ACCT 2302 Final Exam

The primary objective of lean operations is to A. focus on creating value for the customer by eliminating waste. B. provide customers with superior products and services. C. make the company's processes as efficient and effective as possible. D. use activity-based costing information to make decisions that increase profits while satisfying customer needs.

focus on creating value for the customer by eliminating waste.

Activity-based costing helps to A. reduce cost distortion. B. develop departmental overhead rates. C. allocate direct costs. develop a plantwide overhead rate

reduce cost distortion.

Which of the following companies would use a job costing system? A. Health care provider B. Crayon manufacturing company C. Potato chip manufacturing corporation D. Spring water bottling company

Health care provider

Smart Corporation is a manufacturer of smartphones. Assume Smart allocates manufacturing overhead based on machine hours. They estimated 5 million machine hours and $50 million of manufacturing overhead costs. Actual machine hours were 6 million and actual total manufacturing overhead costs were $48 million. What is Smart's predetermined manufacturing overhead rate? A. $8.00/machine hour B. $8.33/machine hour C. $9.60/machine hour D. $10.00/machine hour

$10.00/machine hour. $50,000,000 / 5,000,000 = $10 per MH

A company uses a single raw material in its production process. The standard price for a unit of material is $2.00. During the month the company purchased and used 600 units of this material at a price of $2.25 per unit. The standard quantity required per finished product is 2 units and during the month, the company produced 310 finished units. How much was the direct material price variance? A. $150 favorable B. $150 unfavorable C. $155 favorable D. $155 unfavorable

$150 favorable (600 x 2.25) - (600 x 2) = 150

Given the following July financial information for Classic Toy Manufacturing Company, what amount of cost of goods sold would be reported by Classic Toy for the month of July? Cost of goods manufactured $25,000 Beginning finished goods inventory 4,000 Ending finished goods inventory 6,000 General and administrative expenses 3,000 Selling expenses 2,000 A. $23,000 B. $25,000 C. $26,000 D. $28,000

$23,000

Gale Corporation manufactures windsocks. The business recently decided to adopt an ABC system. The following activities have been identified: Materials handling Number of parts $1.00 Machining Machine hours 60.00 Packaging Number of finished units 2.00 Each windsock requires three parts and spends five minutes in the machining department. The total cost of direct materials and direct labor is $3.50 per windsock. Gale produces 20,000 windsocks each year and sells them at 140% of cost. The total cost of producing the 20,000 windsocks is A. $160,000. B. $230,000. C. $270,000. D. $1,260,000

$270,000. 70,000 (20,000 x 3.50) 60,000 (20,000 x 3 x1) 100,000 (20,000 x (5 / 60) x 60 40,000 (20,000 x 2) = 270,000

A company produced 2,200 units of output during a production process that normally requires 2 hours of labor per unit of output. The standard labor rate is $16 per hour, but the company paid $15 per hour. Actual hours needed to complete the production process were 4,600. How much was the labor efficiency variance? A. $3,000 favorable B. $3,000 unfavorable C. $3,200 favorable D. $3,200 unfavorable

$3,200 unfavorable ((2,200 x 2) - 4,600)) x $16 = (3,200)

A company is analyzing its mixed costs. During July, its busiest month, a company had total labor hours of 14,000 and total costs of $40,000. During February, its slowest month, the company had labor hours of 8,000 and total costs of $25,000. The company is planning for 12,000 direct labor hours next April. How many dollars should the company budget for total costs during April? A. $5,000 B. $6,000 C. $30,000 D. $35,000

$35,000 (40,000 - 25,000) / 6,000 = $2.50 40,000 - 2.50 x 14,000 = 5,000 5,000 + 2.50 x 12,000 = 35,000

Use absorption costing to calculate operating income based on the following information: Selling price = $40.00, variable manufacturing cost per unit = $6.00, total fixed manufacturing cost = $100,000, variable selling cost per unit = $2.00, total fixed selling cost = $10,000, units produced = 5,000, units sold = 4,000. A. $18,000 B. $50,000 C. $38,000 D. $25,000

$38,000 (6 x 5,000) + (2 x 4,000) = 38,000

A marketing consultant uses the job costing system and has a predetermined overhead rate of $15 per direct labor hour. This amount is based on an estimated overhead of $30,000 and an average time of 5.0 hours per job. Job #521 incurred direct material costs of $50 and 6 direct labor hours costing $75 per hour. The total cost of job #521 is A. $155. B. $215. C. $565. D. $590.

