ACCT214 - Exam 2 Review

Purchase order processing is an example of a:

Batch-level activity.

Which of the following would be an acceptable measure of activity for a material handling activity cost pool? Number of material moves A) Yes B) No C) Yes D) No Weight of material moved A) Yes B) Yes C) No D) No

choice A

When computing the cost per equivalent unit, the weighted-average method of process costing considers:

costs incurred during the current period plus cost of beginning work in process inventory.

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):

indirect material cost.

Assume there was no beginning work in process inventory and the ending work in process inventory is 70% complete with respect to conversion costs. Under the weighted-average method, the number of equivalent units of production with respect to conversion costs would be:

less than the units started during the period.

A process costing system is employed in those situations where:

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

Overapplied manufacturing overhead would result if:

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

If sales volume increases and all other factors remain constant, then the:

margin of safety will increase.

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

net operating income

Departmental overhead rates may not correctly assign overhead costs due to:

overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

In process costing, a separate work in process account is kept for each:

processing department

The usual starting point for a master budget is:

the sales forecast or sales budget.

When switching from a traditional costing system to an activity-based costing system that contains some batch-level costs:

the unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase.

Which of the following is correct? The break-even point occurs on the Cost-Volume-Profit graph where:

total contribution margin equals total fixed expenses.

The margin of safety is the amount by which sales can decrease before losses are incurred by the company.

true

Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:

units in beginning work in process and the units started.

Dallman Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on 69,000 machine-hours, total fixed manufacturing overhead cost of $739,000, and a variable manufacturing overhead rate of $6.19 per machine-hour.

$1,166,110

Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (2,000 units) $40,000 Variable expenses 24,000 Contribution margin 16,000 Fixed expenses 11,200 Net operating income $4,800 If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:

$10,400

Hosley Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs: Costs: Wages and salaries $360,000 Depreciation 100,000 Occupancy 120,000 Total$ 580,000 The distribution of resource consumption across the three activity cost pools is given below: Activity Cost Pools (W&S, Dep, Occ) Fabricating 50%, 10%, 5% Processing 40%, 45%, 60% Other 10%, 45%, 35% How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?

$123,000

The following information pertains to Nova Company's cost-volume-profit relationships: Breakeven point in units sold 1,000 Variable expenses per unit $500 Total fixed expenses $150,000 How much will be contributed to net operating income by the 1,001st unit sold?

$150

Stockmaster Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (8,000 units) $320,000 Variable expenses 192,000 Contribution margin 128,000 Fixed expenses 121,600 Net operating income $6,400 The margin of safety in dollars is closest to:

$16,000

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January. Collections are expected to be 90% in the month of sale and 10% in the month following the sale. The cost of goods sold is 75% of sales. The company desires to have an ending merchandise inventory equal to 60% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $24,700. Monthly depreciation is $16,000. Ignore taxes. The cash balance at the end of December would be:

$163,600

Millner Corporation has provided the following data from its activity-based costing accounting system: Activity Cost Pool Total Cost Total Activity Designing products $1,372,448 7,798 product design hours Setting up batches $33,300 740batch set-ups Assembling products $126,160 6,640 assembly hours The activity rate for the "designing products" activity cost pool is closest to:

$176 per product design hour

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $306,000 for November, $326,000 for December, and $226,000 for January. Collections are expected to be 70% in the month of sale and 30% in the month following the sale. The cost of goods sold is 75% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 80% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $22,700. Monthly depreciation is $29,000. Ignore taxes. Accounts payable at the end of December would be:

$184,500

Huelskamp Corporation has provided the following data concerning its overhead costs for the coming year: Wages and salaries $360,000 Depreciation 120,000 Rent 180,000 Total$ 660,000 The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: Activity Cost Pool Total Activity Assembly 60,000 labor-hours Order processing 400 orders Other Not applicable The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools (W&S, Dep, Rent) Assmbly 25%, 15%, 35% Processing 65%, 45%, 40% Other 10%, 40%, 25% The activity rate for the Assembly activity cost pool is closest to:

$2.85 per labor-hour

Warrix Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) $120,000 Variable expenses 90,000 Contribution margin 30,000 Fixed expenses 27,000 Net operating income $3,000 If sales volumes increase to 3,020 units, the increase in net operating income would be closest to:

$200.00

Linnear Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 15,000.00 Total fixed manufacturing overhead cost $156,000.00 Variable manufacturing overhead per machine-hour $5.00 Required: Calculate the estimated total manufacturing overhead for the year.

$231,000

Ploeger Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (4,000 units) $240,000 Variable expenses1 56,000 Contribution margin 84,000 Fixed expenses 81,900 Net operating income $2,100 The break-even point in dollar sales is closest to:

$234,000

Bippus Corporation manufactures two products: Product X08R and Product P56L. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products X08R and P56L. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product P56L?

