acct chap 1-6 questions
Within the relevant range of activity ______. (Select all that apply) a) variable costs do not change in total, only per unit b) fixed costs remain constant in total c) costs and activity can be approximated by a straight line
b & c
The two common methods for determining unit product costs are ______ costing. a) process and variable b) job-order and activity-based c) job-order and process d) traditional and activity-based
c) job-order and process
Sales revenue minus all variable expenses equals ______ ______.
contribution margin
Industries that convert raw materials into homogeneous products typically use ________ costing.
process
Estimated manufacturing overhead ~ Company - $500,000 ~ Dept A. - $338,000 ~ Dept B. - $162,000 Estimated direct labor cost ~ Company - $250,000 ~ Dept A. - $130,000 ~ Dept B. - $120,000 Actual manufacturing overhead ~ Company - $720,000 ~ Dept A. - $400,000 ~ Dept B. - $160,000 Actual direct labor cost ~ Company - $300,000 ~ Dept A. - $160,000 ~ Dept B. - $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is ______.
$1.35 $162,000 / $120,000 = $1.35
One reason to a predetermined overhead rate is to eliminate the effect of seasonal factors. True or False?
True
Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is Blank______. a) $241,000 b) $99,000 c) $57,000
b) $99,000 Reason: Net operating income = $184,000 - $85,000 = $99,000
To calculate the degree of operating leverage, divide ________ by _________ net operating income.
contribution margin
Any item for which cost data is desired is called a(n) ____ ____.
cost object
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ______ ______.
opportunity costs
The contribution margin as a percentage of sales is referred to as the contribution margin or CM ______________ .
ratio
Direct labor is also called _____ labor.
touch
Direct materials and direct labor are both ____ costs. a) nonmanufacturing b) period c) manufacturing d) selling and administrative
manufacturing
A cost that contains both variable and fixed cost elements is called a(n) _________ cost.
mixed
The two most commonly used methods for determining unit product costs are _________ - _________ costing and __________ costing.
job-order & process
Equivalent units of production under the weighted-average method equals: a) units transferred out b) equivalent units in ending work in process plus units transferred out c) united transferred out minus equivalent units in ending work in process d) equivalent units in ending work in process
b) equivalent units in ending work in process plus units transferred out
Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______. a) statement of cash flows b) income statement c) balance sheet
b) income statement
Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is ______. a) 267 b) 534 c) 4,800 d) 7,200
c) 4,800 Reason: ($4,000 + $3,200) ÷ ($15.00 - $13.50) = 4,800 bottles.
The journal entry to record direct materials costs in processing Department #1 is debit ______. a) Raw Materials and credit Work in Process-Department #1 b) Work in Process-Department 1 and credit Accounts Payable c) Work in Process-Department #1 and credit Raw Materials d) Work in Process-Department #1 and credit Manufacturing Overhead
c) Work in Process-Department #1 and credit Raw Materials
Which of the following would not be a good allocation base for manufacturing overhead? a) machine hours b) direct labor hours c) accounting hours d) units of product
c) accounting hours Reason: accounting hours aren't related to manufacturing
When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) _____. a) job cost ledger b) financial statement backup c) subsidiary ledger d) book of original entry
c) subsidiary ledger
Prior costs are blended with current period costs when using the ______ method(s). a) FIFO b) weighted-average c) weighted-average
c) weighted-average
A job cost sheet contains _________. a) selling costs charged to the job b) the selling price of the job c) manufacturing overhead costs charged to the job d) labor costs charged to the job e) materials costs charged to the job
c, d, & e manufacturing overhead, labor, and material costs
The journal entry to record labor cost in the first department is ___________ (debit/credit) Wages payable and ___________ (debit/credit) Work in process-Department #1.
