Final Exam Study Guide

Marchi Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: Activity level 65 guests Variable overhead costs: Supplies $156 Laundry 364Fixed overhead costs: Utilities 250 Salaries & wages 4,480 Depreciation 1,330 Total overhead cost $6,580 The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 70 guests? A. $42,460.00 B. $6,620.00 C. $7,086.15 D. $6,580.00

ANSWER: B

Production order processing is an example of a: A. Unit-level activity. B. Batch-level activity. C. Product-level activity. D. Organization-sustaining activity.

ANSWER: B

Radakovich Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly..................... $436,240 28,000 machine-hours Processing orders........ $60,896 1,600 orders Inspection.................... $82,767 1,410 inspection-hours The company makes 230 units of product F60N a year, requiring a total of 480 machine-hours, 50 orders, and 30 inspection-hours per year. The product's direct materials cost is $12.70 per unit and its direct labor cost is $45.93 per unit. The product sells for $126.60 per unit. According to the activity-based costing system, the total product margin for product F60N is: A. $6,251.70 B. $4,490.70 C. $6,393.70 D. $15,633.10

ANSWER: B

Razz Company is estimating the following sales: July....................... $45,000 August.................. $50,000 September............ $65,000 October................ $80,000 November............ $75,000 December............. $60,000 Sales at Razz are normally collected as follows: 10% in the month of sale; 60% in the month following the sale; and the remaining 30% in the second month following the sale. In Razz's budgeted balance sheet at December 31, at what amount will accounts receivable be shown? A. $49,500 B. $76,500 C. $120,500 D. $135,500

ANSWER: B

Sparks Company has a cash balance of $7,500 on April 1. The company must maintain a minimum cash balance of $6,000. During April, cash receipts of $48,000 are planned. Cash disbursements during the month are expected to total $52,000. Ignoring interest payments, during April the company will need to borrow: A. $3,500 B. $2,500 C. $6,000 D. $4,000

ANSWER: B

The contribution margin ratio is equal to: A. Total manufacturing expenses/Sales. B. (Sales - Variable expenses)/Sales. C. 1 - (Gross Margin/Sales). D. 1 - (Contribution Margin/Sales).

ANSWER: B

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used? A. (Fixed expenses + Target net profit)/Total contribution margin B. (Fixed expenses + Target net profit)/Contribution margin ratio C. Fixed expenses/Contribution margin per unit D. Target net profit/Contribution margin ratio

ANSWER: B

Villi Manufacturing Corporation's most recent sales budget indicates the following expected sales (in units): July August September Expected unit sales..... 230,000 275,000 310,000 Villi wants to maintain a finished goods inventory of 20% of the next month's expected sales. How many units should Villi plan on producing for the month of August? A. 268,000 units B. 282,000 units C. 291,000 units D. 337,000 units

ANSWER: B

When preparing a production budget, the required production equals: A. budgeted sales + beginning inventory + desired ending inventory. B. budgeted sales - beginning inventory + desired ending inventory. C. budgeted sales - beginning inventory - desired ending inventory. D, budgeted sales + beginning inventory - desired ending inventory.

ANSWER: B

When production exceeds sales, the net operating income reported under absorption costing generally will be: A. less than net operating income reported under variable costing. B. greater than net operating income reported under variable costing. C. equal to net operating income reported under variable costing. D. higher or lower because no generalization can be made.

ANSWER: B

Which of the following is the correct method to calculate a predetermined overhead rate? A. Budgeted total manufacturing cost divided by budgeted amount of cost driver. B. Budgeted overhead cost divided by budgeted amount of cost driver. C. Budgeted amount of cost driver divided by budgeted overhead cost. D. Actual overhead cost divided by budgeted amount of cost driver. E. Actual overhead cost divided by actual amount of cost driver.

ANSWER: B

Which of the following is the proper sequence of events in an activity-based costing system? A. Identification of cost drivers, identification of cost pools, calculation of cost application rates, assignment of cost to products. B. Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products. C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates. D. Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products.

ANSWER: B

Within the relevant range, the difference between variable costs and fixed costs is: A. variable costs per unit fluctuate and fixed costs per unit remain constant. B. variable costs per unit are constant and fixed costs per unit fluctuate. C. both total variable costs and total fixed costs are constant. D. both total variable costs and total fixed costs fluctuate.