$249,200

Seventy percent of Pitkin Corporation's sales are collected in the month of sale, 20% in the month following sale, and 10% in the second month following sale. The following are budgeted sales data for the company: Budgeted sales January $200,000 February $300,000 March $350,000 April $250,000 Total budgeted cash collections in April would be:

$275,000

Houseal Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $613,250 55,000 machine-hours Processing orders $46,170 1,500 orders Inspection $146,110 1,900 inspection-hours Data concerning one of the company's products, Product W58B, appear below: Selling price per unit $113.70 Direct materials cost per unit $48.14 Direct labor cost per unit $11.62 Annual unit production and sales 360 Annual machine-hours 1,040 Annual orders 60 Annual inspection-hours 30 According to the activity-based costing system, the product margin for product W58B is:

$3,668.60

Smith Corporation makes and sells a single product called a Pod. Each Pod requires 1.5 direct labor-hours at $9.70 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. Smith Corporation is preparing a Direct Labor Budget for the second quarter of the year. In June the company has budgeted to produce 22,100 Pods. Budgeted direct labor costs incurred in June would be: (Round your intermediate calculations to 2 decimal places.)

$321,555

BW Department Store expects to generate the following sales for the next three months: Expected sales July $490,000 August $540,000 September $580,000 BW's cost of goods sold is 60% of sales dollars. At the end of each month, BW wants a merchandise inventory balance equal to 25% of the following month's expected cost of goods sold. What dollar amount of merchandise inventory should BW plan to purchase in August?

$330,000

Mayeux Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs: Wages and salaries $320,000 Depreciation 160,000 Utilities 240,000 Total $720,000 Distribution of resource consumption: Activity Cost Pools (W&S, Dep, Util) Assembly 50%, 40%, 10% Setting Up 10%, 55%, 35% Other 15%, 50%, 35% How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?

$336,000

Sleeter Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: Budgeted unit sales for April, May, June, and July are 7,500, 11,900, 10,800, and 14,800 units, respectively. All sales are on credit. The ending finished goods inventory equals 30% of the following month's sales. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $5.00 per pound. If 72,000 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

$350,970

Bennette Corporation has provided the following data concerning its overhead costs for the coming year: Wages and salaries $510,000 Depreciation 205,000 Rent 225,000 Total $940,000 The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: Activity Cost Pool Total Activity Assembly 45,000 labor-hours Order processing 450 orders Other Not applicable The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools (W&S, Dep, Rent) Assembly 35%, 15%, 35% Processing 30%, 45%, 30% Other 35%, 40%, 35% The activity rate for the Order Processing activity cost pool is closest to:

$695 per order

Pilkerton Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: The cost of serving customers, $2,533.00 per customer, is the cost of serving a customer for one year. Christoforou Corporation buys only one of the company's products which Pilkerton Enterprises sells for $21.65 per unit. Last year Christoforou Corporation ordered a total of 1,300 units of this product in 3 orders. To fill the orders, 10 batches were required. The direct materials cost is $6.60 per unit and the direct labor cost is $2.75 per unit. Each unit requires 0.15 Direct labor-hours. According to the ABC system, the total overhead cost for this customer this past year was closest to:

$4,254.65

Thomason Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (1,000 units) $40,000 Variable expenses 30,000 Contribution margin 10,000 Fixed expenses 7,000 Net operating income $3,000 If the variable cost per unit increases by $1, spending on advertising increases by $2,000, and unit sales increase by 50 units, the net operating income would be closest to:

$450

Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105. Budgeted unit sales for July, August, September, and October are 7,400, 7,500, 13,800, and 15,300 units, respectively. All sales are on credit. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month. The budgeted accounts receivable balance at the end of August is closest to:

$472,500

All of Gaylord Corporation's sales are on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company: Total sales January $50,000 February $60,000 March $40,000 April $30,000 What is the amount of cash that should be collected in March?

$51,000

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: Sales are budgeted at $357,000 for November, $327,000 for December, and $307,000 for January. Collections are expected to be 80% in the month of sale and 20% in the month following the sale. The cost of goods sold is 70% of sales. The company desires to have an ending merchandise inventory equal to 70% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $25,400. Monthly depreciation is $17,400. Ignore taxes. The net income for December would be:

$55,300

Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to:

$555,750

Jared Beverage Corporation uses a process costing system to collect costs related to the production of its celery flavored cola. The cola is first processed in a Mixing Department and is then transferred out and finished up in the Bottling Department. The finished cases of cola are then transferred to Finished Goods Inventory. The following information relates to the company's two departments for the month of January: Mixing Bottling Cases of cola in work in process, January 169,000 21,000 Cases of cola completed/transferred out during January 605,000 ? Cases of cola in work in process, January 3 171,000 56,000 How many cases of cola were completed and transferred to Finished Goods Inventory during January?

$570,000

Jasper, Inc. reports the following cost information for March: Cost of Goods Manufactured $727,000 Manufacturing Overhead $75,000 Finished Goods Inventory, March 1 $9,000 Finished Goods Inventory, March 31 $9,000 Work-in-Process Inventory, March 1 $9,000 Work-in-Process Inventory, March 31 $4,000 Direct Materials Used $347,000 What is the cost of goods sold for March?

