cost acct practice final exam

Problems with costing occur when​ ________.

incorrect job numbers are recorded on source documents Your answer is correct.

Colonial North​ Manufacturing, Inc. is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is​ discontinued?

net income will decrease by the amount of the contribution margin of the product line being discontinued

The degree to which a predetermined objective or target is met is known as​ ________.

effectiveness

FIFO Aluminum processes a single type of aluminum. During the current period the following information was​ given: Units Material Costs Conversion Costs Begin. Inv. ​ 4,800 ​$6,100 ​$5,600 Started this period ​21,400 ​48,800 ​66,400 Ending Inventory ​4,500 All materials are added at the beginning of the production process. The beginning inventory was​ 25% complete as to​ conversion, while the ending inventory was​ 40% completed for conversion purposes. FIFO Aluminum uses the first−​in, first−out system of process costing. What were the costs assigned to the units transferred out this period​ (Round intermediary calculations to the nearest​ cent)?

$111,322

For fixed manufacturing​ overhead, there is no​ ________.

efficiency variance

Pearl Manufacturing Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of seven years and the new equipment has a value of​ $249,400 with a seven−year life. The expected additional cash inflows are​ $63,000 per year. What is the payback period for this​ investment?

4.0 years

​Katrina's Bridal Shoppe sells wedding dresses. The average selling price of each dress is​ $1,500, variable costs are​ $400, and fixed costs are​ $110,000. How many dresses are sold when operating income is​ zero? (Round the final calculation up to the next whole​ number.)

100 dresses

Sky High sells helicopters. During the current​ year, 150 helicopters were sold resulting in​ $840,000 of sales​ revenue, $250,000 of variable​ costs, and​ $350,000 of fixed costs. The number of helicopters that must be sold to achieve​ $310,000 of operating income is​ ________. ​ (Round intermediary calculations to two decimal​ places, and your final answer up to the nearest whole​ number.)

168 units

Which of the following statements about actual costing is​ true?

Actual costing uses actual indirect−cost rates calculated annually.

Which of the following is true of absorption​ costing?

It includes fixed manufacturing overhead as an inventoriable cost.

Which of the following would be subtracted from sales while calculating contribution margin in a variable costing format of an operating income​ statement?

Direct labor in factory

As a discounted cash flow method does not report good operating income results in the​ project's early​ years, managers are tempted to not use discounted cash flow methods even though the decisions based on them would be in the best interests of the company as a whole over the long run.

TRUE

Which of the following statements is true of accrual accounting rate of return​ (AARR) method and internal rate of return​ (IRR) method?

The AARR method calculates the return using operating−income numbers after considering accruals and​ taxes, whereas the IRR method calculates the return using after−tax cash flows and the time value of money.

Which of the following statements is true of fixed overhead cost​ variances?

The difference between flexible budget costs and allocated overhead costs will give the production volume variance.

In the graph method of CVP​ analysis, ________.

The total revenue line starts at the origin and the total costs line starts at the fixed intercept.

_______ is the level of capacity based on producing at full efficiency all the time.

Theoretical capacity

A cost system determines the cost of a cost object by​ ________.

accumulating and then assigning costs

A favorable variance indicates that​ ________.

actual revenues exceed budgeted revenues

Job−costing is likely to be used​by________

advertising agencies

If machine maintenance is scheduled at a time when production is at a low​ level, then​ ________.

an understanding of operations is needed to determine an appropriate cost driver

At a plant where a union agreement sets annual salaries and​ conditions, annual labor costs usually​ ________.

are considered a fixed cost

Direct costs​ ________

are costs related to a particular cost object that can be traced to that cost object in an economically feasible manner

Elite Stationary employs 20 full−time employees and 10 trainees. Direct and indirect costs are applied on a professional labor−hour basis that includes both employee and trainee hours. Following is information for​ 2020: Budget Actual Indirect costs ​$300,000 ​$400,000 Annual salary of each employee ​$200,000 ​$210,000 Annual salary of each trainee ​$35,000 ​$40,000 Total professional labor−hours ​20,000dlh ​ 40,000dlh When a normal costing system is​ used, clients using proportionately more full−time employees than trainees will​ ________.

be under billed for actual resources used

Which of the following is an example of sunk​ costs?

book value of equipment

The​ ________ is a component of financial budgets.

budgeted statement of cash flows

Sensitivity analysis helps managers evaluate risks​ ________.

by showing the effects of changes to the original data or an underlying assumption

Effective planning of fixed overhead costs includes​ ________.

choosing the appropriate level of investment in productive assets

To discourage producing for​ inventory, management can​ ________.

develop budgeting and planning activities that reduce​ management's freedom to inappropriately build inventory through increased production

Wages paid to machine operators on an assembly line are classified as a​ ________.

direct manufacturing labor cost

In the computation of the cost per equivalent​ unit, the weighted−average method of process costing considers all the costs​ ________

entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

It is usually difficult to find good cost driver ​(cause−and−effect ​relationship) between​ ________ and a cost allocation base.

facility−sustaining costs

Which of the following is a problem related to cost​ analysis?

fixed costs are allocated as if they are variable costs

A limitation of using past performance as a basis for judging actual results is that​ ________.

future conditions can be different from past conditions

Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75−cent price​ increase, demand is expected to fall by​ 7,000 units. Current Projected Demand 76,000 units 69,000 units Selling price $8.50 $9.25 Incremental cost per unit $5.80 $5.80 If the price increase is​ implemented, operating profit is projected to​ ________.