credit & debit
A company purchased a 12 month insurance policy on October 1 for $1,200. On the 31st of December annual financial statements, ________. a) $1,200 is reported as an asset b) $1,200 is reported as an expense c) $900 is reported as a expense and $300 is reported as an asset d) $300 is reported as a expense and $900 is reported as an asset
d) $300 is reported as a expense and $900 is reported as an asset
Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000 a) $190,000 b) $160,000 c) $50,000 d) $80,000
d) $80,000 Gross Margin - Total Selling & Administrative Exp. $140,000 - $60,000 = $80,000
Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing? a) The salary of an attorney at a law firm b) The wages of technicians at an auto repair shop c) The salary of a surgeon at a hospital d) The salary of the manager at a hair salon
d) The salary of the manager at a hair salon
Costs assigned to units of product in absorption costing include ______ manufacturing costs. a) neither variable nor fixed b) only variable c) only fixed d) both variable and fixed
d) both variable and fixed
Predetermined overhead rate per direct labor hour ~ Company - $2.10 ~ Dept A. - $2.40 ~ Dept B. - $1.80 Direct labor hours worked on Job ABC ~ Company - 40 ~ Dept A - 18 ~ Dept B - 22 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $ ___________.
$166.8 To do this just multiply every overhead rate by direct labor hour $2.1 * 40 = $84 $2.4 * 18 = $43.2 $1.8 * 22 = $39.6 $84 + $43.2 + $39.6 = $166.7
A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be $ _____________ .
$5,000
Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage ______ is for Adams, Inc. and _________ for Baron, Inc.
3 & 2 $60,000 / $20,000 = 3 $44,000 / $22,000 = 2
True or false: Knowledge of previous sales is necessary when using incremental analysis to evaluate a change in profits.
False Reason: Incremental analysis only requires information about the change in sales, not the previous ones.
True or false: The sales mix must be taken into consideration when calculating the break-even point for more than one product due to different selling prices, costs, and contribution margins among the products.
True Reason: Because selling prices, costs, and contribution margins of the products differ, the sales mix is assumed to be constant when doing break-even calculations.
Opportunity costs ______. a) are benefits that are given up when selecting one alternative over another b) are uncommon in decision making c) are part of traditional accounting records d) should be considered in decision making
a & d
Methods to calculate departmental unit costs include ______. (Select all that apply) a) weighted-average b) specific identification c) LIFO d) FIFO
a & d weighted-average & FIFO
Conversion costs are ______. a) direct labor plus manufacturing overhead b) direct labor plus raw materials c) raw materials, direct labor, and manufacturing overhead d) raw materials plus manufacturing overhead
a) direct labor plus manufacturing overhead
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost. a) direct material b) manufacturing overhead c) indirect material d) direct labor
a) direct material Reason: The computer processor chip can be easily and conveniently traced to the laptop, making it a direct material cost.
Once the break-even point is reached, the sale of an additional unit increases contribution margin by an amount that is ______ the increase in net operating income. a) equal to b) less than c) greater than
a) equal to
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under ________ costing.
absorption or full
When a company creates overhead rates based on the actions it performs, it is employing an approach called ________ - _________ costing.
activity based
A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n) ________ _________.
allocation base
The adjustment for underapplied overhead ______. a) decreases both cost of goods sold and net operating income b) increases cost of goods sold and decreases net operating income c) decreases cost of goods sold and increases net operating income d) increases both cost of goods sold and net operating income
b) increases cost of goods sold and decreases net operating income
The adjustment for underapplied overhead ______. a) decreases cost of goods sold and increases net operating income b) increases cost of goods sold and decreases net operating income c) decreases both cost of goods sold and net operating income d) increases both cost of goods sold and net operating income
b) increases cost of goods sold and decreases net operating income
The formula for applying overhead to a specific job is ______. a) estimated manufacturing overhead × amount of allocation base incurred by job b) predetermined overhead rate × amount of allocation base incurred by job c) estimated manufacturing overhead ÷ estimated allocation base d) estimated manufacturing overhead ÷ amount of allocation base incurred by job
b) predetermined overhead rate × amount of allocation base incurred by job
Each department has a separate Work in Process account when using ______ costing. a) both process and job-order b) process c) job-order
b) process
How individual costs react to changes in activity level is referred to as cost _______.
