D. $699,000
D. $699,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 7,000 = $280,000. Cost of goods manufactured = $190,000 + $245,000 + $280,000 + $0 - $0 = $715,000. Overapplied overhead = $280,000 - $273,000 = $7,000. Unadjusted cost of goods sold = $0 + $715,000 - $9,000 = $706,000. Adjusted cost of goods sold = $706,000 - $7,000 = $699,000.
Parsley Inc, a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be? A. $58,500 B. $142,500 C. $81,000 D. $85,500
D. $85,500
Jenkins Company had the following information for the year: Direct materials used:$295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $320,000 and 8000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,000. What was adjusted cost of goods sold? A. $900,000 B. $883,000 C. $881,000 D. $864,000
D. $864,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 9,000 = $360,000. Cost of goods manufactured = $295,000 + $245,000 + $360,000 + $0 - $0 = $900,000. Unadjusted cost of goods sold = $0 + $900,000 - $19,000 = $881,000. Overapplied overhead = $360,000 - $343,000 = $17,000. Adjusted cost of goods sold = $881,000 - $17,000 = $864,000.
McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the direct materials used in production. A. $20,000 B. $30,000 C. $110,000 D. $90,000
D. $90,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000.
Jenkins Company had the following information for the year: Direct materials used:$295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,000. What was cost of goods manufactured? A. $841,000 B. $860,000 C. $883,000 D. $900,000
D. $900,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 9,000 = $360,000. Cost of goods manufactured = $295,000 + $245,000 + $360,000 + $0 - $0 = $900,000.
Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted ending finished goods inventory for May? A. 1,000 B. 1,300 C. 1,600 D. 2,100
D. 2,100
40. Jillian Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September? A. 7,500 B. 9,750 C. 16,500 D. 26,250
D. 26,250
Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,450 square meters C. 3,508 square meters D. 3,600 square meters
D. 3,600 square meters
Which of the following represents the cost of the jobs sold during the period? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
D. Cost of Goods Sold Once a job is sold, its total cost is transferred out of Finished Goods Inventory and into Cost of Goods Sold.
When units are sold, the cost associated with the units is debited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold
D. Cost of Goods Sold When units are sold, their cost is transferred from Finished Goods Inventory (with a credit) to Cost of Goods Sold (with a debit).
Which of the following is a characteristic of a manufacturing environment that would use job order costing? A. Standardized production process B. Continuous manufacturing C. Homogenous products D. Differentiated products
D. Differentiated products Job order costing is used in companies that offer customized or unique products or services.
A predetermined overhead rate is calculated using which formula? A. Actual manufacturing overhead cost/estimated units in the allocation base B. Estimated units in the allocation base/estimated manufacturing overhead cost C. Estimated manufacturing overhead cost/actual units in the allocation base D. Estimated manufacturing overhead cost/estimated units in the allocation base
D. Estimated manufacturing overhead cost/estimated units in the allocation base This is the formula for the predetermined overhead rate.
When manufacturing overhead is applied to production, which of the following accounts is credited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Manufacturing Overhead
D. Manufacturing Overhead When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.
Overhead costs are underapplied if the amount applied to Work in Process is A. greater than estimated overhead. B. less than estimated overhead. C. greater than actual overhead incurred. D. less than actual overhead incurred.
D. less than actual overhead incurred. Overhead cost is underapplied if the amount applied is less than the actual overhead cost.
Which type of quality cost would a firm most want to eliminate or reduce as much as possible?
External failure costs
The most common method for disposing of over- or underapplied overhead is to A. recalculate the overhead rate for the period. B. recalculate the overhead rate for the next period. C. make a direct adjustment to Work in Process Inventory. D. make a direct adjustment to Cost of Goods Sold.
D. make a direct adjustment to Cost of Goods Sold. The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold.
Cost of goods manufactured is the amount of cost transferred A. out of Finished Goods Inventory and into Cost of Goods Sold. B. out of Finished Goods Inventory and into Work in Process Inventory. C. out of Work in Process Inventory and into Manufacturing Overhead. D. out of Work in Process Inventory and into Finished Goods Inventory.
D. out of Work in Process Inventory and into Finished Goods Inventory. The total cost that is transferred out of Work in Process Inventory and into Finished Goods Inventory is called the cost of goods manufactured.