$590. 50 + (6 x $75) + (6 x $15) = $590

If the sales price is $150 per unit, the variable cost is $90 per unit, and total fixed costs is $24,000, the breakeven in sales dollars is A. $15,000. B. $24,000. C. $36,000. D. $60,000.

$60,000. (150-90) / 150 = 0.4 24,000 / 0.4 = 60,000

S7-4 Find target profit volume FunTime Cruiseline offers nightly dinner cruises departing from several cities on the eastern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner cruise tickets sell for $50 per passenger. FunTime Cruiseline's variable cost of providing the dinner is $30 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $210,000 per month. The company's relevant range extends to 20,000 monthly passengers. If FunTime Cruiseline has a target operating income of $30,000 per month, how many dinner cruise tickets must the company sell?

(210,000 + 30,000) / 20 = 12,000 tickets

S6-9 Use the high-low method Brimfield Catering uses the high-low method to predict its total overhead costs. Past records show that total overhead cost was $25,600 when 860 hours were worked and $27,800 when 960 hours were worked. If Brimfield Catering has 885 hours scheduled for next month, what is the expected total overhead cost for next month?

(27,800 - 25,600) / (960 - 860) = $22 (variable cost per unit) 22 x 960 = 21,120 (total mixed overhead cost) 27,800 - 21,120 = $6,680 Operating cost equation y = $22x + 6680

S4-5 Use ABC to allocate overhead ABC Allocation Rates: Preparation MOH = $510,000 Cooking and Draining MOH = $928,000 Packaging MOH = $400,000 Preparation Cost = $60/hr Cooking and Draining Time Cost = $29/hr Units Packaged Cost = $0.10/unit NatureMade Snacks just received an order to produce 12,000 single-serving bags of gourmet, fancy-cut, sweet potato chips. The order will require 21 preparation hours and 36 cooking and draining hours. Use the activity rates you calculated in S4-4 to compute the following: 1. What is the total amount of manufacturing overhead that should be allocated to this order? 2. How much manufacturing overhead should be assigned to each bag? 3. What other costs will the company need to consider to determine the total manufacturing costs of this order?

(60 x 21) + (29 x 36) + (0.10 x 12,000) = 3,504 (Total) / 12,000 = 0.29 MOH per bag In addition to the costs previously listed, the company needs to consider direct materials and direct labor.

S11-12 Calculate and interpret overhead variances Assume that the Janis Corporation's manufacturing facility actually incurred $2,980,000 of manufacturing overhead for the year. Total fixed manufacturing overhead was budgeted at $3,010,000. Using a standard costing system, the company allocated $2,941,000 of fixed manufacturing overhead to production. Requirements 1. Calculate the total fixed manufacturing overhead variance. What does this tell managers? 2. Determine the fixed overhead budget variance. What does this tell managers? 3. Determine the fixed overhead volume variance. What does this tell managers? 4. Doublecheck: Do the two variances (computed in Requirements 2 and 3) sum to the total overhead variance computed in Requirement 1?

1) Actual Standard 2,980,000 - 2,941,000 = 39,000 U 2) Actual Budgeted 2,980,000 - 3,010,000 = 30,000 U 3) Budgeted Standard 3,010,000 - 2,941,000 = 69,000 U 4) Yes the two variances add up to the total variance

S3-11 Calculating overallocated or underallocated overhead Well-Flow Company had estimated $1,053,000 of manufacturing overhead (MOH) for the year and 58,500 direct labor (DL) hours, resulting in a predetermined MOH rate of $18 per DL hour. By the end of that year, the company had actually incurred $1,005,000 of MOH costs and had used a total of 57,000 DL hours on various jobs. 1. By how much did the company overallocate or underallocate MOH for the year? 2. Was MOH overallocated or underallocated for the year? How do you know?

1,053,000 / 58,500 = $18 57,000 x $18 = $1,026,000 1) Actual = 1,005,000 Allocated = 1,026,000 21,000 2) MOH was over allocated for the year because the amount of allocated exceeded the amount of actual overhead by 21,000

If the sales price is $60 per unit, the variable cost is $10 per unit, total fixed costs is $60,000, and 12,000 units are produced, the breakeven in units is A. 1,200. B. 1,000. C. 240. D. 200.