behavior
Differential cost is: (Select all that apply) a) the same as opportunity costs b) never relevant in a product decision c) also known as incremental costs d) the difference in costs between two alternatives
c & d
The journal entry to record the transfer of completed units to the finished goods warehouse is to debit ______. a) Cost of goods sold and credit Work in Progress b) Work in Process and credit Cost of goods sold c) Finished goods and credit Work in process d) Finished goods and credit Cost of goods sold
c) Finished goods and credit Work in process
Which of the following statements is correct? a) The risk of loss is not impacted by the margin of safety b) The higher the margin of safety, the higher the risk of incurring a loss c) The higher the margin of safety, the lower the risk of incurring a loss
c) The higher the margin of safety, the lower the risk of incurring a loss
Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______ accurate. a) simpler and more b) simpler and less c) more complex and more d) more complex and less
c) more complex and more
The formula for applying overhead to a specific job is ______. a) estimated manufacturing overhead ÷ amount of allocation base incurred by job b) estimated manufacturing overhead × amount of allocation base incurred by job c) predetermined overhead rate × amount of allocation base incurred by job d) estimated manufacturing overhead ÷ estimated allocation base
c) predetermined overhead rate x amount of allocation base incurred by job
Direct labor plus manufacturing overhead equals _______ cost.
conversion
Net operating income equals: a) unit sales x unit contribution margin b) dollar sales - dollar sales to break even c) (dollar sales - dollar sales to break even) * unit contribution margin d) (unit sales - unit sales to break even) * unit contribution margin
d) (unit sales - unit sales to break even) * unit contribution margin
Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is ______. a) 9,524 b) 15,238 c) 24,762 d) 40,000
d) 40,000 Reason: ($520,000 + $320,000) ÷ $21 = 40,000
The journal entry to record direct labor costs in processing Department #1 is debit ______. a) Labor costs and credit Work in process Department #1 b) Salaries and wages payable and credit Work in process-Department #1 c) Work in process-Department #1 and credit Manufacturing overhead d) Work in process-Department #1 and credit Salaries and wages payable
d) Work in process-Department #1 and credit Salaries and wages payable
The equivalent units completed are valued the same as units ______ for purposes of determining the cost per unit. a) in work in process b) transferred in c) partially completed d) transferred out
d) transferred out
The contribution margin equals sales minus all ______ expenses. a) product b) period c) fixed d) variable
d) variable
The journal entry to record material cost in the second department includes a __________ (debit/credit) to Work in Process-Department #2
debit
Process costing accumulates costs by _______ .
department
Labor costs that are easily traced to a job are called _______ labor costs.
direct
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _______ materials.
direct
In an automobile manufacturing plant, the assembly-line workers are classified as ________ ________.
direct labor
Selling and Administrative costs are ________ costs.
direct or indirect
Number of partially completed units x Percentage completion of those units with respect to the processing in the department = ___________ units
equivalent
To report ending inventory, partially completed units are translated into _________ units.
equivalent
Contribution margin is first used to cover ___________ expenses. Once the break-even point has been reached, contribution margin becomes __________ .
fixed & profit/income
When the analysis of a change in profits only considers the costs and revenues that will change as the result of the decision, the decision is being made using __________ analysis.
incremental
Differential costs are also known as _________ costs.
incremental, relevant, or decremental
A manufacturing cost that cannot be easily traced to a specific cost object is a(n) _______ cost.
indirect
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the _________ principle.
matching
Work is performed on products, and materials, labor, or overhead costs are added to products in a(n) _________ department.
processing
Inventoriable costs is another term for _____ costs
product
On a traditional income statement, cost of goods sold reports the _______ costs attached to merchandise sold during the period, while selling and administrative expenses report all _________ costs that have been expensed as incurred.
product & period
The assumption that cost behavior is strictly linear is reasonably valid within the ______ _____of activity.
relevant range
The relative proportions in which a company's products are sold is referred to as __________ __________ .
sales mix
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of ________ costs.
variable
True or false: The flow of costs through manufacturing accounts is basically the same for job-order costing and process costing.