Underapplied overhead means A. too little overhead was applied to raw materials. B. actual overhead is greater than estimated overhead. C. finished goods will need to be credited. D. there is a debit balance remaining in the overhead account.
D. there is a debit balance remaining in the overhead account. If overhead is underapplied, there is a debit balance in the account.
In what type of organization is decision-making authority spread throughout the organization?
Decentralized organization In a decentralized organization, decision-making authority is spread throughout the organization, and managers are given a great deal of autonomy to decide how to manage their individual units.
Which of the following is not a component of the cash budget? Budgeted cash collections Budgeted cash payments Depreciation expense Cash borrowed or repaid
Depreciation Expense
Which of the following is not a component of the cash budget?
Depreciation expense
Which of the following is not a type of quality cost?
Development costs
Which of the following is a characteristic of a manufacturing environment that would use job order costing? Standardized production process Continuous manufacturing Homogenous products Differentiated products
Differentiated products
Equivalent units are tracked separately for which two categories of costs? Direct labor and manufacturing overhead. Direct materials and conversion cost. Direct materials and indirect materials. Finished goods and cost of goods sold.
Direct materials and conversion cost.
Total manufacturing costs includes
Direct materials and direct labor
Manufacturing costs are generally classified into which of the following categories?
Direct materials, direct labor, and manufacturing overhead
Which of the following is the correct formula to compute an activity rate?
Divide the total activity cost by the total activity driver
Which component of the cash budget is shown as a line item on the budgeted balance sheet? Budgeted cash collections Budgeted cash payments Cash repaid Ending cash balance
Ending Cash Balance
Which component of the cash budget is shown as a line item on the budgeted balance sheet?
Ending cash balance
Which of the following steps in the managerial decision-making process involves differential analysis?
Evaluate the costs and benefits of the alternatives.
You wish to take an Excel course. (Step 1 of the decision-making process.) You may enroll at one within your school or you may take a community class at the local library. (Step 2 of the decision-making process.) You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration This information illustrates which step in the decision-making process?
Evaluate the costs and benefits of the alternatives.
Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.
False Although service providers do not have manufacturing overhead, they incur many indirect costs, such as rent, supplies, supervision, advertising, and administrative expenses. ABC can be used to assign these costs to different services and customers.
When manufacturing overhead is applied to a job, a credit is made to the Work in Process account.
False Applied manufacturing overhead is debited (not credited) to Work in Process inventory. The credit is to the Manufacturing Overhead account.
To eliminate underapplied overhead at the end of the year, Manufacturing Overhead would be debited and Cost of Goods Sold would be credited.
False If manufacturing overhead is underapplied during the year, Manufacturing Overhead will need to be credited to bring the account balance to zero, while Cost of Goods Sold would be debited.
Each individual indirect cost should be assigned to one activity when forming activity cost pools.
False Some costs will need to be allocated among several activities (not one activity).
The total amount of cost assigned to jobs that were completed during the year is the cost of goods sold.
False The total amount of cost assigned to jobs that were completed during the year is the cost of goods manufactured, not the cost of goods sold.
To assign activity costs using the activity proportion method, multiply the activity rate by the activity requirements of each individual product.
False To assign activity costs using the activity proportion method, multiply the total activity cost by the activity proportion for each product.
Firms that use JIT often rely on:
Fewer suppliers that must adhere to very strict quality standards.
Which of the following balanced scorecard perspectives measures how an organization satisfies its stakeholders?
Financial
Managerial Accounting Information includes all of the following except:
Financial statements prepared in accordance with generally accepted accounting principles
Managerial accounting information includes all of the following except:
Financial statements prepared in accordance with generally accepted accounting principles.
When units are sold, the cost associated with the units decreases which account?
Finished Goods Inventory
Which of the following would not be an example of a cost to include in a selling and administrative expense budget? Legal expenses Accounting services Fixed manufacturing overhead Franchise fees
Fixed Manufacturing Overhead
Which of the following costs is not relevant in a special-order decision?
Fixed Overhead Fixed overhead costs will be incurred whether or not the order is accepted so they are not relevant to the special-order decision.