ANSWER: B

9. Garrison Company uses a weighted-average process-costing system. Company records disclosed that the firm completed 50,000 units during the month and had 10,000 units in process at month-end, 25% complete. Conversion costs associated with the beginning work-in-process inventory amounted to $105,000, and amounts that relate to the current month totaled $840,000. If conversion is incurred uniformly throughout manufacturing, Garrison's equivalent-unit cost is: A. $15.75. B. $16.43. C. $18.00. D. $18.90. E. an amount other than those shown above.

ANSWER: C

All other things being equal, if a division's traceable fixed expenses increase: A. the division's contribution margin ratio will decrease. B. the division's segment margin ratio will remain the same. C. the division's segment margin will decrease. D. the overall company profit will remain the same.

ANSWER: C

A company produces a single product. Variable production costs are $12 per unit and variable selling and administrative expenses are $3 per unit. Fixed manufacturing overhead totals $36,000 and fixed selling and administration expenses total $40,000. Assuming a beginning inventory of zero, production of 4,000 units and sales of 3,600 units, the dollar value of the ending inventory under variable costing would be: A. $4,800 B. $8,400 C. $6,000 D. $3,600

ANSWER: A

As production takes place, all manufacturing costs are added to the: A. Work-in-Process Inventory B. Manufacturing-Overhead Inventory account C. Cost-of-Goods-Sold D. Finished-Goods Inventory E. Production Labor

ANSWER: A

Barringer Manufacturing Corporation has prepared the following overhead budget for next month. Activity level 7,800 Machine hoursVariable overhead costs: Supplies $34,320 Indirect labor 50,700Fixed overhead costs: Supervision 10,200 Utilities 5,600 Depreciation 8,800 Total overhead cost $109,620 The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 7,900 machine-hours rather than 7,800 machine-hours? A. $110,710.00 B. $109,620.00 C. $110,868.00 D. $111,025.38

ANSWER: A

All the following are considered to be benefits of participative budgeting, except for: A. Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization. B. The budget estimates are prepared by those directly involved in activities. C. When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations. D. Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.

ANSWER: C

Alpha Company reported the following data for its most recent year: sales, $500,000; variable expenses, $300,000; and fixed expenses, $150,000. The company's degree of operating leverage is: A. 10 B. 2 C. 4 D. 2.5

ANSWER: C

Black Company's sales are $600,000, its fixed expenses are $150,000, and its variable expenses are 60% of sales. Based on this information, the margin of safety is: A. $90,000 B. $190,000 C. $225,000 D. $240,000

ANSWER: C

Blackwelder Snow Removal's cost formula for its vehicle operating cost is $1,240 per month plus $348 per snow-day. For the month of December, the company planned for activity of 12 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $6,330. The vehicle operating cost in the planning budget for December would be closest to: A. $5,426 B. $6,112 C. $5,416 D. $6,330

ANSWER: C

Browning, which uses a process-costing system, adds all material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The information that follows relates to the period just ended: Units started and completed: 60,000Units in ending work-in-process inventory: 20,000, 80% complete Which of the following choices correctly expresses the total equivalent units of production with respect to material and conversion cost? A. 60,000 for materials and 60,000 for conversion. B. 76,000 for materials and 76,000 for conversion. C. 80,000 for materials and 76,000 for conversion. D. 80,000 for materials and 64,000 for conversion. E. 80,000 for materials and 80,000 for conversion.

ANSWER: C

Buford Company rents out a small unused portion of its factory to another company for $1,000 per month. The rental agreement will expire next month, and rather than renew the agreement Buford Company is thinking about using the space itself to store materials. The term to describe the $1,000 per month is: A. sunk cost. B. period cost. C. opportunity cost. D. variable cost.

ANSWER: C

Designing a new product is an example of a: A. Unit-level activity. B. Batch-level activity. C. Product-level activity. D. Organization-sustaining activity.

ANSWER: C

Direct costs: A. are incurred to benefit a particular accounting period. B. are incurred due to a specific decision. C. can be easily traced to a particular cost object. D. are the variable costs of producing a product.

