Cost Final
Armour, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be $15,000, and direct professional labor cost was projected to be $225,000. During the year, Armour incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:
$1,000 underapplied
The accounting records of Dixon Company revealed the following costs: direct materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000. Dixon's product costs total:
$1,050,000
Travers Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to work-in-process for:
$106,000
Play Time is a nursery school for pre-kindergarten children. The school has determined that the following biweekly revenues and costs occur at different levels of enrollment: (chart) The average cost per student when 16 students enroll in the school is:
$175
Guaranteed Appliance Co. produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate expenses, $500,000; assembly-line workers, $180,000; security guards, $45,000; and plant supervisor, $110,000. The total of Guaranteed's direct labor cost was:
$180,000
St. Vincent's, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours, production setups, and number of parts components as cost drivers. (chart) The overhead cost allocated to Beta by using traditional costing procedures would be:
$240,000
Metalica Company applies overhead based on machine hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000. By 20x1 year-end, actual overhead totaled $525,000, and actual machine hours were 25,000. On the basis of this information, the 20x1 predetermined overhead rate was:
$25 per machine hour
The accounting records of Younkin Corporation revealed the following selected costs: sales commissions, $65,000; plant supervision, $190,000; and administrative expenses, $185,000. Younkin's period costs total:
$250,000
During a recent accounting period, Falcon Express' shipping department processed 26 orders. Each order typically takes four hours to complete. However, the average time increased to 5 hours because of various departmental inefficiencies. If shipping labor is paid $14 per hour, the company's non-value-added cost would be?
$364
Blakely charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year: budgeted manufacturing overhead, $480,000; actual manufacturing overhead, $440,00; budgeted machine hours, 20,000; actual machine hours, 16,000; overhead applied to production totaled:
$384,000
Play Time is a nursery school for pre-kindergarten children. The school has determined that the following biweekly revenues and costs occur at different levels of enrollment: (chart) The marginal cost when the twenty-first student enrolls in the school is:
$55
Boxer Industries worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. A review of job no. 403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000. If Boxer applies overhead of 150% of direct labor cost, the overhead applied to job no. 403 must have been:
$6,000
Rainbow Glass Company manufactures decorative glass products. The firm employs a process-costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. The company's production schedule for October follows: (chart) Calculate each of the following amounts using weighted-average process costing: (1) equivalent units of direct material during October, (2) equivalent units of conversion activity during October
1. 10,000 2. 8,600
Identify these costs as either observable or hidden quality costs: 1. A quality cost that can be measured and reported 2. The cost of inspectors' salaries 3. A cost that cannot be easily measured, reported, or even estimated 4. The opportunity cost of lost sales after a defective product is sold
1. observable 2. observable 3. hidden 4. hidden
The following tasks are associated with an activity-based costing system: 1-Assignment of cost to procedure 2-Calculation of pool rates 3-Identification of cost drivers 4-Identification of cost pools
4, 3, 2, 1
What is the operating leverage (contribution margin / net income) for these 3 companies?
A: 4 B: 2 C: 9
What would be the percentage increase of net income with a 10% increase in sales?
A: 40% B: 20% C: 90%
Which of the following choices correctly depicts a cost that arises from a batch-level activity and one that arises from a facility-level activity?
B. inspection and property taxes
Gutierrez, which uses a process-costing system, adds all material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The information that follows relates to the period just ended: Units started and completed: 75,000 Units in ending work-in-process inventory: 15,000, 60% complete Which of the following choices correctly expresses the total equivalent units of production with respect to material and conversion cost?
D. material: 90,000; conversion: 84,000
Which of the following acts strives to improve corporate governance and the quality of corporate accounting/reporting?
Sarbanes-Oxley
Which of the following statements about the ethical climate of business is false?