$727,000

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $303,000 for November, $323,000 for December, and $223,000 for January. Collections are expected to be 70% in the month of sale and 30% in the month following the sale. The cost of goods sold is 75% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 80% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $22,400. Monthly depreciation is $27,500. Ignore taxes. The difference between cash receipts and cash disbursements for December would be:

$77,750

If a companies interest payable account had a $8,000 balance at the beginning of the year; a $10,000 balance at the end of the year; and an interest expense of $1,000 how much cash was used for interest during the year?

-1,000

Which of the following are examples of operating cash flows?

-Cash flows related to production and delivery of goods and services -Interest expense and interest income

The Jung Corporation's production budget calls for the following number of units to be produced each quarter for next year: Budgeted production Quarter 1 45,000 units Quarter 2 38,000 units Quarter 3 34,000 units Quarter 4 48,000units Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with an inventory of direct materials equal to 30% of that quarter's direct material requirements. Budgeted direct materials purchases for the third quarter would be:

114,600 pounds

The following information was taken from the production budget of Piwte Corporation for next quarter: Units to be produced January 128,000 February 140,000 March 152,000 Desired ending inventory of finished goods January 30,000 February 36,000 March 38,000 How many units is the company expecting to sell in the month of February?

134,000

Henkes Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 28,000 labor-hours. The estimated variable manufacturing overhead was $1.4 per labor-hour and the estimated total fixed manufacturing overhead was $484,000. The actual labor-hours for the year turned out to be 24,000 labor-hours. Compute the company's predetermined overhead rate for the recently completed year. (Round your answer to 2 decimal places.)

18.69

Orear Corporation manufactures two products: Product Z34D and Product J25M. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Z34D and J25M. Using the plantwide overhead rate, the percentage of the total overhead cost that is allocated to Product J25M is closest to:

30%

Frolic Corporation has budgeted sales and production over the next quarter as follows: Sales in units July 41,000 August 53,000 September ? Production in units July 42, 100 August 53,300 September 57,650 The company has 4,200 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 72,500 units. Budgeted sales for September would be (in units):

56,000

Arona Corporation manufactures canoes in two departments, Fabrication and Waterproofing. In the Fabrication Department, fiberglass panels are attached to a canoe- shaped aluminum frame. The canoes are then transferred to the Waterproofing department to be coated with sealant. Arona uses a weighted-average process cost system to collect costs in both departments. All materials in the Fabrication Department are added at the beginning of the production process. On July 1, the Fabrication Department had 30 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 15 canoes in process that were 59% complete with respect to conversion cost. During July, the Fabrication Department completed 66 canoes and transferred them to the Waterproofing Department. What are the Fabrication Department's equivalent units of production related to conversion costs for July?

74.85

Arona Corporation manufactures canoes in two departments, Fabrication and Waterproofing. In the Fabrication Department, fiberglass panels are attached to a canoe- shaped aluminum frame. The canoes are then transferred to the Waterproofing department to be coated with sealant. Arona uses a weighted-average process cost system to collect costs in both departments. All materials in the Fabrication Department are added at the beginning of the production process. On July 1, the Fabrication Department had 30 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 12 canoes in process that were 98% complete with respect to conversion cost. During July, the Fabrication Department completed 77 canoes and transferred them to the Waterproofing Department. What are the Fabrication Department's equivalent units of production related to conversion costs for July?

88.76

Which of the following would be classified as a product-level activity?

Advertising a product.

Which of the following statements is correct with regard to a Cost-Volume-Profit graph?

A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.

Which of the following types of companies would typically use process costing rather than job-order costing?

A breakfast cereal manufacturer.

Refer to the T-account below: Raw Materials Debit 15,000(9), (5)85,000 Balance 25,000 Credit 75,000 Entry (5) could represent which of the following?

Purchases of raw materials.

Refer to the T-account below: Prepaid Insurance Debit (Balance) 30,000 Credit (8)9,000 Entry (8) could represent which of the following?

Insurance cost incurred on the factory which is added to the Manufacturing Overhead account.

All of the following statements are correct when referring to process costing except:

Process costing would be appropriate for a jeweler who makes custom jewelry to order.

Designing a new backpack at an outdoor sports equipment company is an example of a:

Product-level activity.

The cost of electricity for running production equipment is classified as: Conversion cost Period cost A)Yes No B)Yes Yes C)No Yes D)No No

choice A

Under the weighted-average method, the cost of units transferred out of a department is computed as follows for a cost category:

Units transferred to the next department × Cost per equivalent unit

An increase in the Inventory account from $10,000 at the beginning of the year to $15,000 at the end of the year would be shown on the statement of cash flows prepared under the indirect method as:

a deduction from net income of $5,000 in order to arrive at net cash provided by operating activities.