ANSWER: C

Fang Corporation had 5,200 units of work in process on April 1. During April, 14,300 units were completed and as of April 30, 7,000 units remained in production. How many units were started during April? A. 12,200. B. 12,500. C. 16,100. D. 26,500. E. None of the above.

ANSWER: C

Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the costs of inspecting the finished products at Guerra? A. Machine-hours B. Direct labor-hours C. Inspection time D. Number of inspections

ANSWER: C

Placek Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below: Activity level 6,800 patientsVariable overhead costs: Supplies @$2.60/patient $17,680 Laundry @$5.60/patient 38,080Total variable overhead 55,760Fixed overhead costs: Wages & salaries 21,080 Occupancy costs 44,880Total fixed overhead costs 65,960Total overhead cost $121,720 The total overhead cost at an activity level of 7,700 patients per month should be: A. $129,550 B. $121,720 C. $129,100 D. $137,830

ANSWER: C

Poskey Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Wages and salaries............ $400,000 Depreciation...................... 160,000 Utilities.............................. 100,000 Total.................................. $660,000 Distribution of resource consumption: Activity Cost Pools Assembly Setting Up Other Total Wages and salaries.............. 40% 40% 20% 100% Depreciation........................ 20% 35% 45% 100% Utilities................................ 25% 55% 20% 100% How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool? A. $187,000 B. $264,000 C. $217,000 D. $165,000

ANSWER: C

Product costs that have become expenses can be found in: A. period costs. B. selling expenses. C. cost of goods sold. D. administrative expenses.

ANSWER: C

The budget method that maintains a constant twelve month planning horizon by adding a new month on the end as the current month is completed is called: A. an operating budget. B. a capital budget. C. a continuous budget. D. a master budget.

ANSWER: C

The controller of Kleyman Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: Wall Mirrors Specialty Windows Total expected units produced............... 4,000 3,000 Total expected material moves............... 500 400 Expected direct labor-hours per unit...... 7 6 The total materials handling cost for the year is expected to be $28,400.40. If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost should be allocated to the wall mirrors? (Round off your answer to the nearest whole dollar.) A. $15,293 B. $16,176 C. $17,287 D. $14,200

ANSWER: C

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): A. period cost. B. direct material cost. C. indirect material cost. D. opportunity cost.

ANSWER: C

The direct labor budget is based on: A. the desired ending inventory of finished goods. B. the beginning inventory of finished goods. C. the required production for the period. D. the required materials purchases for the period.

ANSWER: C

The following are budgeted data: January February March Sales in units.... 15,000 20,000 18,000 Production in units.............. 18,000 19,000 16,000 One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February should be: A. 19,600 pounds B. 20,400 pounds C. 18,400 pounds D. 18,600 pounds

ANSWER: C

When computing standard cost variances, the difference between actual and standard price multiplied by actual quantity yields a(n): A. combined price and quantity variance. B. efficiency variance. C. price variance. D. quantity variance.

ANSWER: C

When manufacturing overhead is applied to production, it is added to: A. the Cost of Goods Sold account. B. the Raw Materials account. C. the Work in Process account. D. the Finished Goods inventory account.

ANSWER: C

Which of the following budgets are prepared before the production budget? A. Direct Materials Budget-Yes, Sales Budget-Yes B. Direct Materials Budget-Yes, Sales Budget-No C. Direct Materials Budget-No, Sales Budget-Yes D. Direct Materials Budget-No Sales Budget-No

ANSWER: C

Which of the following comparisons best isolates the impact that changes in prices of inputs and outputs have on performance? A. static planning budget and flexible budget B. static planning budget and actual results C. flexible budget and actual results D. master budget and static planning budget

ANSWER: C

Which of the following is NOT an objective of the budgeting process? A. To communicate management's plans throughout the entire organization. B. To provide a means of allocating resources to those parts of the organization where they can be used most effectively. C. To ensure that the company continues to grow. D. To uncover potential bottlenecks before they occur.