The Robinson-Patman Act strives to improve the overall quality of corporate reporting
Which of the following manufacturers would most likely not use a process-cost accounting system?
a builder of customized yachts
Templeton Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:
a debit to manufacturing overhead for $9,000
What is meant by the phrase management by exception?
a managerial practice in which only significant deviations from expected performance are investigated
Goal congruence is important to an organization's success. How does a responsibility accounting system foster goal congruence?
a responsibility accounting system fosters goal congruence by establishing the performance criteria by which each manager will be evaluated. Development of performance measures and standards for those measures can help to ensure that managers are striving toward goals that support the organization's overall objectives
What is a segmented income statement?
a segmented income statement shows the segment margin for each major segment of the enterprise
Distinguish between static and flexible budgets.
a static budget is based on only one level of activity. a flexible budget allows for several different levels of activity
Indicate which of the following descriptions (engineered cost, committed cost, or discretionary cost) best describes each cost listed below: a. Annual cost of maintaining a highway b. Cost of ingredients in a breakfast cereal c. Cost of advertising for a credit card company d. Depreciation on an insurance company's computer e. Cost of charitable donations that are budgeted as 1% of sales revenue f. Research and development costs, annual budget of $45,000
a. committed b. engineered c. discretionary d. committed e. discretionary f. discretionary
Flexible budgets reflect a company's anticipated costs based on variations in:
activity levels
Which of the following statements about performance reports are true?
all 3 are correct
Which of the following statements is (are) true about non-value-added activities?
all 3 are true
What factor(s) are important in selecting cost drivers for an ABC system?
all 3 of these are important
Examples of responsibility centers include:
all of the above
Some criticisms of standard costing in an advanced manufacturing environment include:
all of the above
What are some advantages of a standard costing system?
all of the above
What are the key features of the segmented income statement?
all of the above
What factors do managers often consider when determining the significance of a variance?
all of the above
The term cost allocation base refers to:
all of the above are correct
What things are included in a control system?
all of the above are parts of a control system
Which statements explain the difference between absorption costing and variable costing?
all of the above statements are correct
Product costing in a manufacturing firm is the process of:
assigning costs to the firm's inventory
Jefferies Company's only variable overhead cost is electricity. They show an unfavorable variable overhead spending variance. What are some possible reasons?
both A and B
What are some possible causes of an unfavorable direct-labor rate variance?
both A and C
Which of the following is the correct method to calculate a predetermined overhead rate?
budgeted overhead cost / budgeted amount of cost driver
Under- or overapplied manufacturing overhead at year-end is most commonly:
charged or credited to cost of goods sold
Flagler, Inc. disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when manufacturing overhead was underapplied by $15,000. If sales revenue totaled $1,400,000, determine: (1) Flagler's adjusted cost of goods sold and (2) gross margin
choice D - $605,000 and $795,000
Which of the following is not an example of a responsibility center?
contribution center
The relationship between cost and activity is known as:
cost behavior
A forecast of a cost at a particular level of activity is known as:
cost prediction
Assume that a managerial accountant regularly communicates with business associates to avoid conflicts of interest and advises relevant parties of potential conflicts. In doing so, the accountant will have applied the ethical standard of:
credibility
Job no. C12 was completed in November at a cost of $28,500, subdivided as follows: direct material, $13,500; direct labor, $6,000; and manufacturing overhead, $9,000. The journal entry to record the completion of the job is:
debit: finished goods inventory - 28,500 credit: work-in-process inventory - 28,500
If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then $16,000 is termed the:
differential cost
When using normal costing, the total production cost of a job is composed of:
direct material, direct labor, and applied manufacturing overhead
Under variable costing, fixed manufacturing overhead is:
expensed immediately when incurred
A committed cost results from a management decision to spend a particular amount of money for some purpose.
false
A predetermined overhead rate is calculated by dividing actual overhead cost by the actual amount of a cost driver used in the process.
false
Equivalent units and physical units are the same in manufacturing inventories.
false
The relevant range is that range of activity where a company achieves its maximum efficiency.
false
When goods are sold, their costs are transferred to finished goods inventory.
false
Which of the following inventories would a company ordinarily hold for sale?
finished goods
The underlying difference between absorption costing and variable costing lies in the treatment of:
fixed manufacturing overhead
When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is:
goal congruence
The division of activities into unit-level, batch-level product-sustaining level, and facility-level categories is commonly known as a cost:
hierarchy
Operational performance measure: non-value added time (NVA) =
inspection time + waiting time (total) + move time
A flexible budget:
is both preferred over a static budget in the evaluation of performance and can be used to compare actual and budgeted costs at various levels of activity
What are the criteria for determining whether an activity adds value?
is it necessary? is the activity efficiently performed? is the activity sometimes value-added and sometimes non-value-added?
