cost accounting final

Beginning inventory in units 0 Units produced 4,800 Units sold 4,000 Sales $ 400,000 Material cost (unit level or variable) $ 96,000 Variable conversion cost used (Committed) $ 48,000 Facility-level or fixed manufacturing cost $ 72,000 Indirect operating costs (fixed) $ 80,000 The difference between the variable ending inventory cost and the absorption ending inventory cost is:

800 units times $15 per unit indirect manufacturing cost

Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below. Sales $ 3,500,000 Cost of sales: Direct Material $ 500,000 Direct labor 250,000 Variable Overhead 275,000 Fixed Overhead 600,000 1,625,000 Gross Profit $ 1,875,000 Selling and General & Admin. Exp. Variable 750,000 Fixed 250,000 1,000,000 Operating Income $ 875,000 The contribution margin ratio for the current year is:

49.3%

Both total revenues (TR) and total costs (TC) are likely to be affected by changes in the output.

True

Which of the following costs are irrelevant for a special order that will allow an organization to utilize some of its present idle capacity?

Unavoidable fixed overhead.

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the:

net realizable value method.

Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:

overapplied by $60,000.

The practice of setting prices highest when the quantity demanded for the product approaches capacity:

peak-load pricing.

The practice of setting price below cost with the intent to drive competitors out of business:

predatory pricing.

Agreement among business competitors to set prices at a particular level:

price fixing.

In general, the first budget prepared is the:

sales budget.

The purpose of the flexible budget is to:

compare actual and budgeted results at virtually any level of production.

In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs:

completed during the period.

The process of assigning indirect costs to products, services, people, business units, etc., is

cost allocation.

The beginning Finished Goods Inventory plus the cost of goods manufactured equals

cost of goods available for sale for the period.

The Work-in-Process Inventory of the Model Fabricating Corp. was $3,000 higher on December 31, 2016 than it was on January 1, 2016. This implies that in 2016:

cost of goods manufactured was less than total manufacturing costs.

The term "relevant range" as used in cost accounting means the range over which:

cost relationships are valid.

Costs that differ among or between two or more alternative courses of action are

differential costs.

Which of the following costs is both a prime cost and a conversion cost? -direct materials -direct labor -manufacturing overhead -administrative costs

direct labor

Exporting a product to another country at a price below domestic cost:

dumping.

A standard cost system may be used in: (CPA adapted)

either job-order costing or process costing.

If overhead is applied to production using direct labor hours and the direct labor efficiency variance is favorable, then the variable overhead efficiency variance is:

favorable.

For purposes of allocating joint costs to joint products, the estimated net realizable value at split-off is equal to:

final sales price reduced by cost to complete after split-off.

The field of accounting that reports according to generally accepted accounting principles (GAAP) is called:

financial accounting.

Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:

greater than the balance in the Applied Manufacturing Overhead account.

The sales activity variance is equal to the sum of the market share variance and the:

industry volume variance.

The amount by which a company's sales can decline before losses are incurred is called the:

margin of safety.

The difference between total sales in dollars and total variable costs is called:

the contribution margin.

A product cost is deducted from revenue when

the finished goods are sold.

An opportunity cost is

the foregone benefit from the best alternative course of action.

One of the primary differences between job costing for service and manufacturing companies is service firms generally:

use fewer direct materials.

A disadvantage of the high-low method of cost analysis is that it:

uses only two data points, which may not be representative of normal conditions.

The Foxmoor Company produces three products, X, Y, and Z from a single raw material input. Product Y can be sold at the split-off point for total revenues of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000. Product Y:

would increase the company's overall net income by $2,000 if processed further and then sold.

Honeysuckle Manufacturing has the following data: Selling Price $ 60 Variable manufacturing cost $ 33 Fixed manufacturing cost $ 250,000 per month Variable selling & administrative costs $ 9 Fixed selling & administrative costs $ 120,000 per month What dollar sales volume does Honeysuckle need to achieve a $50,000 operating profit per month?

$1,400,000.