ANSWER: C

Which of the following manufacturers would most likely use job-order costing? A. Chemical B. Microchip C. Custom-furniture D. Gasoline E. Fertilizer

ANSWER: C

Which of the following represents the normal sequence in which the below budgets are prepared? A. Sales, Balance Sheet, Income Statement B. Balance Sheet, Sales, Income Statement C. Sales, Income Statement, Balance Sheet D. Income Statement, Sales, Balance Sheet

ANSWER: C

Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory's purchasing department? A. Machine-hours B. Direct labor-hours C. Number of orders processed D. Cost of materials purchased

ANSWER: C

A flexible budget: A. classifies budget requests by activity and estimates the benefits arising from each activity. B. presents a statement of expectations for a period of time but does not present a firm commitment. C. presents the plan for only one level of activity and does not adjust to changes in the level of activity. D. presents the plan for a range of activity so that the plan can be adjusted for changes in activity levels.

ANSWER: D

An example of a period cost is: A. fire insurance on a factory building. B. salary of a factory supervisor. C. direct materials. D. rent on a headquarters building.

ANSWER: D

Carver Company produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is: A. $7 B. $17 C. $22 D. $16

ANSWER: D

Douglas Company plans to sell 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met. Based on these data, how many units of Product A must be produced during the month of July? A. 28,800 B. 22,200 C. 24,000 D. 25,800

ANSWER: D

Electricity costs that were incurred by a company's production processes should be debited to: A. Utilities Expense. B. Accounts Payable. C. Cash. D. Manufacturing Overhead. E. Work-in-Process Inventory.

ANSWER: D

Ernst Company currently uses traditional costing procedures, applying $300,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. Product Pool No. 1 (Driver: DLH) Pool No. 2 (Driver: SU) Pool No. 3 (Driver: PC) X 400 25 1,300 Y 600 75 700 Pool Cost $60,000 $140,000 $100,000 The overhead cost allocated to product X by using activity-based costing procedures would be: A. $176,000. B. $180,000. C. $120,000. D. $124,000.

ANSWER: D

Guilbault Midwifery's cost formula for its wages and salaries is $2,340 per month plus $154 per birth. For the month of June, the company planned for activity of 115 births, but the actual level of activity was 112 births. The actual wages and salaries for the month was $19,530. The wages and salaries in the planning budget for June would be closest to: A. $19,530 B. $19,588 C. $20,053 D. $20,050

ANSWER: D

Horton Company applies overhead based on direct labor hours. At the beginning of 2017, the company estimated that manufacturing overhead would be $500,000, and direct labor hours would be 10,000. Actual overhead by the conclusion of 2017 amounted to $400,000. On the basis of this information, Horton's 2017 predetermined overhead rate is: A. $0.02 per direct labor hour. B. $0.025 per direct labor hour. C. $40 per direct labor hour. D. $50 per direct labor hour. E. none of the above.

ANSWER: D

In August direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $34,000, the direct labor cost was: A. $36,000 B. $22,667 C. $51,000 D. $81,000

ANSWER: D

In an income statement segmented by product line, a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be: A. classified as a traceable fixed expense and not allocated. B. allocated to the product lines on the basis of sales dollars. C. allocated to the product lines on the basis of segment margin. D. classified as a common fixed expense and not allocated.

ANSWER: D

Mason Company's selling price was $20.00 per unit. Fixed expenses totaled $54,000, variable expenses were $14.00 per unit, and the company reported a profit of $9,000 for the year. The break-even point for Mason Company is: A. 10,500 units B. 4,500 units C. 8,500 units D. 9,000 units

ANSWER: D

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as: A. direct materials. B. a period cost. C. administrative expense. D. manufacturing overhead.

ANSWER: D

Belsky Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly..................... $313,490 29,000 machine-hours Processing orders........ $49,476 1,400 orders Inspection.................... $73,882 1,060 inspection-hours The company makes 490 units of product Q19S a year, requiring a total of 1,080 machine-hours, 60 orders, and 20 inspection-hours per year. The product's direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit. According to the activity-based costing system, the average cost of product Q19S is closest to: A. $97.64 per unit B. $66.64 per unit C. $93.31 per unit D. $94.79 per unit

ANSWER: A

Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses total $35,000 per period. By how much will net operating income change if sales are expected to increase by $40,000? A. $16,000 increase B. $5,000 increase C. $24,000 increase D. $11,000 decrease

ANSWER: A

Company X sold 25,000 units of product last year. The contribution margin per unit was $2, and fixed expenses totaled $40,000 for the year. This year fixed expenses are expected to increase to $45,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same net operating income as was earned last year: A. 27,500 B. 22,500 C. 35,000 D. 2,500

