Acct 303 Test 2

AAA company sells two items: A and B. Units sold A- 100 B- 200 Total -300 Sales A- 500 B- 400 Total- 900 Variable costs A-200 B-100 Total- 300 Fixed costs-300 What is the overall unit contribution margin of this company? A. 2 B. 1.5 C. 6 D. 3

A. 2

In making decisions about whether to sell or further process joint products or by-products, allocation of common or joint costs is: A. Irrelevant and should be ignored. B. Useful. C. Useful depending on the method chosen. D. Essential.

A. Irrelevant and should be ignored.

Staley Co. manufactures computer monitors. The following is a summary of its basic cost and revenue data: Sales price Per Unit- $480 Percent- 100 Variable costs Per Unit- 312 Percent- 65 Unit contribution margin Per Unit- $168 Percent- 35 Assume that Staley Co. is currently selling 600 computer monitors per month and monthly fixed costs are $80,000. What is Staley Co.'s degree of operating leverage (DOL) at this sales volume (i.e., at 600 units)? A. 4.8 B. 5.6 C. 5.1 D. 5.0

A. 4.8

AAA company sells two items: A and B. Units sold A- 100 B- 200 Total -300 Sales A- 500 B- 400 Total- 900 Variable costs A-200 B-100 Total- 300 Fixed costs-300 How many units of A and B should be sold to achieve BEP? A. A = 50 units, B = 100 units B. A = 100 units, B = 10 units C. A = 10 units, B = 100 units D. A = 100 units, B = 50 units

A. A = 50 units, B = 100 units

Factory overhead can be over- or under-applied because: A. All of these answer choices are correct. B. Some actual factory overhead cost varies from the expected. C. Production volume may vary from expected volume. D. Some actual factory overhead costs are incurred unexpectedly.

A. All of these answer choices are correct.

BBB company incurred production costs of $976,000 with total spoilage of $15,000 and normal spoilage of $10,000 last month. How much did spoilage increase product costs last month? A. $10,000 B. $25,000 C. $15,000 D. $5,000

A. $10,000

ACE Company has two service departments — actuarial and rating, and two production departments — P1 and P2. The allocation rate of each service department's costs to the other departments is shown below: FROM TO Actuarial Actuarial- 0% Rating- 40% P1- 20% P2- 40% Rating Actuarial- 25% Rating- 0% P1- 37.5% p2- 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial- $60,000 Rating- $40,000 P1- $60,000 P2- $70,000 The total cost accumulated in P1 using the direct method is : A. $100,000 B. $130,000 C. $126,000 D. $104,000

A. $100,000

Framing House, Inc. produces and sells picture frames. Variable costs are expected to be $17 per frame; fixed costs for the year are expected to total $130,000. The budgeted selling price is $25 per frame. The sales dollars required to make a before-tax profit of $20,000 for Framing House would be: A. $468,750 B. $406,150 C. $412,050 D. $476,350

A. $468,750

Abnormal spoilage: A. Is unacceptable spoilage that should not occur under efficient operating conditions. B. Is controllable in the short run. C. Is considered part of good production. D. Arises under efficient operating conditions.

A. Is unacceptable spoilage that should not occur under efficient operating conditions.

Which of the following industries is more suitable for using a job costing system? A. Medical clinics. B. Petroleum product manufacturing. C. Cement manufacturing. D. Chemical plants.

A. Medical clinics.

Standard costs are: A. Planned costs the firm should attain. B. Associated with direct labor and factory overhead only. C. Targeted low costs the firm should strive for. D. Associated with direct materials and factory overhead only.

A. Planned costs the firm should attain.

Net Realizable Value (NRV) of a product is: A. Ultimate sales value - additional processing and selling cost. B. Profit at split-off + additional processing and selling cost. C. Cost allocation plus separable cost. D. Split-off cost - profit margin - additional processing and selling cost.

A. Ultimate sales value - additional processing and selling cost.

AAA Corporation sells a single product. If the selling price and the unit variable cost both increase by 10% and fixed costs do not change, then: A. Unit CM increases, and BEP in units decreases. B. Unit CM decreases, and BEP in units increases. C. Unit CM increases, and BEP in units does not change. D. Unit CM does not change, and BEP in units does not change.

A. Unit CM increases, and BEP in units decreases.

Under job costing, factory overhead costs are assigned to products or services using labor or machine hours which are: A. Volume-based cost drivers. B. Non-volume-based cost drivers only. C. A homogeneous cost pool. D. Multiple cost pools.

A. Volume-based cost drivers.

AAA company produces two different types of desk, D-10 and D-35, with an annual fixed cost of $6,000. Price and unit variable cost for D-10 is $100 and $20, and price and unit variable cost for D-35 is $200 and $40 for D-35. How much is AAA's breakeven point in dollars if the expected sales mix in units is 75% for D-10 and 25% for D-35? A. $ 8,000 B. $ 7,500 C. $ 8,500 D. $ 9,000

B. $ 7,500

True or False: All other things the same, a reduction in the variable costs per unit will decrease the break-even point.