Which of the following would not be an example of a cost to include in a selling and administrative expense budget?
Fixed manufacturing overhead
Which of the following costs is not relevant in a special-order decision?
Fixed overhead
___________ is/are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.
Fixed overhead costs
___________ is/are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.
Fixed overhead costs Fixed overhead costs are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.
Which of the following is not a step in the managerial decision-making process?
Forecast the potential sales.
A large company that uses activity based costing would do which of the following?
Group activities together to simplify the number of activities.
Which of the following terms is generally not used to describe the forward-oriented nature of the budgeting process?
Hoped for
Managers who use activity-based management should begin by asking all of the following questions except:
How am I evaluated annually based on these activities?"
Which of the following are facility-level activities?
Human resource hiring fairs Paying factory insurance
Which of the following is the best example of a facility-level activity?
Human resources
Which of the following is the best example of a facility-level activity? Human resources Research and development Painting a final product Product testing
Human resources
Which of the following types of standards can be achieved only under perfect conditions?
Ideal standard
Which of the following is not a step in the managerial decision-making process?
Identify the activity cost drivers.
Which of the following functions of management involves arranging the necessary resources to carry out the plan?
Implementing
Which of the following functions of management involves providing motivation to achieve results?
Implementing
Which of the following is not a characteristic of financial accounting?
Information is subjective, relevant and future-oriented
Which of the following sets just-in-time systems apart from traditional manufacturing systems?
Materials are purchased only as they are needed to manufacture goods.
The formula for budgeted raw materials purchases is Budgeted production units + Ending raw materials inventory - Beginning raw materials inventory. Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory. Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory. Materials needed for production + Beginning raw materials inventory - Ending raw materials inventory.
Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory.
The cost of materials used on a specific job is first captured on which source document?
Materials requisition form
Which of the following statements are true?
Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Quality training is an example of a prevention cost.
If the total activity cost were unknown, it could be calculated by:
Multiplying the total activity driver by the activity rate.
If the total activity cost were unknown, it could be calculated by: Dividing the total activity driver by the activity rate. Multiplying the total activity driver by the activity rate. Adding the total activity driver to the activity rate. Subtracting the activity rate from the total activity driver.
Multiplying the total activity driver by the activity rate.
When are period costs counted as inventory?
Never
Which of the following would be considered a non-volume-based cost driver?
Number of batches
Residual income can be calculated as:
Operating income - (hurdle rate × average invested assets) The formula for residual income is operating income minus the result of the hurdle rate multiplied by average invested assets.
Which of the following is true of a firm that has reached the limit on its resources?
Opportunity costs are now relevant. A firm that has reached the limit on its resources must give up regular production to fill special orders, and therefore opportunity costs become relevant.
Which of the following is not a true statement about capacity?
Opportunity costs are relevant when capacity of a critical resource is unlimited.
Creating a budget is an important part of which phase of the planning and control process? Planning Organizing Directing/Leading Control
Organizing
Total manufacturing overhead under activity-based costing consists of all ___
Overhead assigned during Stage 2 allocations
Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. Which of the following would be correct?
Overhead is overapplied by $5,000.
Manufacturing overhead was estimated to be $406,000 for the year along with 20,300 direct labor hours. Actual manufacturing overhead was $423,400, and actual labor hours were 21,500. Which of the following would be correct?
Overhead is overapplied by $6,600 Calculate the predetermined overhead rate by dividing the estimated total manufacturing overhead by the estimated total direct labor hours. ($406,000 / 20,300 = $20.00). Apply manufacturing overhead by multiplying the predetermined rate by the actual total direct labor hours. ($20.00 × 21,500 = $430,000). Since the applied overhead ($430,000) on the credit side of the manufacturing overhead account is greater than the actual overhead ($423,400) on the debit side of the manufacturing overhead account, the $6,600 credit balance represents overapplied overhead.
Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Machining activity is used by Standard?
P × $500,000 = $150,000; P = 30%.
Which of the following is the best example of a unit-level activity?
Painting a final product
Which of the following is the best example of a unit-level activity? Human resources Research and development Painting a final product Product testing
Painting a final product
Which of the following are facility-level activities?
Paying factory insurance Human resource hiring fairs
Which of the following is the correct sequencing of the functions within the managerial cycle?