True Reason: Both costing systems use the same manufacturing accounts to post costs.
True or false: A processing department needs to calculate a separate unit cost for each type of cost incurred.
True Reason: This is correct. Even if a company combines direct labor and overhead into conversion cost, a unit cost must be computed.
Differences between job-order and process costing include that process costing ______. (Select all that apply) a) accumulates costs by department b) is used for indistinguishable products c) assigns materials, labor, and overhead costs to specific customer orders d) computes units costs by job
a & b accumulates costs by department & is used for indistinguishable products Reason c & d are wrong: This is true of job-order costing.
Costs assigned to units of product under absorption costing include: (Select all that apply) a) fixed manufacturing b) variable manufacturing c) variable nonmanufacturing d) fixed nonmanufacturing
a & b fixed manufacturing & variable manufacturing
A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will ______. a) increase by $7,750 b) decrease by $8,000 c) decrease by $12,250 d) increase by $15,750
a) increase by $7,750 Reason: (($735,000 - $700,000) × 45%) - $8,000 = $7,750 increase
Manufacturing overhead consists of ______. a) many different kinds of indirect costs b) many different kinds of direct costs c) a single kind of direct cost d) a single kind of indirect cost
a) many different kinds of indirect costs
Ceramic Creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If Ceramic Creations sells 25,000 pots, net operating income will be: a) $0 b) $130,000 c) $325,000 d) $250,000
b) $130,000 Reason: Net income = (25,000 - 15,000) × ($25 - $12) = $130,000.
Cost structure refers to the relative portion of product and period costs in an organization. a) True b) False
b) False
When constructing a CVP graph, the vertical axis represents: a) fixed costs b) dollars c) variable costs d) unit volume
b) dollars
When making a decision using incremental analysis consider the ______. (Select all that apply) a) old income statement in comparison to the new income statement b) volume that would occur regardless of the decision c) change in costs resulting specifically from the decision d) change in sales dollars resulting specifically from the decision
c & d Reason: Incremental analysis focuses on what changes - not the entire income statement.
Contribution margin: a) equals sales minus fixed expenses b) is first used to cover variable expenses c) becomes profit after fixed expenses are covered d) is not affected by changes in activity
c) becomes profit after fixed expenses are covered
The calculation of contribution margin (CM) ratio is ______. a) variable expenses ÷ contribution margin b) contribution margin ÷ total expenses c) contribution margin ÷ sales d) net operating income ÷ total contribution margin
c) contribution margin ÷ sales
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find ______. a) actual overhead b) the predetermined overhead rate for the job c) the total cost of the job d) overhead applied to the job
d) overhead applied to the job
Sweet Dreams sells pillows for $25 each. Variable costs are $15 per pillow. The company is considering improving the quality of materials which will increase variable costs to $19. The company expects the improved materials will increase sales from 1,200 to 1,500 pillows per month. The impact of this change on total contribution margin would be a(n) ____________ (increase/decrease) of $ ______________ .
decrease & $3,000 Old : 1200 * (25-15) = $12,000 New: 150 * (25-19) = $9000 $9,000 - $12,000 = ($3,000) or -$3,000
A change in revenues between two alternatives is known as _____________ revenue or incremental revenue.
differential
Process costing produces ______ units. a) distinct b) homogeneous c) specialized d) different types of
b) homogeneous
Manufacturing overhead costs ______. (Select all that apply) a) tend to vary significantly, in total, from one period to the next b) do not impact the average cost per unit c) consist of many different items d) are indirect costs
c & d
When preparing a CVP graph, the horizontal axis represents: a) sales dollar b) total costs c) unit volume d) variable costs
c) unit volume
The correct journal entry to apply manufacturing costs to processing Department #1 is __________ (debit/credit) Manufacturing overhead and ________ (debit/credit) Work in process-Department #1.
credit & debit
True or false: The equivalent units of production computed under the weighted-average method takes into account the percentage completed of the beginning inventory.