True

True or False: Joint products are usually made from the same raw materials.

True

If estimated annual factory overhead is $480,000; overhead is applied using direct labor hours; estimated annual direct labor hours are 200,000; actual March factory overhead is $42,000; and actual March direct labor hours are 17,000; then overhead is: A. $200 overapplied. B. $1,200 underapplied. C. $800 overapplied. D. $800 underapplied

B. $1,200 underapplied.

Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to increased market competition, the CFO of Stylish Sitting has grown worried about the firm's upcoming income stream. The CFO asked you to use the company financial information provided below. Sales price-$75.00 Per-unit variable costs Invoice cost-41.70 Sales commissions-18.30 Total per unit variable costs-$60.00 Total annual fixed costs: Advertising-$56,000 Rent-78,000 Salaries-226,000 Total annual fixed costs-$360,000 The annual breakeven point, in dollar sales, is: A. $1,100,000 B. $1,800,000 C. $1,300,000 D. $1,500,000

B. $1,800,000

CCC Inc. produces two products using common materials. The costs incurred before the additional process to convert common materials into individual products are $50,000. The following information is provided to determine the production costs for each product. Product C-10 Units Produced 4,000 Separable Costs $10,000 Selling Price $10 C-25 Units Produced 6,000 Separable Cost $20,000 Selling Price $15 The amount of joint costs allocated to product C-25 using the NRV is: A. $20,000 B. $15,000 C. $10,000 D. $25,000

B. $15,000

Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service? A. Reciprocal method B. Direct method C. Step method D. Indirect method

B. Direct Method

Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions? A. Are we using our debt wisely? B. How much revenue can we lose before we drop below the breakeven point? C. How much will profits change if sales change? D. Will we break even?

B. How much revenue can we lose before we drop below the breakeven point?

AAA Co. uses a job cost system and predetermines a factory overhead rate based on the amount of expected fixed costs and expected volume. At the conclusion of the fiscal year, overapplied overhead could be explained by which of the following? Actual Fixed Costs Actual Volume A) Less than expected, Less than expected B) Less than expected, More than expected C) More than expected, More than expected D) More than expected, Less than expected A. Option C B. Option B C. Option D D. Option A

B. Option B

From a strategic management perspective, the primary reason a firm performs CVP analysis is to find the level of sales that: A. Will allow the firm to compete in a market place. B. Produces a desired (or targeted) level of profit for the firm. C. Will just cover all fixed costs. D. Reduces the threat of bankruptcy.

B. Produces a desired (or targeted) level of profit for the firm.

Normal spoilage is defined as: A. Scrap B. Spoilage that occurs under efficient operations. C. Uncontrollable waste as a result of a special production run. D. Spoilage that arises under inefficient operations.

B. Spoilage that occurs under efficient operations.

True or False: One of the downsides of physical measure method is that costs under this approach do not match with individual products' revenues.

True

AAA company produces and sells only one product. The unit variable costs, fixed costs, and the breakeven point in units for AAA company is $15, $8,500, and 500, respectively. What is the price of the product? A. $ 15 B. $ 17 C. $ 32 D. $ 10

C. $ 32

ACE Company has two service departments — actuarial and rating, and two production departments — P1 and P2. The allocation rate of each service department's costs to the other departments is shown below: FROM TO Actuarial Actuarial- 0% Rating- 40% P1- 20% P2- 40% Rating Actuarial- 25% Rating- 0% P1- 37.5% p2- 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial- $60,000 Rating- $40,000 P1- $60,000 P2- $70,000 The total cost accumulated in P2 using the step method is : A. $100,000 B. $130,000 C. $126,000 D. $104,000

C. $126,000

AAA company incurred normal spoilage of $1,200 and abnormal spoilage of $2,300 last year. How much spoilage costs should AAA charge as a period costs? A. $1,100 B. $1,200 C. $2,300 D. $3,500

C. $2,300

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows. Units Sold DBB-1- 16,000 DBB-2- 24,000 DBB-3- 36,000 Total- 76,000 Price (after addt'l processing) DBB-1- $65 DBB-2- $50 DBB-3- $75 Separable Processing cost DBB-1- $110,000 DBB-2- $44,000 DBB-3- $66,000 Total- $220,000 Units Produced DBB-1- 16,000 DBB-2- 24,000 DBB-3- 36,000 Total0 76,000 Total Joint Cost- $3,600,000 Sales Price at Split-off DBB-1- $25 DBB-2- $35 DBB-3- $55 The amount of joint costs allocated to product DBB-1 using the sales value at split-off method is : A. $757,800 B. $216,870 C. $447,120 D. $939,240