Plan - Implement - Control
Creating a budget is an important part of which phase of the planning and control process?
Planning
Which of the following is the forward-looking phase of the planning and control cycle? Planning Directing/Leading Organizing Control
Planning
Which of the following is a disadvantage of decentralization?
Potential duplication of resources
Which of the following is not an advantage of decentralization?
Potential duplication of resources
Manufacturing overhead is applied to each job using which formula?
Predetermined overhead rate × actual value of the cost driver for the job
What is the primary goal of accounting?
To provide information for decision making.
The formula for break-even point in terms of sales dollars is:
Total fixed costs/Contribution margin ratio
Which costing system assigns overhead using volume-based cost drivers?
Traditional
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Consider the transportation cost. At what point would you be indifferent between alternatives?
Transportation cost of $250 per class for the community course Solve for the transportation cost per class to determine the point of indifference. Subtract the cost of the community course ($1,000) from the college course ($3,000). Divide that result ($2,000) by the number of classes (8) to get the transportation cost per class that would make you indifferent between alternatives ($250). ($3,000 - $1,000 = $2,000/8 = $250)
A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated total cost driver.
True A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated total cost driver.
Activity-based costing systems include non-volume-based cost drivers.
True ABC systems include both volume-based and non-volume-based measures that capture factors other than volume.
The cost measurement system can impact how indirect costs are spread among product lines, which may affect decisions managers make.
True The cost measurement system can impact how indirect costs are spread among product lines and thus the information that managers have about the profitability of those products.
The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold.
True The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold. Doing so makes sense as long as most of the jobs worked on during the period were completed and sold.
The total manufacturing cost for a job is based on the amount of applied overhead using the predetermined overhead rate.
True The total manufacturing cost is based on the amount of overhead applied using the predetermined overhead rate.
Volume-based cost systems tend to:
Under-cost low-volume products and over-cost high-volume products.
What level of activity is performed each time a single item is produced?
Unit
Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?
Value engineering
When an activity must be performed for each individual unit, an appropriate cost driver is ___
Volume-Based
Which of the following statements is correct about the way managers set standards for employees?
When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training
When direct materials are used in production, which of the following accounts is increased?
Work in Process Inventory
When materials are placed into production: Raw Materials Inventory is debited if the materials are traced directly to the job. Work in Process Inventory is debited if the materials are traced directly to the job. Manufacturing Overhead is debited if the materials are traced directly to the job. Raw Materials Inventory is credited only if the materials are traced directly to the job, otherwise manufacturing overhead is credited.
Work in Process Inventory is debited if the materials are traced directly to the job.
Which of the following would be used to apply manufacturing overhead to production for the period? Raw Materials Inventory would be debited. Work in Process Inventory would be debited. Manufacturing Overhead would be debited. Work in Process Inventory would be credited.
Work in Process Inventory would be debited.
Which of the following would be used to record the labor cost that is traceable to a specific job? Raw Materials Inventory would be debited. Work in Process Inventory would be debited. Manufacturing Overhead would be debited. Manufacturing Overhead would be credited.
Work in Process Inventory would be debited.
Which of the following would be used to transfer the cost of completed goods during the period to the Finished Goods account?
Work in Process Inventory would be decreased.
Which of the following would be used to record the labor cost that is traceable to a specific job?
Work in Process Inventory.
To reconcile the total cost of Work in Process Inventory, account for: both beginning Work in Process Inventory and any costs that were added during the current period. only beginning Work in Process Inventory. only costs that were added during the period. beginning Work in Process Inventory, any costs that were added during the current period, and completed costs.
both beginning Work in Process Inventory and any costs that were added during the current period.
