ACCT 202 CH 1 Exam Review

Contribution Margin

: Is revenue remaining after deducting variable costs; may be expressed as contribution margin per unit

TRUE

A credit balance in the MOH account at the end of the year means that the MOH was overapplied T/F

TRUE

A flour manufacturer is more likely to use process costing than job-order costing wheras a manufacturer of customized leather jackets is more likely to use job-order costing than process costing -T/F

FALSE

A job-order costing system would be best suited for production of a large quantity of a homogeneous product. T/F

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

A process costing system is employed in those situations where:

TRUE

Actual overhead costs are not assigned to jobs in a job costing system T/F

TRUE

Advertising costs should not be charged to the MOH account T/F

Dr Finished Goods XXX; Cr Work in Process - Waterproofing XXX

Arona Corp manufactures canoes in two departments, Fabrication and waterproofing. In the fabrication dept, fiberglass panels are attached to a canoe-shaped aluminum frame. The canoes are then transferred to the waterproofing department to be coated with sealant. 61. What journal entry should arona make to record the completion of the production process by the waterproofing department?

45,540

Awtis Corporation has a margin of safety percentage of 25% based on its actual sales. The break-even point is $248,400 and the variable expenses are 45% of sales. Given this information, the actual profit is

$750

Beat 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 40,000; Total fixed manufacturing overhead cost $ 344,000 ;Variable manufacturing overhead per machine-hour $ 3.90; Recently, Job M759 was completed. It required 60 machine-hours. The amount of overhead applied to Job M759 is closest to:

$270

Carradine 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 total fixed manufacturing overhead cost of $105,000, variable manufacturing overhead of $3.00 per machine-hour, and 70,000 machine-hours. The company recently completed Job P233 which required 60 machine-hours. The amount of overhead applied to Job P233 is closest to:

.758

Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. An average of 2,100 cups are sold each month. What is the CM Ratio for Coffee Klatch?

1,150 cups

Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. An average of 2,100 cups are sold each month. What is the break-even sales in units?

$8.20 per DLH

Darrow Corporation uses a POHR based on DLH to apply MOH to jobs. Last year, they worked 10,000 DLH and incurred $80,000 of actual MOH cost. If MOH was underapplied by $2,000, the POHR for the Corporation for the year must have been:

debit to WIP $79,000

During July at Loeb Corporation, $83,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a:

Dr FG $50,000 → Cr WIP $50,000; Cr FG $56,000 → Dr COGS $56,000

During March, Zea Inc. transferred $50,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $56,000. The journal entries to record these transactions would include a:

TRUE

Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have the positive net operating income. T/F

FALSE low CM percentage results in lower profit; net operating income is Contribution margin - Fixed expenses. Fixed expenses do not change so net op income is dependent on CM.

For a given level of sales, a low contribution margin ratio will produce more net operating income than a high contribution margin ratio. T/F

$32.40 per machine-hour

Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine-hours 36,000; Estimated variable manufacturing overhead $ 3.01 per machine-hour; Estimated total fixed manufacturing overhead $ 1,058,040; The predetermined overhead rate for the recently completed year was closest to:

$37.09 per machine-hour

Gilchrist Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 79,000 machine-hours. The estimated variable manufacturing overhead was $7.38 per machine-hour and the estimated total fixed manufacturing overhead was $2,347,090. The predetermined overhead rate for the recently completed year was closest to:

$200,000

Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?

FALSE; MOH gets closed out to COGS (an expense account; increases with debit) debit overapplication difference to MOH, and credit to COGS

If a company closes any underapplied or overapplied manufacturing overhead to the Cost of Goods Sold account, then the COGS will be debited if manufacturing overhead is overapplied for the period. T/F

not change

If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will: decrease; increase; not change; change but direction cannot be determined

TRUE

If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a period will be recorded in the MOH account. T/F

FALSE; You apply MOH either on a monthly/quarterly/etc. basis based on a rate.

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used. (T/F?)

the amount of MOH cost applied to WIP is less than the actual MOH cost incurred.