Process costing is used to account for:
large numbers of identical products that are produced in a continuous process
The value chain of a manufacturer would tend to include activities related to:
manufacturing research and development product design marketing
Ashley Corporation uses a process-cost accounting system. The company adds direct materials and direct labor at the start of its production process; overhead cost is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work-in-process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?
materials, 100%; labor, 100%; overhead cost, 40%
Which of the following inventories would a discount retailer report as an asset?
merchandise inventory
In order for a company to achieve a sustainable competitive advantage, it must perform value chain activities:
more than one answer choice is correct
Which of the following perspectives is normally absent in a balanced scorecard?
none of these
Costs that are expensed when incurred are called:
period costs
Operational performance measure: value added time =
processing time
Operational performance measure: manufacturing cycle efficiency (MCE) =
processing time / processing time + inspection time + waiting time after production begins + move time
What are the two factors that tend to result in product cost distortion under traditional, volume-based product costing systems?
product diversity and non-unit level overhead costs
If a company sells goods that cost $80,000 for $92,000, the firm will:
reduce finished-goods inventory by $80,000
The assignment of direct labor cost to individual jobs is based on:
the actual time spent on each job multiplied by the wage rate
The cost of resources supplied but unused is known as:
the cost of unused capacity
External failure costs are a product quality costs defined as:
the costs incurred when defective products have been sold
Appraisal costs are a product quality costs defined as:
the costs of determining whether defects exist
Prevention costs are a product quality costs defined as:
the costs of preventing defects
Internal failure costs are a product quality costs defined as:
the costs of repairing defects found prior to product sale
The upper limit on the production of goods and services if everything works perfectly is known as:
theoretical capacity
Financial accounting focuses primarily on reporting:
to parties outside of an organization
Operational performance measure: manufacturing cycle time =
total production time per batch / units per batch
In a sequential production operation, each department establishes its own work-in-process account. The cost transferred from one department to the next is called:
transferred-in costs
An example of a discretionary cost is the cost of research and development.
true
Because labor hours are related closely to the volume of activity in the factory, these traditional product-costing systems often are said to be volume-based costing system.
true
Cost that are nearly variable, but increase in small steps instead of continuously are called step-variable costs.
true
Customer-profitability analysis uses activity-based costing to determine the activities, costs, and profit associated with serving particular customers.
true
Direct labor and manufacturing overhead often are combined into a single cost category termed conversion costs
true
Efficient or inefficient use of a specific component of variable overhead will cause the firm to have a variable overhead efficiency variance.
true
For any organization selling multiple products, the relative proportion of each type of product sold is called the sales mix.
true
If the organization operates at an activity level outside the relevant range, any cost predictions based on data from the relevant range may not be very accurate.
true
In a process costing system, costs are accumulated by department or process.
true
In an activity-based costing system, direct materials used would typically be classified as a unit-level cost.
true
Manufacturing overhead is a pool of indirect production costs that must somehow be attached to each unit manufactured.
true
Non-value-added costs are costs of activities that can be eliminated with no deterioration of product quality, performance, or perceived value.
true
On the CVP graph, the break-even point is determined by the intersection of the total revenue line and the total expense line
true
Responsibility accounting refers to the various concepts and tools used by managers to measure the performance of people and departments in order to foster goal congruence.
true
Sunk costs are irrelevant to all future decisions.
true
The break-even point is that level of activity where total revenue equals total cost.
true
The contribution margin ratio can also be expressed as a percentage.
true
The contribution margin ratio is calculated as unit contribution margin divided by the selling price per unit.
true
The following equation is used to calculate cost of goods sold during the period. (beginning finished goods + cost of goods manufactured - ending finished goods)
true
The relevant range is the range of activity in which management of a company expects to operate.
true
Variable costs change in direct proportion to a change in the activity level.
true
Boston, Inc. applies manufacturing overhead at the rate of $40 per machine hour. Budgeted machine hours for the current period were anticipated to be 120,000; however, a lengthy strike resulted in actual machine hours being worked of only 90,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:
underpaid by $580,000
In an activity-based costing system, direct materials used would typically be classified as a:
unit-level cost
Operational performance measure: manufacturing velocity =
units per batch / total production time per batch
What is meant by customer profitability analysis?
using ABC costing to determine if a particular customer causes additional costs which affects profitability
How should a company that manufactures automobiles classify its partially completed vehicles?
work-in-process inventory
As production takes place, all manufacturing costs are added to the:
work-in-process inventory account