ANSWER: A

Given the following data: Selling price per unit................................. $2.00 Variable production cost per unit.............. $0.30 Fixed production cost................................ $3,000 Sales commission per unit......................... $0.20 Fixed selling expenses............................... $1,500 The break-even point in dollars is: A. $6,000 B. $4,500 C. $2,647 D. $4,000

ANSWER: A

Gyro Gear Company produces a single product, a special gear used in automatic transmissions. Each gear sells for $28, and the company sells 500,000 gears each year. Unit cost data are presented below: Variable Fixed Direct material.......................... $6.00 Direct labor............................... $5.00 Manufacturing overhead........... $2.00 $7.00 Selling & administrative........... $4.00 $3.00 The unit product cost of gears under variable costing is: A. $13 B. $20 C. $17 D. $27

ANSWER: A

Hatch Company has two divisions, O and E. During the year just ended, Division O had a segment margin of $9,000 and variable expenses equal to 70% of sales. Traceable fixed expenses for Division E were $19,000. Hatch Company as a whole had a contribution margin ratio of 40%, a segment margin of $25,000, and sales of $200,000. Given this data, the sales for Division E for last year were: A. $50,000 B. $150,000 C. $87,500 D. $116,667

ANSWER: A

Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following procedures that must be performed by the close of business on Friday: 1- Calculation of equivalent units 2- Analysis of physical flows of units3- Assignment of costs to completed units and units still in process4- Calculation of unit costs Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 1, 2, 4, 3. C. 1, 4, 3, 2. D. 2, 1, 4, 3. E. 2, 1, 3, 4.

ANSWER: D

Smith Corporation has a degree of operating leverage of 8. This means that a 1% change in sales dollars at Smith will generate an 8% change in: A. variable expenses. B. fixed expenses. C. contribution margin. D. net operating income.

ANSWER: D

The break-even point in unit sales is found by dividing total fixed expenses by: A. the contribution margin ratio. B. the variable expenses per unit. C. the sales price per unit. D. the contribution margin per unit.

ANSWER: D

The costs of direct materials are classified as: Conversion cost Manufacturing cost Prime costA) Yes Yes YesB) No No No C) Yes Yes No D) No Yes Yes A. Choice A B. Choice B C. Choice C D. Choice D

ANSWER: D

The journal entry needed to apply $40,000 of overhead would include: A. a debit to Manufacturing Overhead B. a credit to Work in Process C. a debit to Cost of Goods Sold D. a debit to Work in Process E. a credit to Cost of Goods Sold

ANSWER: D

The plans of management are expressed formally in: A. the annual report to shareholders. B. Form 10-Q submitted to the Securities and Exchange Commission. C. Form 10-Q submitted to the Securities and Exchange Commission. D. budgets.

ANSWER: D

The plant manager's salary is an example of a: A. Unit-level activity. B. Batch-level activity. C. Product-level activity. D. Organization-sustaining activity.

ANSWER: D

The standard price per unit of materials is used in the calculation of which of the following variances? A. Neither the Material Price Variance nor the Material Quantity Variance B. Just on the Material Quantity Variance C. Just on the Material Price Variance D. On both the Material Price Variance and the Material Quantity Variance

ANSWER: D

The three basic elements of manufacturing cost are direct materials, direct labor, and: A. cost of goods manufactured. B. cost of goods sold. C. work in process. D. manufacturing overhead.

ANSWER: D

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs: A. started in process during the period. B. in process during the period. C. completed and sold during the period. D. completed during the period.

ANSWER: D

Under variable costing, fixed manufacturing overhead is: A. carried in a liability account. B. carried in an asset account. C. ignored. D. immediately expensed as a period cost.

ANSWER: D

Unit costs in a process-costing system are derived by using: A. in-process units. B. completed units. C. physical units. D. equivalent units. E. a measure of activity other than those listed above.

ANSWER: D

Which of the following costs should not be included in product costs for internal management reports that are used for decision-making? A. Costs of unit-level activities. B. Costs of batch-level activities. C. Costs of product-level activities. D. Costs of organization-sustaining activities.