C. $447,120

BBB Company has two service departments — S1 and S2, and two production departments — P1 and P2. S1 department costs are allocated by machine hours and S2 department costs are allocated by square feet. The relevant information is given below: Before allocation S1- $280 S2- $450 P1- $250 P2- $350 Machine hour S1- - S2- 30 P1- 30 P2- 40 Square feet S1- 50 S2- - P1- 100 P2- 50 The total cost accumulated in the P2 department using the step method is: A. $690 B. $670 C. $640 D. $660

C. $640

During the current year, OutlyTech Corp. expected to sell 24,000 telephone switches. Fixed costs for the year were expected to be $12,144,000, the unit sales price was budgeted at $3,200, and unit variable costs were budgeted at $1,440. OutlyTech's margin of safety (MOS) in units is : A. 16,970 B. 22,190 C. 17,100 D. 18,270

C. 17,100

Departmental rates are appropriate when all the following exist except: A. Departments are not similar in function. B. Departments have dissimilar cost drivers. C. All departments have similar cost drivers and cost usage characteristics. D. Not all products pass through the same processes.

C. All departments have similar cost drivers and cost usage characteristics.

Cost system design/selection should consider all except which one of the following? A. Nature of the industry, product, or service. B. A firm's strategy and management information needs. C. Customer needs. D. Cost/benefit of system design/selection and operation.

C. Customer needs.

At the breakeven point, total fixed cost is: A. More than the total contribution margin (CM). B. Less than the total contribution margin (CM). C. Equal to the total contribution margin (CM). D. Equal to the contribution margin per unit (CM).

C. Equal to the total contribution margin (CM).

A normal costing system uses actual costs for direct materials and direct labor, and: A. Estimated costs that the firm should attain. B. Estimated factory overhead costs based on material cost. C. Estimated costs for factory overhead. D. Actual costs for factory overhead.

C. Estimated costs for factory overhead.

Volume-based rates are appropriate in situations where the incurrence of factory overhead: A. Varies considerably from period to period. B. Is related to several non-homogeneous cost drivers. C. Is related to a single, common cost driver. D. Is related to multiple cost drivers.

C. Is related to a single, common cost driver.

Which one of the following methods of allocating joint costs allocate joint costs to joint products on the basis of estimated sales values at the split-off point? A. Physical measure method. B. Sales value at split-off method. C. Net realizable value method. D. Net sales value method.

C. Net realizable value method.

CVP analysis with multiple products assumes that sales will continue at the same mix of products, expressed in either sales units or sales dollars. This assumption is essential, because a change in the product mix will probably change: A. The total fixed cost. B. The average sales price per unit. C. The weighted-average contribution margin. D. The average variable cost per unit.

C. The weighted-average contribution margin.

Income taxes have the following effect on the breakeven point (BEP) calculation: A. They generally decrease the BEP. B. They may increase or decrease the BEP, depending on the cost structure of the organization. C. They have no effect on the BEP. D. They generally increase the BEP.

C. They have no effect on the BEP.

BBB Company has two service departments — S1 and S2, and two production departments — P1 and P2. S1 department costs are allocated by machine hours and S2 department costs are allocated by square feet. The relevant information is given below: Before allocation S1- $280 S2- $450 P1- $250 P2- $350 Machine hour S1- - S2- 30 P1- 30 P2- 40 Square feet S1- 50 S2- - P1- 100 P2- 50 The total cost accumulated in two production departments using the step method is: A. $730 B. $660 C. $600 D. $1,330

D. $1,330

ABC Company listed the following data for the current year: -Budgeted factory overhead $1,044,000 -Budgeted direct labor hours 69,600 -Budgeted machine hours 24,000 -Actual factory overhead 1,037,400 -Actual labor hours 72,600 -Actual machine hours 23,600 If overhead is applied based on direct labor hours, the overapplied or underapplied overhead is: A. $15,300 overapplied. B. $15,300 underapplied. C. $51,600 underapplied. D. $51,600 overapplied.

D. $51,600 overapplied.

BBB Company has two service departments — S1 and S2, and two production departments — P1 and P2. S1 department costs are allocated by machine hours and S2 department costs are allocated by square feet. The relevant information is given below: Before allocation S1- $280 S2- $450 P1- $250 P2- $350 Machine hour S1- - S2- 30 P1- 30 P2- 40 Square feet S1- 50 S2- - P1- 100 P2- 50 The total cost accumulated in the P1 department using the direct method is: A. $640 B. $660 C. $690 D. $670