1,200. 60,000 / (60-10) = 1,200

Leverage Corporation sells two products: Regular and Supreme. Leverage sells three Regulars for every two Supremes. The Regular sells for $20 each with variable costs of $11 each, whereas the Supreme sells for $25 each with variable costs of $15 each. If fixed costs are $21,000, what is the breakeven point in units? A. 1,167 units of each B. 1,050 units of each C. 1,340 units of Regular and 894 units of Supreme D. 894 units of Regular and 1,340 units of Supreme

1,340 units of Regular and 894 units of Supreme Reg = 20 - 11 = 9 Supreme = 25 - 15 = 10 9 / 60% = 5.40 10 / 40 = 4 21,000 / 9.40 = 2,234 Reg = 2,234 x 60% = 1340 Supreme = 2,234 x 40% = 894

Green Company has budgeted sales of 23,000 units for June and 25,000 units for July. Green's policy is to maintain its finished goods inventory at 25% of the following month's unit sales. Accordingly, at the end of May, Green had 5,750 units on hand. How many units must it produce in June in order to support the sales goal and maintain its policy regarding finished goods inventory? A. 6,250 units B. 23,000 units C. 23,500 units D. 29,250 units

23,500 units 23,000 + (25,000 x 0.25) - 5,750 = 23,500

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sale price of $30 each. This is a $10 reduction in the normal selling price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change. Which of the following is TRUE? A. Management should accept the order if the variable costs per unit and fixed costs in total will not change with the order. B. Management should accept the order if they have excess capacity. C. Management should consider not accepting the order if the customers will expect the price decrease as the standard price in the future. D. All of the above are true.

All of the above are true.

Assume Ametrine Company expects each division to earn an 8% target rate of return. Assume Division A had the following results: Sales $24,500,000 Operating income 1,250,000 Total assets 15,500,000 The Divison's RI equals A. ($10,000). B. $10,000. C. $710,000. D. ($710,000).

B. $10,000. 1,250,000 - (15,500,000 x 8%) = 10,000

The individual responsible for managing all of the financial aspects of the organization is the A. COO. B. CFO. C. CEO. D. CPA.

CFO.

E2-44B Compute direct materials used and Cost of Goods Manufactured Laurel Industries is calculating its Cost of Goods Manufactured at year-end. The company's accounting records show the following: The Raw Materials Inventory account had a beginning balance of $14,000 and an ending balance of $19,000. During the year, the company purchased $63,000 of direct materials. Direct labor for the year totaled $133,000 while manufacturing overhead amounted to $162,000. The Work in Process Inventory account had a beginning balance of $25,000 and an ending balance of $24,000. Assume that Raw Materials Inventory contains only direct materials. Compute the Cost of Goods Manufactured for the year. (Hint: The first step is to calculate the direct materials used during the year.)

Calculation of direct materials used Beginning raw materials inventory $ 14,000 Plus: Purchases of direct materials 63,000 Materials available for use $ 77,000 Less: Ending raw materials inventory (19,000) Direct materials used $ 58,000 Schedule of cost of goods manufactured Beginning work in process inventory $ 25,000 Plus: Manufacturing costs incurred Direct materials used (from previous schedule) 58,000 Direct labor 133,000 Manufacturing overhead 162,000 Total manufacturing costs to account for $ 378,000 Less: Ending work in process inventory (24,000) Cost of goods manufactured $ 354,000

Which of the following budgets is the comprehensive planning document for the entire organization? A. Sales budget B. Capital expenditure budget C. Comprehensive budget D. Budgeted income statement

Comprehensive budget

S10-6 Calculate ROI, capital turnover, and sales margin Irvin Chemical Corporation has three divisions. Following is division information from the most recent year. For each of the Consumer Markets Division, calculate sales margin, capital turnover, and return on investment (ROI).

Functional ingredients Sales margin $6,188 / $22,100 = 28.0% Capital turnover $22,100 / $13,000 = 1.70 ROI 28.0% x 1.70 = 47.60% Consumer markets Sales margin $1,290 / $21,500 = 6.0% Capital turnover $21,500 / $10,750 = 2.0 ROI 6.0% x 2.0 = 12.0% Performance markets Sales margin $4,375 / $17,500 = 25.0% Capital turnover $17,500 / $14,000 = 1.25 ROI 25.0% x 1.25 = 31.25%

S9-6 Direct materials budget Breadmaster produces organic bread that is sold by the loaf. Each loaf requires 1/2 of a pound of flour. The bakery pays $2.00 per pound of the organic flour used in its loaves. The bakery expects to produce the following number of loaves in each of the upcoming four months: July 1,540 loaves August 1,820 loaves September 1,660 loaves October 1,460 loaves The bakery has a policy that it will have 20% of the following month's flour needs on hand at the end of each month. At the end of June, there were 154 pounds of flour on hand. Prepare the direct materials budget for the third quarter, with a column for each month and for the quarter