ANSWER: D

Which of the following statements is a good description of the variances that should be investigated under the management by exception concept? A. all variances should be investigated. B. only unfavorable variances should be investigated. C. a small random sample of all variances should be investigated. D. unusually large favorable and unfavorable variances should be investigated.

ANSWER: D

Morrison, Inc., which uses a process-cost accounting system, passes completed production from Department A to Department B for further manufacturing. The journal entry to record completed production in Department A requires: A. a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory. B. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory. C. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A. D. a debit to Work-in-Process Inventory: Department A and a credit to Work-inProcess Inventory: Department B. E. a debit to Work-in-Process Inventory: Department B and a credit to Work-inProcess Inventory: Department A.

ANSWER: E

The operations of King Company resulted in a $5,000 overapplied overhead for the year just completed. If King Company allocates the overapplied overhead among accounts, the journal entry to correctly allocate the overapplied overhead would include: A. a debit to Manufacturing Overhead B. a credit to Work in Process C. a credit to Finished Goods D. a credit to Cost of Goods Sold E. would include all of the above

ANSWER: E

Hochberg Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication............................ 30,000 machine-hours Order processing.................. 300 orders Other.................................... Not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries............... $340,000 Depreciation......................... 160,000 Occupancy............................ 220,000 Total..................................... $720,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabrication Order Processing Other Total Wages and salaries................. 30% 60% 10% 100% Depreciation........................... 15% 50% 35% 100% Occupancy............................. 15% 55% 30% 100% The activity rate for the Fabrication activity cost pool is closest to: A. $5.30 per machine-hour B. $3.60 per machine-hour C. $7.20 per machine-hour D. $4.80 per machine-hour

ANSWER: A

If a company applies overhead to production on the basis of a predetermined rate, a debit balance in the Manufacturing Overhead account at the end of the period means that A. actual overhead cost was greater than the amount charged to production. B. actual overhead cost was less than the amount of direct labor cost. C. more overhead cost has been charged to production than has been charged to finished goods during the period. D. actual overhead cost was less than the amount charged to production.

ANSWER: A

Managerial accounting: A. has its primary emphasis on the future. B. is required by regulatory bodies such as the SEC. C. focuses on the organization as a whole, rather than on the organization's segments. D. Responses a, b, and c are all correct.

ANSWER: A

Ofarrell Snow Removal's cost formula for its vehicle operating cost is $1,840 per month plus $377 per snow-day. For the month of November, the company planned for activity of 14 snow-days, but the actual level of activity was 19 snow-days. The actual vehicle operating cost for the month was $9,280. The vehicle operating cost in the flexible budget for November would be closest to: A. $9,003 B. $7,118 C. $9,280 D. $9,660

ANSWER: A

On January 1, Colver Company has 6,500 units of Product A on hand. During the year, the company plans to sell 15,000 units of Product A, and plans to have 5,000 units on hand at year end. How many units of Product A must be produced during the year? A. 13,500 B. 16,500 C. 15,000 D. 20,000

ANSWER: A

Poor quality materials could have an unfavorable effect on which of the following variances? A. Both Labor Efficiency Variance and Material Quantity Variance B. Only on Labor Efficiency Variance C. Only on Material Quantity Variance D. On neither Labor Efficiency Variance nor Material Quantity Variance

ANSWER: A

Prime cost consists of direct materials combined with: A. direct labor. B. manufacturing overhead. C. indirect materials. D. cost of goods manufactured.

ANSWER: A

Process costing is used to account for: A. large numbers of identical products that are produced in a continuous manufacturing environment. B. small numbers of products that are produced in batches. C. raw materials that are converted directly to finished goods. D. finished goods that are refined and processed further. E. large numbers of products that are produced in a non-repetitive process.

ANSWER: A

The controller of Kleyman Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: Wall Mirrors Specialty Windows Total expected units produced............... 4,000 3,000 Total expected material moves............... 500 400 Expected direct labor-hours per unit...... 7 6 The total materials handling cost for the year is expected to be $28,400.40. If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost should be allocated to the specialty windows? (Round off your answer to the nearest whole dollar.) A. $12,622 B. $13,108 C. $12,224 D. $14,200

ANSWER: A

The cost of fire insurance for a manufacturing plant is generally considered to be a: A. product cost. B. period cost. C. variable cost. D. all of these.