If manufacturing overhead is underapplied, what happens to MOH applied to WIP?

TRUE

In a CVP graph (sometimes called a break even chart), unit volume is represented on the horizontal X axis and dollars on the vertical Y axis. T/F

Predetermined OH rate (POHR) = Est. MOH / Est. MH

In a job-order costing system that is based on machine-hours what is the formula?

WIP

In a job-order costing system, MOH applied is recorded as a debit to:

MOH

In a job-order costing system, indirect labor cost is usually recorded as a debit to:

Processing department

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

$730

Job WR53 at NW Fab, Inc. required $200 of direct materials and 10 direct labor hours at $15 per hour. Estimated total overhead for the year was $760,000 and estimated direct labor hours were 20,000. What would be recorded as the cost of job WR53?

TRUE

Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources (T/F?)

TRUE

Job-order costing would be more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications. T/F

WIP -- assembly

Kota Toy Corp manufactures lizard dolls in two departments, Molding and Assembly. In the Molding department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the assembly department where hair is applied. What account would Kota debit to record the transfer of dolls out of the molding department

82,000; Units started into production or transferred in = Units in ending work in process inventory + Units completed and transferred out - Units in beginning work in process inventory = 7,000 + 79,000 - 4,000 = 82,000

Kota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments. On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. How many dolls were started in the Molding Department during January?

FALSE; Direct labor is touch labor. Touch labor is inventoriable/traceable product cost. Direct labor shows up under WIP. Expense is for income statement, direct labor goes on the balance sheet.

On a manufacturing company's income statement, direct labor is separately listed as an expense. T/F

$12.10

Purves Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $121,000 and 10,000 direct labor-hours for the period. The company incurred actual total fixed manufacturing overhead of $113,000 and 10,900 total direct labor-hours during the period. The predetermined overhead rate is closest to:

No, it is not a sunk cost

Suppose that your car could be sold now for $5,000. Is this a sunk cost?

TRUE CM-Fixed= Net operating (profit) if net op= 0 then you have the break even point.

The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin. T/F

FALSE; There are only Raw Materials, WIP, Finished goods and MOH (temporary)

The following entry would be used to record the transfer of $40,000 of direct material and $10,000 of indirect material from the storeroom to production: DR Direct Materials $40,000; DR Indirect Materials $10,000; CR Raw Materials $50,000 T/F

False this is the only journal entry that is different from job-order costing. Debit Finished goods and WIP department B (baking)

The following journal entry would be made in a processing costing system when units that have been completed in the final processing department are transferred to the finished goods warehouse: Dr Finished Goods XXX Cr Raw Materials XXX. T/F

FALSE; CM-Fixed= Net profit $$= Target Profit / Contribution Margin % ← FALSE Real formula: $$= (Target Profit + Fixed) / CM% Q = (Target Profit + Fixed) / (CMper unit)

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio. T/F

TRUE

To estimate what the profit will be at various levels of activity, multiply the number of units to be sold above or below the break-even point by the unit contribution margin. T/F

completed during the period

Under a job-costing system, the dollar amount transferred from WIP to Finished Goods is the sum of the costs charged to all jobs:

$550,000

Valvano 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 total fixed manufacturing overhead cost of $440,000, variable manufacturing overhead of $2.20 per machine-hour, and 50,000 machine-hours.The estimated total manufacturing overhead is closest to:

WIP account

When MOH is applied to production, it is added to which account?

Gross margin will increase; Gross margin= Revenue-COGS CoGS decreases with a credit from overapplied MOH.

When closing overapplied manufacturing overhead to Cost of Goods Sold what happens to gross margin?

False debit Raw Materials credit cash/accounts payable

When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials T/F

TRUE

When raw materials are purchased, they are recorded as an asset T/F

The products produced are heterogeneous in nature

Which of the following items is not a characteristic of a process cost system: -The products produced are heterogeneous in nature -When the finished product emerges all units have precisely the same amount of materials, labor, and overhead -Focus is on continually producing Homogeneous products -Once production begins, it continues until the finished product emerges