D. $670

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows. Units Sold DBB-1- 16,000 DBB-2- 24,000 DBB-3- 36,000 Total- 76,000 Price (after addt'l processing) DBB-1- $65 DBB-2- $50 DBB-3- $75 Separable Processing cost DBB-1- $110,000 DBB-2- $44,000 DBB-3- $66,000 Total- $220,000 Units Produced DBB-1- 16,000 DBB-2- 24,000 DBB-3- 36,000 Total0 76,000 Total Joint Cost- $3,600,000 Sales Price at Split-off DBB-1- $25 DBB-2- $35 DBB-3- $55 The amount of joint costs allocated to product DBB-1 using the net realizable value method is : A. $667,345 B. $881,640 C. $286,500 D. $709,200

D. $709,200

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows. Units Sold DBB-1- 16,000 DBB-2- 24,000 DBB-3- 36,000 Total- 76,000 Price (after addt'l processing) DBB-1- $65 DBB-2- $50 DBB-3- $75 Separable Processing cost DBB-1- $110,000 DBB-2- $44,000 DBB-3- $66,000 Total- $220,000 Units Produced DBB-1- 16,000 DBB-2- 24,000 DBB-3- 36,000 Total0 76,000 Total Joint Cost- $3,600,000 Sales Price at Split-off DBB-1- $25 DBB-2- $35 DBB-3- $55 The amount of joint costs allocated to product DBB-1 using the physical measure method is: A. $1,705,320 B. $54,250 C. $49,200 D. $757,800

D. $757,800

CCC Inc. produces two products using common materials. The costs incurred before the additional process to convert common materials into individual products are $50,000. The following information is provided to determine the production costs for each product. Product C-10 Units Produced 4,000 Separable Costs $10,000 Selling Price $10 C-25 Units Produced 6,000 Separable Cost $20,000 Selling Price $15 The unit product cost of product C-10 using the physical measure method is : A. $10 B. $6 C. $4 D. $8

D. $8

AAA company sells three items: A, B, and C. Unit price A- $100 B- $80 C- $190 Unit variable cost A- $40 B- $40 C- $90 The sales mix proportion in units is 5:3:2 for each product. The fixed cost is $1,000. How many units must this company sell at the breakeven point? A. 15 B. 21 C. 19 D. 17

D. 17

Kelvin Co. produces and sells socks. Variable costs are budgeted at $4 per pair, and fixed costs for the year are expected to total $90,000. The selling price is expected to be $6 per pair. The sales units required for Kelvin Co. to make an after-tax profit of $15,000, given an income tax rate of 40%, are: A. 65,661units. B. 56,500 units. C. 60,000 units. D. 57,500 units.

D. 57,500 units.

The journal entry required to record factory depreciation includes: A. A debit to the Depreciation Expense account. B. A debit to the Accumulated Depreciation account. C. A debit to the Cost of Goods Manufactured account. D. A debit to the Factory Overhead account.

D. A debit to the Factory Overhead account.

Depending on the nature of rework being done on a particular unit of product, the cost can be charged to one of three specific accounts. Which of the following is correct? A. Normal rework common to all jobs is charged to the Work-in-Process Inventory account. B. Normal rework for a particular job is charged to that specific job's Finished Goods Inventory account. C. Abnormal rework is charged to the Work-in-Process Inventory account. D. Abnormal rework is charged to a Loss from Abnormal Rework account.

D. Abnormal rework is charged to a Loss from Abnormal Rework account.

For job costing in service industries, overhead costs are usually applied to jobs based on: A. Indirect labor. B. Factory overhead. C. Indirect materials. D. Direct labor-hours or dollars.

D. Direct labor-hours or dollars.

Operation costing is a hybrid costing system for products and services that uses: A. Job costing to assign direct material costs and standard costing for conversion cost. B. Normal costing for conversion cost and process costing for materials cost. C. Process costing to assign conversion costs and normal costing for materials cost. D. Job costing for direct materials costs and process costing for conversion cost.

D. Job costing for direct materials costs and process costing for conversion cost.

The two main advantages of using predetermined factory overhead rates are to provide more accurate unit cost information and to: A. Simplify the accounting process. B. Extend the useful life of the cost data. C. Insure transmission of correct data. D. Provide cost information on a timely basis.

D. Provide cost information on a timely basis.

The point in a joint production process at which individual products can be identified for the first time is called the: A. Joint identification point. B. Separable point. C. By-pass point. D. Split-off point.

D. Split-off point.

Breakeven analysis assumes that __________________________ over the relevant range. A. selling prices are not fixed B. unit variable costs vary C. fixed costs are nonlinear D. total costs are linear

D. total costs are linear

True or False: The degree of operating leverage is relatively constant in amount as sales volume changes for most firms.

False

True or False: The direct method of departmental cost allocation is the simplest of the three methods because it only considers the reciprocal flows partially.

False

True or False: The step method ignores all the reciprocal cost flows between service departments.

False

True or False: Self-consumption of service department sources is usually ignored in cost allocation.

True

True or False: A capital-intensive company will have higher break-even point than a less capital-intensive company with the same sales.

True