ANSWER: A

The final step in recognizing the completion of production requires a company to: A. debit Finished-Goods Inventory and credit Work-in-Process Inventory. B. debit Work-in-Process Inventory and credit Finished-Goods Inventory. C. add direct labor to Work-in-Process Inventory. D. add direct materials, direct labor, and manufacturing overhead to Work-in Process Inventory. E. add direct materials to Finished-Goods Inventory.

ANSWER: A

The following direct labor information pertains to the manufacture of product X: Time required to make one unit.................................. 2 direct labor-hours Number of direct labor workers.................................. 50 workers Number of productive hours per week, per worker.... 40 hours Weekly wages per worker........................................... $500 Workers' benefits treated as direct labor costs........... 20% of wages What is the standard direct labor cost per unit of product Glu? A. $30 B. $24 C. $15 D. $12

ANSWER: A

The journal entry needed to record $5,000 of advertising for Westwood Manufacturing would include: A. a debit to Advertising Expense. B. a credit to Advertising Expense C. a debit to Manufacturing Overhead D. a credit to Manufacturing Overhead. E. a debit to Projects-in-Process.

ANSWER: A

The labor time required to assemble a product is an example of a: A. Unit-level activity. B. Batch-level activity. C. Product-level activity. D. Organization-sustaining activity.

ANSWER: A

The left side of the Manufacturing Overhead account is used to accumulate A. actual manufacturing overhead costs as incurred throughout the accounting period. B. overhead applied to Work-in-Process Inventory. C. underapplied overhead. D. predetermined overhead. E. overapplied overhead.

ANSWER: A

Under absorption costing, fixed manufacturing overhead costs: A. are deferred in inventory when production exceeds sales. B. are always treated as period costs. C. are released from inventory when production exceeds sales. D. none of these.

ANSWER: A

Variable expenses for Alpha Company are 40% of sales. What are sales at the break-even point, assuming that fixed expenses total $150,000 per year? A. $250,000 B. $375,000 C. $600,000 D. $150,000

ANSWER: A

Which of the following is a key document in a typical process-costing system? A. Departmental production report. B. Master schedule. C. Production budget. D. Sequential product report. E. Materials requirement report.

ANSWER: A

Which of the following would not affect the break-even point? A. number of units sold B. variable expense per unit C. total fixed expenses D. selling price per unit

ANSWER: A

If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone: A. is a key aspect of the activity-based costing model. B. will systematically overcost high-volume products and undercost low-volume products. C. will systematically overcost low-volume products and undercost high-volume products. D. must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.

ANSWER: B

In an income statement prepared as an internal report using variable costing, variable selling and administrative expenses would: A. not be used. B. be used in the computation of the contribution margin. C. be used in the computation of net operating income but not in the computation of the contribution margin. D. be treated the same as fixed selling and administrative expenses.

ANSWER: B

Kentucky Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work in process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work in process inventory? A. Materials, 100%, conversion cost, 100%. B. Materials, 100%, conversion cost, 40%. C. Materials, 100%, conversion cost, 60%. D. Materials, 40%, conversion cost, 40%. E. Materials, 40%, conversion cost, 100%.

ANSWER: B

Use the following to answer questions 7-12: Abbey Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price....................................................... $129 Units in beginning inventory.............................. 0 Units produced................................................... 6,300 Units sold............................................................ 6,100 Units in ending inventory................................... 200 Variable costs per unit: Direct materials............................................... $32 Direct labor...................................................... $50 Variable manufacturing overhead................... $5 Variable selling and administrative................. $11 Fixed costs: Fixed manufacturing overhead........................ $88,200 Fixed selling and administrative..................... $97,600 What is the unit product cost for the month under variable costing? A. $87 B. $101 C. $112 D. $98 What is the unit product cost for the month under absorption costing? A. $101 B. $98 C. $87 D. $112 The total contribution margin for the month under the variable costing approach is: A. $170,800 B. $256,200 C. $100,900 D. $189,100 The total gross margin for the month under the absorption costing approach is: A. $189,100 B. $6,100 C. $170,800 D. $191,000 Question 110 / 1 pts What is the net operating income for the month under variable costing? A. $3,300 B. $2,800 C. ($14,100) D. $6,100 What is the net operating income for the month under absorption costing? A. $3,300 B. $2,800 C. ($14,100) D. $6,100