July 1,540 × 0.50 770 182 952 (154) 798 × $2.00 $1,596 August 1,820 × 0.50 910 166 1,076 (182) 894 × $2.00 $1,788 September 1,660 × 0.50 830 146 976 (166) 810 × $2.00 $1,620 Quarter 5,020 × 0.50 2,510 146 2,656 (154) 2,502 × $2.00 $5,004

Monroe Group is preparing its cash collections budget. Budgeted sales are $150,000 in July, $175,000 in August, and $200,000 in September. Fifty percent of sales are cash sales; the remainder is on account. Sales on account are expected to be collected 30% in the month of sale, 60% in the month following the month of sale, and 10% in the second month following the month of sale. What are anticipated cash collections during the month of September? A. $190,000 B. $180,000 C. $130,000 D. $100,000

July 150,000 -75,000 (150,000 x 50%) = 75,000 Credit Sales August 175,000 -87,500 (150,000 x 50%) = 87,500 Credit Sales September 200,000 -100,000 (200,000 x 50%) = 100,000 Credit Sales 100,000 + (100,000 x 30%) + (87,500 x 60%) + (75,000 x 10%) = 190,000

Which of the following is FALSE about managerial accounting versus financial accounting? A. Managerial reports are prepared annually, whereas financial reports are prepared when required. B. Managerial accounting is primarily utilized by internal users, whereas financial accounting is primarily utilized by external users. C. The primary information characteristic for managerial accounting is relevance, whereas the primary information characteristics for financial accounting are reliability and objectivity. D. No authoritative body requires managerial accounting reports, whereas the SEC requires financial accounting reports for publicly traded companies.

Managerial reports are prepared annually, whereas financial reports are prepared when required.

Which of the following is NOT true regarding a contribution margin income statement? A. The contribution margin income statement is organized by cost behavior. B. Operating income will always be the same as operating income in a traditional income statement regardless of changes in inventory levels. C. All fixed costs, including fixed MOH, are expensed below the contribution margin line. D. The contribution margin is equal to sales revenue minus variable expenses

Operating income will always be the same as operating income in a traditional income statement regardless of changes in inventory levels.

Which of the following statements is true regarding regression analysis? A. Regression analysis considers all of the data points for determining the line that best fits the data so it is usually less accurate than the high-low method. B. Regression analysis helps generate a statistic, called the R-square, which tells how well the line fits the data points. C. Regression analysis can only be used by manufacturing companies to predict costs. D. All of the above are true.

Regression analysis helps generate a statistic, called the R-square, which tells how well the line fits the data points.

E8-33A Determine maximum outsourcing price Hamilton Containers manufactures a variety of boxes used for packaging. Sales of its Model A20 box have increased significantly to a total of 430,000 A20 boxes. Hamilton has enough existing production capacity to make all of the boxes it needs. The variable cost of making each A20 box is $0.80. By outsourcing the manufacture of these A20 boxes, Hamilton can reduce its current fixed costs by $103,200. There is no alternative use for the factory space freed up through outsourcing, so it will just remain idle. What is the maximum Hamilton will pay per Model A20 box to outsource production of this box?

The variable cost per switch is $0.80. The avoidable fixed cost per switch is $0.24 ($103,200/430,000). Hamilton would be indifferent between outsourcing and making the Model A20 boxes if the outsourcing price was $1.04 ($0.80 + 0.24) per A20 box. Therefore, Hamilton will only be willing to pay up to $1.04 per Model A20 box if outsourcing.

Which of the following is NOT a component of manufacturing overhead in the production of wine for a winery? A. Depreciation on the basket press used to crush grapes B. Salaries of supervisors C. Oil and lubricants for machines D. Wages of employees who crush grapes

Wages of employees who crush grapes

Thematics Publishing produces 10,000 binders each year. Each binder has a variable cost of $17 and total fixed costs of $110,000 per year. The binders can be purchased from an outside supplier for $20 each. The production space will remain idle, but fixed costs can be reduced by 30%. The annual impact of purchasing the binders will be to A. increase operating income by $3,000. B. increase operating income by $47,000. C. decrease operating income by $3,000. D. decrease operating income by $47,000.

increase operating income by $3,000. 200,000 (20x 10,000) 33,000 (110,000 x 30%) 200,000 - 33,000 = 167,000 170,000 (10,000 x 17) 170,000 - 167,000 = 3,000