Under Eagle Co.'s job order costing system, manufacturing overhead is applied to Work-in-Process using a predetermined annual overhead rate. During February, Eagle's transactions included the following: Direct materials issued to production $ 90,000 Indirect materials issued to production 8,000 Manufacturing overhead incurred 125,000 Manufacturing overhead applied 113,000 Direct labor costs 107,000 Eagle had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in February? (CPA adapted)

$310,000.

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8 pounds $ 1.70 per pound $ 13.60 Direct Labor .25 hour $ 9.20 per hour 2.30 $ 15.90 During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $288,000. The total factory wages for November were $44,000, 90% of which were for direct labor. TaskMaster manufactured 17,000 units of product during November using 126,000 pounds of direct materials and 4,500 direct labor hours. What is the direct labor price (rate) variance for November?

$1,800.

Fromme's Frocks has the following machine hours and production costs for the last six months of last year: Month Machine Hours Production Cost July 15,000 $ 12,075 August 13,500 10,800 September 11,500 9,580 October 15,500 12,080 November 14,800 11,692 December 12,100 9,922 If Fromme expects to incur 14,000 machine hours in January, what will be the estimated total production cost using the high-low method?

$11,142.50

Brevard Industries produces two products. Information about the products is as follows: Product 1 Product 2 Units produced and sold 4,650 10,700 Selling price per unit $ 16 $ 14 Variable costs per unit 10 9 The company's fixed costs totaled $77,000, of which $15,700 can be directly traced to Product 1 and $40,700 can be directly traced to Product 2. The effect on the firm's profits if Product 2 is dropped would be a:

$12,800 decrease

The Kansas Company is preparing a cash budget for the month of July. The following information on accounts receivable collections is available from Kansas' past collection experience: Percent of current month's sales collected this month 15 % Percent of prior month's sales collected this month 72 % Percent of sales two months prior to current month collected this month 6 % Percent of sales three months prior to current month collected this month 3 % The remaining 4% are not collected and are written off as bad debts. Credit sales to date are as follows: July-estimated $ 150,000 June $ 135,000 May $ 120,000 April $ 145,000 What are the estimated collections in July?

$131,250.

In 2016, the Allen Company had consulting revenues of $1,000,000 while operating costs were $750,000. In 2017, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential revenue for 2017 will be

$150,000

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8 pounds $ 1.70 per pound $ 13.60 Direct Labor .25 hour $ 8.20 per hour 2.05 $ 15.65 During November, TaskMaster purchased 168,000 pounds of direct materials at a total cost of $336,000. The total factory wages for November were $44,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 143,000 pounds of direct materials and 5,000 direct labor hours. What is the direct labor efficiency variance for November?

$2,050.

Grover Company has the following data for the production and sale of 2,000 units. Sales price per unit $ 800 per unit Fixed costs: Marketing and administrative $ 400,000 per period Manufacturing overhead $ 200,000 per period Variable costs: Marketing and administrative $ 50 per unit Manufacturing overhead $ 80 per unit Direct labor $ 100 per unit Direct Materials $ 200 per unit What is the conversion cost per unit?

$280

The following information has been gathered for the Harrell Manufacturing Company for its fiscal year ending December 31: Actual manufacturing overhead costs $ 212,500 Actual direct labor hours 54,900 Actual direct labor costs $ 445,000 Estimated manufacturing overhead costs $ 210,000 Estimated direct labor $ 434,000 Estimated direct labor hours 56,000 What is the predetermined manufacturing overhead rate per direct labor hour?

$3.75.

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 7 pounds $ 1.60 per pound $ 11.20 Direct Labor .30 hour $ 10.00 per hour 3.00 $ 14.20 During November, TaskMaster purchased 154,000 pounds of direct materials at a total cost of $277,200. The total factory wages for November were $52,000, 80% of which were for direct labor. TaskMaster manufactured 21,000 units of product during November using 132,000 pounds of direct materials and 5,000 direct labor hours. What is the direct materials price variance for November?

$30,800.

QuikCard processes credit card receipts for local banks. QuikCard processed 1,400,000 receipts in October. All receipts are processed the same day they are received. October costs were labor of $14,000 and overhead of $28,000. What is the cost to process 1,000 receipts?

$30.00.