ABC can be used in _______
both service and manufacturing companies
A budget depends upon:
both the level of output as well as the input standards
Activity-based costing systems typically include ___ cost drivers
both volume and non-volume based
Activity-based costing systems typically include ______ cost drivers
both volume- and non-volume-based
Activity-based costing systems typically include ______ cost drivers.
both volume- and non-volume-based
a detailed plan that translates the company's objectives into financial terms, identifying the resources and expenditures that will be requires over the planning horizon is a
budget
NOT included in operating budget
budgeted balance sheet
When calculating raw materials purchases, the starting point should be actual materials purchases from the previous year. budgeted sales. budgeted production. budgeted cost of raw materials.
budgeted production
When calculating the direct labor budget, the starting point should be actual direct labor hours from the previous year. budgeted sales. budgeted production. budgeted cost of direct labor.
budgeted production
when calculating raw materials purchases, the starting point should be
budgeted production
The activity-rate method involves:
calculating an activity rate that is similar to the predetermined overhead rate.
a primary financial budget
cash budget
When comparing mutually exclusive capital investments, managers should:
choose the option with the lowest cost on a net present value basis
To reconcile the number of physical units using the weighted average method of process costing, one must determine whether the units were: completed or still in process at the end of the period. sold or still in inventory at the end of the period. in the next production process or sold at the end of the period. using direct materials or conversion costs at the end of the period.
completed or still in process at the end of the period.
backward-looking phase of the planning and control cycle
control
One of the most important concepts in responsibility accounting is the:
controllability principle. The controllability principle forms the basis of responsibility accounting, holding that managers should only be held responsible for what they control.
The formula to compute activity proportion is ______
cost driver for product / cost driver for all products
The formula to compute activity proportion is ______.
cost driver for product / cost driver for all products
An important part of TQM is a(n) ______ report that summarizes the costs incurred to prevent, deduct, and correct problems.
cost of quality
Target costing is in stark contrast to _______-______ pricing, in which the company adds a markup to expenses required to produce the product.
cost plus
A group of similar activities that have been combined together is an activity ______
cost pool
A group of similar activities that have been combined together is an activity ______.
cost pool
A group of similar activities that have been combined together is called an activity
cost pool
The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the:
cost-based method.
Determining what a product costs and adding a markup is called ______
cost-plus pricing
NOT a way to reduce the dysfunctional behaviors associated with budgeting
create budget slack
A unit-level activity to a manufacturer is the same as a(n) _______ -level activity to a service company.
customer
Investment turnover is defined as:
the ratio of sales revenue to average invested assets. he formula for investment turnover is sales revenue divided by average invested assets. Net operating income divided by average invested assets is return on investment; net operating income divided by sales revenue is profit margin; and profit margin divided by return on investment is the inverse of investment turnover.
Using the activity-proportion method results in:
the same cost allocations as the activity rate method.
Using the activity-proportion method results in: higher cost allocations than the activity rate method. lower cost allocations than the activity rate method. the same cost allocations as the activity rate method. higher or lower cost allocations than the activity rate method, depending on the circumstances.
the same cost allocations as the activity rate method.
The first step in ABC is:
to identify and classify activities.
The activity rate is computed by dividing the ______ by the ______.
total activity cost; total cost driver
The y-intercept of the cost line on a scattergraph represents:
total fixed cost.
An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called _______ _______ management
total quality
A management system that focuses on continually improving production processes is called ______
total quality management
Traditional costing systems tend to overcost high-volume products because ______
traditional costing systems don't allow for complex activities required by lower-volume products high-volume products use more labor and machine hours
A ________________ is the amount that one division charges when it sells goods or services to another division within the same company.
transfer price The definition of a transfer price is the price one division charges when it sells goods or services to another division within the same company.
True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.
true
An activity that is performed for each individual unit is a ________ level activity.
unit
An activity that is performed for each individual unit is a ___________ level activity.
unit
Installing parts on an automobile is a(n) ______ -level activity.
unit
An activity that is performed for a specific customer is a(n):
unit-level activity.
The perceived value of a product or service to the customer is enhanced by ______ - ______ activities
value added
The concept of the _____ _______ begins with the customer and works backward to ensure that activities deliver what matters to customers.
value chain
The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the _________ ____________
value chain
Analyzing products to determine which functions add value and finding ways to deliver those functions while meeting the target cost is called ____
value engineering
Direct labor hours and machine hours are both examples of ___ -based cost drivers.
volume
Direct labor hours and machine hours are both examples of _____-based cost drivers.
volume
Comparing the master budget with the flexible budget creates a:
volume variance
When an activity must be performed for each individual unit, an appropriate cost driver is ______
volume-based
ABC works best in service industries ______.
when different customers require different levels of services