False Reason: The equivalent units already include work accomplished in prior periods.
A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is ______. a) 7,625 b) 12,725 c) 5,100
a) 7,625 Reason: Unit sales to break-even = Fixed expenses ÷ Contribution margin per unit = $305,000 ÷ $40 = 7,625
Companies that use job-order costing make ________. a) a very few products in large numbers b) many different products
b) many different products
Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a _______ cost. a) mixed b) variable c) fixed
variable
At the break-even point ______. (Select all that apply) a) net operating income is zero b) the company is experiencing a loss c) total revenue equals total cost d) the company is earning a profit
a & c Reason: At the break-even point there is no profit or loss.
Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by ______. a) $0.35 b) $0.65
a) $0.35
Which of the following is not a COST CLASSIFICATION associated with decision making? a) Indirect Costs b) Opportunity Costs c) Differential Costs d) Sunk Costs
a) Indirect Costs
Costs in beginning work in process inventory was $4,500 and $37,800 in costs were added during the period. If there are 7,050 equivalent units, the cost per equivalent unit under the weighted-average method is $ ____________.
$6 ($4,500 + $37,800)/7050 = $6
Predetermined overhead rate per direct labor hour ~ Company - $2.10 ~ Dept A. - $2.40 ~ Dept B. - $1.80 Direct labor hours worked on Job ABC ~ Company - 30 ~ Dept A - 17 ~ Dept B - 13 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $ ___________.
$64.20 $2.40 * 17 = $40.8 $1.80 * 13 = $23.4 $2.40 × 17 + $1.80 × 13 = $64.20
The difference in revenues between two alternatives is called ______. a) marginial revenue b) incremental revenue c) net profit d) incremental costs
b) incremental revenue
The degree of operating leverage = ______. a) gross margin ÷ net operating income b) contribution margin ÷ net operating income c) contribution margin ÷ total sales d) total sales ÷ net operating income
b) contribution margin ÷ net operating income
True or false: Without knowing the future, it is not obvious which cost structure is better: a structure with higher fixed costs and lower variable costs or a structure with lower fixed costs and higher variable costs.
True Reason: This is true. Without knowing the future, it is not obvious which cost structure is better: a structure with higher fixed costs and lower variable costs or a structure with lower fixed costs and higher variable costs. Both have advantages and disadvantages.
Which of the following statements is true? (Select all that apply) a) Period costs are expensed as they are incurred b) The wage of assembly-line workers are period costs c) Sales commissions are period costs d) Period costs are included as part of the cost of goods sold
a & c Period costs are expensed as they are incurred and Sales commissions are period costs
Which of the following are differences between the traditional and contribution format to income statements? (Select all that apply) a) Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. b)The traditional income statement is for internal use, while the contribution format income statement is for external use. c) Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.
a & c Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.
CVP analysis allows companies to easily identify the change in profit due to changes in: (Select all that apply) a) volume b) costs c) selling price d) management e) location
a, b, & c
Similarities between job-order costing and process costing include the ______. (Select all that apply) a) basic purpose to assign and compute product costs b) manufacturing accounts used c) flow of costs through the manufacturing accounts d) way in which unit costs are calculated
a, b, & c basic purpose to assign and compute product costs manufacturing accounts used flow of costs through manufacturing accounts Reason its not d: Job-order costing calculates unit costs by job and process costing does it by department.