Grover Company has the following data for the production and sale of 2,000 units. Sales price per unit $ 800 per unit Fixed costs: Marketing and administrative $ 400,000 per period Manufacturing overhead $ 200,000 per period Variable costs: Marketing and administrative $ 50 per unit Manufacturing overhead $ 80 per unit Direct labor $ 100 per unit Direct Materials $ 200 per unit What is the prime cost per unit?

$300

The following pertains to Upton Co. for the year ending December 31, 2016: Budgeted Sales $ 1,000,000 Break-even Sales 700,000 Budgeted Contribution Margin 600,000 Cashflow Break-even 200,000 Upton's margin of safety is: (CPA adapted)

$300,000.

The Arthur Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The Benton Company has approached Arthur with an offer to buy 11,000 utensils at $0.70 each. Arthur sells its utensils wholesale for $0.82 each; the average cost per unit is $0.77, of which $0.10 is fixed costs. If Arthur were to accept Benton's offer, what would be the increase in Arthur's operating profits?

$330

Brewsky's is a chain of micro-breweries. Managers are interested in the costs of the stores and believe that the costs can be explained in a large part by the number of customers patronizing the stores. Monthly data regarding customer visits and costs for the preceding year for one of the stores have been entered into the regression analysis and the analysis is as follows: Average monthly customer-visits 1,462 Average monthly total costs $ 4,629 Regression Results Intercept $ 1,496 b coefficient $ 2.08 R2 0.86814 Based on the data derived from the regression analysis, what are the estimated costs for 1,600 customer-visits in a month? (CMA adapted)

$4,824.

Zantaq Inc has 5,400 machine hours available each month. The following information on the company's three products is available: Bookcases Chairs Side Tables Contribution margin per unit $ 15.00 $ 18.00 $ 7.50 Machine hours per unit 3 2 1 The market demand is limited to 2,000 units of each of the three products. What is the maximum possible contribution margin that Zantaq could make in any month?

$46,500.

Job 731 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $ 2,391 Direct labor-hours 69 labor-hours Direct labor wage rate $ 13 per labor-hour Machine-hours 129 machine-hours The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 731 would be:

$5,094.

Stock Co. uses a job order costing system. The following debits (credits) appeared in Stock's work-in-process account for the month of April: April Description Amount 1 Balance $ 4,000 30 Direct materials 24,000 30 Direct labor 16,000 30 Factory overhead 12,800 30 To finished goods (48,000 ) Stock applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct material charged to Job No. 5? (CPA adapted)

$5,200.

Ballard Company incurred a total cost of $8,600 to produce 400 units of pulp. Each unit of pulp required five (5) direct labor hours to complete. What is the total fixed cost if the variable cost was $1.50 per direct labor hour?

$5,600.

The following information pertains to Tiller Co.: Sales $ 800,000 Variable Costs 160,000 Fixed Costs 40,000 What is Tiller's break-even point in sales dollars? (CPA adapted)

$50,000

Refresh produces soft drinks and sodas. Production of 100,000 liters was started in February, 85,000 liters were completed. Material costs were $38,220 for the month while conversion costs were $16,380. There was no beginning work-in-process; the ending work-in-process was 40% complete. What is the cost of the product that was completed and transferred to finished goods?

$51,000.

Products X, Y, and Z are produced from the same process at a cost of $7,500. Five thousand pounds of raw material yields 3,500 X, 4,500 Y, and 3,000 Z. Selling prices are: X $2 per unit, Y $4 per unit, Z valueless. The ending inventory of X is 90 units. What is the value of the ending inventory if joint costs are allocated using net realizable value?

$54.00.

In 2016, the Allen Company had consulting revenues of $1,000,000 while operating costs were $750,000. In 2017, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs. Assuming no changes are expected for the other services, the differential operating costs for 2017 will be

$60,000.

The operations of Bridgeton Corporation are divided into the Adams Division and the Carter Division. Projections for the next year are as follows: Adams Division Carter Division Total Sales $ 635,000 $ 361,000 $ 996,000 Variable costs 211,000 169,000 380,000 Contribution margin $ 424,000 $ 192,000 $ 616,000 Direct fixed costs 183,000 155,000 338,000 Segment margin $ 241,000 $ 37,000 $ 278,000 Allocated common costs 94,000 78,000 172,000 Operating income (loss) $ 147,000 $ (41,000 ) $ 106,000 Operating income for Bridgeton Corporation, as a whole, if the Carter Division was dropped would be:

$69,000.