increase by $32,850

Which of the following is an example of time−series ​data:

indirect labor costs and machine−hours in a​ manufacturer's assembly department each month for the last 12 months

Which of the following is a stage of the capital budgeting process that determines which investment yields the greatest benefit and the least cost to an​ organization?

make decisions by choosing among alternatives stage

An unfavorable​ production-volume variance​ ______

measures the amount of extra fixed costs planned for but not used

For a business that offers customers a store where product can be purchased and picked up or a delivery service that can ship the product directly to the​ customer, which of the following would most likely be the best cost allocation base for distribution​ costs?

number of pounds of product shipped or delivered

A company has three products possible products that it can produce in a machine intensive production process. Capacity is constrained by the number of hours the machines can run during a period and the products are so popular that all units produced will be sold. Here is additional​ information: Product A Product B Product C Contribution per unit ​$20 ​$30 ​$40 Machine hours per unit 2.5 3.25 4.5 Which of the following would be an accurate conclusion based on these​ facts?

product B should be emphasized if the goal is to maximize contribution margin.

The​ sales-volume variance is sometimes due to​ ________.

quality problems leading to customer dissatisfaction

The district director of 5 mortgage origination offices staffed by bank associates who could call potential customers in an attempt to gain home mortgage and home equity loan business is most likely responsible for​ a(n) ________.

revenue center

A learning curve is a function​ ________.

that measures the decline in labor−hours per unit due to workers becoming better at a job

Operating decisions primarily deal with​ ________.

the best use of scarce resources

Which if the following are not conversion​ costs?

the cost of tires on an automobile

The assignment of the cost of the leather used to make 100 bicycle seats to a custom order to be shipped to a bike retailer is an example​ of:

the cost tracing of direct costs to the chosen cost object

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant​ cost?

the setup cost of the new equipment

A single indirect−cost rate distorts product costs because​ ________.

there is an assumption that all support activities affect all products in a uniform way

If​ 1,000 units are produced and only 700 units are​ sold, ________ results in the greatest amount of expense reported on the income statement.

throughput costing

A favorable price variance for direct manufacturing labor might indicate that​ ________

underskilled employees are being hired

An unfavorable​ flexible-budget variance for variable costs may be the result of​ _______

using more input quantities than were budgeted

Product−cost cross−subsidization means​that:

when a company under costs one of its​ products, it will over cost at least one of its other products

The cost components of a heater include​ $38 for the​ compressor, $14 for the sheet molded compound​ frame, and​ $70 per unit for assembly. The factory machines and tools cost is​ $53,000. The company expects to produce​ 1,400 heaters in the coming year. What cost function best represents these​ costs?

y​ = 53,000​ + 122X

Blistre Company operates on a contribution margin of​ 40% and currently has fixed costs of​ $510,000. Next​ year, sales are projected to be​ $3,100,000. An advertising campaign is being evaluated that costs an additional​ $110,000. How much would sales have to increase to justify the additional​ expenditure?

​$275,000

Wonderful Products Manufacturing Corp. provided the following information for last​ month: Sales ​$43,000 Variable costs ​14,000 Fixed costs ​11,000 Operating income ​$18,000 If sales reduce to half of the amount in the next​ month, what is the projected operating​ income?

​$3,500

Globus Autos sells a single product.​ 8,300 units were sold resulting in​ $83,000 of sales​ revenue, $20,000 of variable​ costs, and​ $14,000 of fixed costs. If variable costs decrease by​ $1.00 per​ unit, the new margin of safety is​ ________. (Round intermediate calculations to the nearest​ cent.)

​$66,721

Majestic Corporation manufactures wheelbarrows and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the​ company's manufacturing overhead​ data: Budgeted output units ​43,500 units Budgeted​ machine-hours ​17,400 hours Budgeted var. manuf. OH costs for​ 43,500 units ​$382,800 Actual output units produced ​47,500 units Actual​ machine-hours used ​15,100 hours Actual variable manufacturing overhead costs ​$387,518 What is the amount of the budgeted variable manufacturing overhead cost per​ unit? (Do not round any intermediary calculations. Round your final answer to the nearest​ cent.)

​$8.80

The Venoid Corporation has an annual cash inflow from operations from its investment in a capital asset of​ $18,000 (excluding​ depreciation) each year for eight years. The​ corporation's income tax rate is​ 40%. Calculate the total after−tax cash inflow from operations for eight years.

​$86,400

Charlie Chairs​ Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost​ categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Department A for February 2020​ are: Work in​ process, beginning​ inventory, 40% converted 320 units Units started during February 900 units Work in​ process, ending inventory 120 units Costs for Department A for February 2020​ are: Work in​ process, beginning​ inventory: Direct materials ​$160,000 Conversion costs ​$203,000 Direct materials costs added during February ​$601,000 Conversion costs added during February ​$427,000 How many units were completed and transferred out of Department A during​ February?

​1,100 units

Direct Disk Drive Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were for August​ 2020: Work in​ process, beginning inventory ​150,800 units Transferred−in costs​ (100% complete) Direct materials​ (0% complete) Conversion costs​ (80% complete) Transferred in during current period ​450,200 units Completed and transferred out ​400,800 units Work in​ process, ending inventory ​202,000 units Transferred−in costs​ (100% complete) Direct materials​ (0% complete) Conversion costs​ (60% complete) Calculate equivalent units for conversion costs using the FIFO method.

​399,560 units