Widely used allocation bases in manufacturing include: (Select all that apply) a) machine hours b) direct labor hours c) product revenue d) units of product e) nonmanufacturing costs f) direct labor costs
a, b, d, & f
Manufacturing overhead: (Select all that applies) a) contains fixed costs. b) is directly traceable to units produced. c) consists of many different types of costs. d) is an indirect cost.
a, c, & d contains fixed costs consists of many different types of costs and is an indirect cost
Product costs ______. (Select all that apply) a) are always expensed in the same period in which the related products are produced b) include all costs involved in making and selling a product c) "attach" to units of product as they are purchased for resale or produced d) are also called inventoriable costs
c & d "attach" to units of product as they are purchases for resale or produced (**** this wording) are also called inventoriable costs
A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, the net operating income or (loss) is Blank______. a) $54,000 b) ($10,000) c) $36,000 d) ($64,000)
c) $36,000 Reason: Net operating income = (750 - 450) × $120 = $36,000.
Murphy Manufacturing estimated total manufacturing overhead for the year to be $100,000 and that 5,000 direct-labor hours would be used. Actual overhead was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during the year that used 200 direct labor-hours was ______. a) $4,800 b) $100,000 c) $4,000 d) $3,200
c) $4,000 Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000
Equivalent units of production under the weighted-average method equals: a) units transferred out minus equivalent units in ending work in process b) equivalent units in ending work in process c) units transferred out d) equivalent units in ending work in process plus units transferred out
d) equivalent units in ending work in process in process plus units transferred out
Once production is completed in all processing departments, production costs are transferred to ______. a) work in process b) cost of goods sold c) manufacturing overhead d) finished goods
d) finished goods
In process costing, manufacturing overhead costs are ______. a) only assigned to the first work in process department b) not assigned to work in process c) applied based on actual costs incurred in each department d) generally applied using a predetermined overhead rate
d) generally applied using a predetermined overhead rate
The difference in costs between two alternatives is called a(n) ______ cost. a) opportunity b) common c) sunk d) incremental
d) incremental Reason: even though this isn't technically the definition incremental costs are also known as differential costs which this definition is actually for
Operating leverage is a measure of how sensitive ______ is to a given percentage change in sales dollars. a) total variable expense b) selling price per unit c) total gross margin d) net operating income
d) net operating income
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find. a) the total cost of the job b) the predetermined overhead rate for the job c) actual overhead d) overhead applied to the job
d) overhead applied to the job
The term used for the relative proportion in which a company's products are sold is ______. a) sales price b) operating leverage c) break-even d) sales mix
d) sales mix
Which of the following items are found above the contribution margin on a contribution margin format income statement? (Select all that apply) a) Fixed expenses b) Variable expenses c) Sales d) Net operating income
b & c Variable expenses and Sales Reasons it's not a or d - Fixed expenses are deducted from the contribution margin. - Net operating income = Contribution margin - Fixed expenses.
A company transferred 150 units to finished goods and has 215 units in ending work in process inventory that are 60% complete. Using weighted-average costing, the number of equivalent units is ______. a) 65 b) 215 c) 279 d) 150
c) 279 150 + (215 × 60%) = 279
Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales ______. (Select all that apply) a) net operating income will increase by $0.70 b) net operating income will increase by $0.30 c) total contribution margin will increase by $0.30 d) total contribution margin will increase by $0.70
a & c both net operating income and total contribution margin will increase by $0.70
Cost behavior ______. (Select all that apply) a) refers to how a cost will change as activity level changes b) is a detailed analysis technique used to determine whether costs are fixed or variable c) categorizes costs as fixed, mixed and variable d) is the relative proportion of each type of cost in an organization
a & c refers to how a cost will change as activity level changes categorizes costs as fixed, mixed, and variable
A bill of materials contains the _______. (Select all that apply) a) type of each direct materials to be drawn from the storeroom b) quantity of materials to be drawn from the storeroom c) quantity of each direct material needed to complete a unit of product d) type of materials to be drawn from the storeroom
a & c type of each material to be drawn from the storeroom & quantity of each direct material needed to complete a unit of product
The journal entry to record the transfer of partially completed products from processing Department #1 to processing Department #2 is to debit Work in Process Department: a) #2 and credit Work in Process-Department #1. b) #2 and credit Finished goods. c) #1 and credit Work in process - Department #2. d) #1 and credit Finished goods.
a) #2 and credit Work in Process-Department #1.