The following cost data for the month of May were taken from the records of the Terrence Manufacturing Company: (CIA adapted) Depreciation on factory equipment $ 1,000 Depreciation on sales office 500 Advertising 7,000 Wages of production workers 28,000 Raw materials used 47,000 Sales salaries and commissions 10,000 Factory rent 2,000 Factory insurance 500 Materials handling 1,500 Administrative salaries 2,000 Based upon this information, the manufacturing cost incurred during the month was

$80,000.

Rapid Enterprises applies manufacturing overhead to its cost objects on the basis of 75% of direct material cost. If Job 17X had $72,000 of manufacturing overhead applied to it during May, the direct materials assigned to Job 17X was:

$96,000.

Which of the following formulas is used to calculate the contribution margin ratio?

(Sales - Variable costs) ÷ Sales.

Brewsky's is a chain of micro-breweries. Managers are interested in the costs of the stores and believe that the costs can be explained in a large part by the number of customers patronizing the stores. Monthly data regarding customer visits and costs for the preceding year for one of the stores have been entered into the regression analysis and the analysis is as follows: Average monthly customer-visits 1,462 Average monthly total costs $ 4,629 Regression Results Intercept $ 1,496 b coefficient $ 2.08 R2 0.86814 What is the percent of the total variance that can be explained by the regression equation? (CMA adapted)

86.8%

If the total materials variance for a given operation is favorable, why must this variance be further evaluated as to price and usage?

A further evaluation lets management evaluate the activities of the purchasing and production functions.

Which of the following is not normally considered part of the value chain?

Administration

Which of the following is the best reason why cost accounting information does not need to be comparable to similar information in other organizations?

Because managers that use this information are making decisions only for their organization.

Which of the following statements is(are) true? (A) A favorable variance is not necessarily good, and an unfavorable variance is not necessarily bad. (B) The master budget includes operating budgets (e.g., production budget) and financial budgets (e.g., cash budget).

Both A and B are true.

Which of the following costs would continue to be incurred even if a segment is eliminated?

Common fixed costs

What are the transfers-out from the Finished Goods Inventory called?

Cost of Goods Sold.

Snuggle Toys, Inc. had the following summarized results for the month ending July 31: Actual Budget Revenues $ 60,000 $ 52,000 Costs 53,600 45,600 Operating profits $ 6,400 $ 6,400 As the cost accountant, which single note to the above financial results is most appropriate in the report to management?

Costs as a percentage of revenues are above budget and a further scrutiny of the results might be appropriate.

The forecasting method in which individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called:

Delphi technique.

Because outliers are extreme data points, they can be included in the regression analysis and not significantly affect the results.

False

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8 pounds $ 1.80 per pound $ 14.40 Direct Labor .25 hour $ 8.00 per hour 2.00 $ 16.40 During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. Is the direct labor price (rate) variance favorable or unfavorable?

Favorable.

At the break-even point, the total contribution margin equals total: (CPA adapted)

Fixed costs.

Which of the following accounts would be a period cost rather than a product cost? -Depreciation on manufacturing machinery. -Maintenance on factory machines. -Production manager's salary. -Freight out.

Freight out.

Which of the following costs would most likely be classified as variable, assuming the account analysis method is used to determine cost behaviors? Indirect materials. Supervisory salaries. Equipment maintenance. Building occupancy costs.

Indirect materials.

Which of the following statements is (are) true? (A)The market share variance is more controllable by the marketing department than the industry volume variance. (B)The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

Only A is true.

Which of the following statements is (are) true regarding the benefits associated with participative budgeting? (A) Goal congruence by divisions means top management need not be concerned with overall profitability. (B) Budget assumptions and estimates are prepared by those closest to the budgeted activity.

Only B is true.

The journal entry to record requisitions of material for new jobs started during the period is: A. Work-In-Process Inventory xxx Materials Inventory xxx B. Materials Inventory xxx Purchases xxx C. Cost of Goods Sold xxx Finished Goods Inventory xxx D. Finished Goods Inventory xxx Work-In-Process Inventory xxx

Option A

When a manager is concerned with monitoring total cost, total revenue, and net profit conditioned upon the level of productivity, an accountant should normally recommend: (CPA adapted) Flexible Budgeting Standard Costing A. Yes Yes B. Yes No C. No Yes D. No No

Option A

If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the break-even point, respectively? Contribution Margin Ratio Break-even Point A. Decreased Increased B. Increased Decreased C. Decreased Decreased D. Increased Increased

Option B

On January 1, 2016, Randolph Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Randolph's budgeted break-even point and budgeted margin of safety? (CPA adapted) Budgeted Break-even Point Budgeted Margin of Safety A. Increase Increase B. Increase Decrease C. Decrease Decrease D. Decrease Increase

Option B

Great Falls Company makes two products, Wool Gloves and Wool Mittens. They are initially processed from the same raw material and then, after split-off, further processed separately. Additional information is as follows: Gloves Mittens Total Final Sales Price $ 12,600 $ 9,960 $ 22,560 Joint Costs Prior to Split-Off Point ? ? 8,496 Costs Beyond Split-Off Point $ 4,200 $ 4,200 $ 8,400 What are the joint costs allocated to Gloves and Mittens assuming Great Falls uses the estimated net realizable value approach? Gloves Mittens A. $ 4,248 $ 4,248 B. $ 4,600 $ 3,896 C. $ 5,040 $ 3,456 D. $ 5,200 $ 3,296

Option C

The journal entry to write-off a significant underapplied overhead balance at the end of an accounting period is: A. Applied Manufacturing Overhead xxx Cost of Goods Sold xxx Manufacturing Overhead Control xxx B. Applied Manufacturing Overhead xxx Cost of Goods Sold xxx Manufacturing Overhead Control xxx C. Applied Manufacturing Overhead xxx Work-In-Process Inventory xxx Finished Goods Inventory xxx Cost of Goods Sold xxx Manufacturing Overhead Control xxx D. Applied Manufacturing Overhead xxx Work-In-Process Inventory xxx Finished Goods Inventory xxx Cost of Goods Sold xxx Manufacturing Overhead Control xxx

Option C

The journal entry to record the completion of a job in a job costing system is: A. Finished Goods Inventory xxx Materials Inventory xxx B. Work-In-Process Inventory xxx Applied Manufacturing Overhead xxx C. Manufacturing Overhead Control xxx Finished Goods Inventory xxx D. Finished Goods Inventory xxx Work-In-Process Inventory xxx

Option D

Which department is customarily held responsible for an unfavorable materials quantity variance?

Production.

Which of the following is a nonvalue-added activity?

Rework of defective items

Which of the following variances will always be favorable when actual sales exceeds budgeted sales?

Sales activity.

With regard to the CVP graph, which of the following statements is not correct?

The CVP graph assumes that variable costs go down as volume goes up.

Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?

The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid experienced individuals.

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8 pounds $ 1.80 per pound $ 14.40 Direct Labor .25 hour $ 8.00 per hour 2.00 $ 16.40 During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. Is the direct labor efficiency variance favorable or unfavorable?

Unfavorable.

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8 pounds $ 1.80 per pound $ 14.40 Direct Labor .25 hour $ 8.00 per hour 2.00 $ 16.40 During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. Is the direct materials price variance favorable or unfavorable?

Unfavorable.

Which of the following is the difference between variable costs and fixed costs? (CMA adapted)

Variable costs per unit are fixed over the relevant range and fixed costs per unit are variable.

How would a 5% sales commission paid to sales personnel be classified in a manufacturing company?

Variable, period cost.

(CMA adapted) A costing method that first assigns costs to activities and then assigns them to products based on the products' consumption of those activities is:

activity-based costing.

A company's break-even point will not be increased by:

an increase in the number of units produced and sold.

Long-range planning as a management function is more important:

at top management levels.

Continual process of measuring a company's own products, services or activities against competitors' performance is

benchmarking.