Marjorie's Mugs sold 300 mugs last year for $20 each. Variable costs were $7 per mug and total fixed costs were $1,700. Marjorie's Mugs' profit was ______. a) $2,200 b) $2,100 c) $3,800 d) $6,000
a) $2,200 Reason: Profit = 300 × ($20 - $7) - $1,700 = $2,200.
A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on contribution margin would be a ______. a) $450 increase b) $2,450 increase c) $2,730 increase d) $2,280 increase
a) $450 Reason: The current contribution margin is $39 per unit ($80 - $41) or $19,500 (500 units × $39) total. The new contribution margin would be $35 per unit ($39 - $4 new cost) or $19,950 (570 units × $35), an increase of $450.
Cost-plus pricing occurs when ______. a) a markup percentage is added to the cost of the job b) the cost of the job is multiplied by 2 c) non-manufacturing costs are added to manufacturing costs
a) a markup percentage is added to the cost of the job
When computing the equivalent units of production under the weighted-average method, the fact that the units in the ______ were partially complete with respect to materials and conversion is ignored. a) beginning work in process inventory b) ending work in process inventory c) ending finished goods inventory d) beginning finished goods inventory
a) beginning work in process inventory
Assuming sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit. a) decrease b) have no impact on c) increase
a) decrease Reason: Sales - variable cost = contribution margin so an increase in variable cost per unit decreases contribution margin per unit.
The adjustment for overapplied overhead ______ net income. a) decreases cost of goods sold and increases b) increases both cost of goods sold and c) decreases both cost of goods sold and d) increases cost of goods sold and decreases
a) decreases cost of goods sold and increases
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order. a) direct b) indirect c) common d) overhead
a) direct
To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the _____. a) estimated total allocation base b) estimated units of production c) estimated total direct labor hours d) actual total manufacturing overhead
a) estimated total allocation base
Administrative costs include ______. a) executive compensation and public relations costs b) shipping costs and sales commissions c) factory maintenance workers' wages and factory supervisors' salaries d) sales commissions and factory supervisors' salaries
a) executive compensation and public relations costs
Within the relevant range of activity, ______ costs remain constant in total. a) fixed b) both fixed and variable c) neither fixed or variable d) variable
a) fixed
When compared to a departmental approach, using activity-based costing results in ______ overhead rates. a) more b) the same number of c) less
a) more
The variable expense ratio is the ratio of variable expense to ______. a) sales b) fixed expense c) net operating income d) the contribution margin
a) sales
Contribution margin is ______. a) sales revenue minus variable costs b) sales revenue minus cost of goods sold c) all revenue minus all costs d) sales revenue minus fixed costs
a) sales revenue minus variable costs
To prepare a CVP graph, lines must be drawn representing total revenue, ______. a) total expense, and total fixed expense b) total expense, and profit c) total variable expenses, and total fixed expenses d) break-even point, and profit
a) total expense, and total fixed expense
Which type of cost changes in total, in direct proportion to changes in activity level? a) variable b) opportunity c) differential d) fixed
a) variable
The contribution margin is equal to sales minus ______. a) variable expenses b) both variable expenses and fixed expenses c) net operating income d) fixed expenses
a) variable expenses
Typical cost drivers include ______. (Select all that apply) a) flight-hours b) computer time c) utilities cost d) machine-hours e) machine depreciation
a, b & d Reason: Utilities cost is an overhead cost, not something that causes overhead costs. Reason: Machine depreciation is an overhead cost, not something that causes overhead costs.
Which of the following are most likely fixed costs? (Select all that apply) a) Factory Rent b) Factory Insurance c) Administrative Sales d) Electricity to operate factory
a,b,& c Factory rent, Factory Insurance, and Administrative Sales
The total cost of a job is calculated by adding the total of direct labor costs, direct materials cost, and: a) actual manufacturing overhead cost, and applied nonmanufacturing cost. b) predetermined manufacturing overhead cost. c) predetermined manufacturing overhead cost and nonmanufacturing cost. d) actual manufacturing overhead cost.
b) predetermined manufacturing overhead cost
Direct materials, direct labor, and manufacturing overhead are all ______ costs. a) variable b) product c) direct d) conversion e) period
b) product
A processing department is an organization unit ______. a) that processes units into the finished goods b) where work is performed on a product, and materials, labor or overhead are added c) where materials and labor are combined to be processed d) where work is performed on a product and overhead is added to complete the units
b) where work is performed on a product, and materials, labor or overhead are added
Costs transferred in from Department A to Department B ______. a) will not be complete with respect to work done in Department A b) will always be 100% complete with respect to Department A c) are no different than the materials and conversion cost categories d) must be at least 50% complete
b) will always be 100% complete with respect to Department A
When using process costing, a separate ______ account is maintained for each processing department. a) finished goods b) work in process c) raw materials d) cost of goods sold
b) work in process
Cost objects include: (Select all that apply) a) anything for which revenue data is desired b) anything for which cost data is desired c) organizational subunits d) customers
b, c, & d
The break-even point calculation is affected by: (Select all that apply) a) number of batches produced b) sales mix c) selling price per unit d) costs per unit
b, c, & d sales mix. selling price per unit. costs per unit.
CVP analysis focuses on how profits are affected by ______. (Select all that apply) a) break-even point b) total fixed costs c) selling price d) unit variable costs e) sales volume
b, c, d, e & f total fixed costs selling price unit variable cost mix of products sold sales volume
Manufacturing costs include ______. (Select all that apply) a) selling costs b) direct materials c) administrative costs d) manufacturing overhead e) direct labor
b, d, & e direct materials, manufacturing overhead, & direct labor
To calculate cost per equivalent unit using the weighted-average method, add the cost of ____________ work in process inventory to costs added during the period and divide by equivalent units of production.
beginning
Units in ___________work in process inventory + units started or transferred in = Units in __________ work in process inventory + units completed and transferred out. (Enter either beginning or ending in each blank.)
beginning & ending
Estimated manufacturing overhead ~ Company - $500,000 ~ Dept A. - $338,000 ~ Dept B. - $162,000 Estimated direct labor cost ~ Company - $250,000 ~ Dept A. - $130,000 ~ Dept B. - $120,000 Actual manufacturing overhead ~ Company - $720,000 ~ Dept A. - $400,000 ~ Dept B. - $160,000 Actual direct labor cost ~ Company - $300,000 ~ Dept A. - $160,000 ~ Dept B. - $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is ______. a) $2.50 b) $2.40 c) $2.60 d) $2.00
c) $2.60 Reason: $338,000 ÷ $130,000 = $2.60
The following information is for S&P Enterprises for the month of July: Direct Materials: $76,000 Direct Labor: $40,000 Variable Manufacturing Overhead: $25,000 Fixed Manufacturing Overhead: $30,000 Variable Selling Expense: $12,000 Fixed Selling Expense: $15,000 Variable Administrative Expense: $6,000 Fixed Administrative Expense: $18,000 Total Fixed Cost for the month of July is ________. a) $88,000 b) $146,000 c) $63,000 d) $33,000
c) $63,000 Just add up everything labeled "fixed" $30,000 + $15,000 + $18,000 = $63,000