ANSWER: A, A, D, C, A, D

Use the following to answer questions 6-11: ACE, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of direct labor hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard Standard Price Standard Quantity or Rate Cost Direct materials............................. 1.5 pounds $3.00 per pound $4.50 Direct labor.................................... 0.6 hours $6.00 per hour $3.60 Variable manufacturing overhead. 0.6 hours $1.25 per hour $0.75 During March, the following activity was recorded by the company: The company produced 3,000 units during the month. A total of 8,000 pounds of material were purchased at a cost of $23,000. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of material remained in the warehouse. During March 1600 direct labor hours were worked at a rate of $6.50 per hour. Variable manufacturing overhead costs during March totaled $1,800. The materials price variance for March is: A. $1,000 F B. $1,000 U C. $750 F D. $750 U Question 71 / 1 pts The materials quantity variance for March is: A. $4,500 F B. $10,500 F C. $10,500 U D. $4,500 U Question 81 / 1 pts The labor rate variance for March is: A. $480 U B. $800 U C. $480 F D. $800 F Question 91 / 1 pts The labor efficiency variance for March is: A. $5,040 U B. $1,200 U C. $1,200 F D. $5,040 F Question 101 / 1 pts The variable overhead rate variance for March is: A. $200 U B. $600 U C. $600 F D. $200 F Question 111 / 1 pts The variable overhead efficiency variance for March is: A. $1,050 F B. $1,050 U C. $250 F D. $250 U

ANSWER: A, D, B, C, D, C.

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction? A. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold. B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory. C. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods Inventory. D. Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of Goods Sold. E. Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.

ANSWER: B

A flexible budget is a budget that: A. is updated with actual costs as they occur during the period. B. is updated to reflect the actual level of activity during the period. C. is prepared using a computer spreadsheet application. D. contains only variable production costs.

ANSWER: B

Companies that use a process-cost accounting system would: A. charge goods produced with actual overhead amounts rather than applied overhead amounts. B. establish a separate Work-in-Process Inventory account for each manufacturing department. C. establish a separate Finished-Goods Inventory account for each manufacturing department. D. pass completed production directly to Cost of Goods Sold. E. eliminate the need for the Finished-Goods Inventory account.

ANSWER: B

During the month of August, direct labor cost totaled $13,000 and direct labor cost was 20% of prime cost. If total manufacturing costs during August were $88,000, the manufacturing overhead was: A. $75,000 B. $23,000 C. $65,000 D. $52,000

ANSWER: B

Entler Framing's cost formula for its supplies cost is $2,250 per month plus $16 per frame. For the month of June, the company planned for activity of 502 frames, but the actual level of activity was 497 frames. The actual supplies cost for the month was $10,580. The supplies cost in the planning budget for June would be closest to: A. $10,580 B. $10,282 C. $10,686 D. $10,202

ANSWER: B

Gamma Company has sales of $120,000, a contribution margin of $48,000, and a net operating income of $12,000. The company's degree of operating leverage is: A. 2.5 B. 4.0 C. 10.0 D. 4.8

ANSWER: B

Gopher charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year: Budgeted manufacturing overhead: $360,000 Actual manufacturing overhead: $315,000 Budgeted machine hours: 15,000 Actual machine hours: 10,000 Overhead applied to production totaled: A. $210,000. B. $240,000. C. $472,500. D. $540,000. E. some other amount.

ANSWER: B

Hampton manufactures products X and Y, applying overhead on the basis of labor hours. X requires a variety of complex manufacturing procedures and consumes significant productive resources. Y, on the other hand, is relatively simplistic in nature. What would an activity-based costing system likely disclose about products X and Y as a result of Hampton's current accounting procedures? A. Both X and Y being undercosted. B. X being undercosted and Y being overcosted. C. X being overcosted and Y being undercosted. D. Both X and Y being overcosted.

ANSWER: B

Hollis Company sells a single product for $20 per unit. The company's fixed expenses total $240,000 per year, and variable expenses are $12 per unit of product. The company's break-even point is: A. $400,000 B. $600,000 C. 20,000 units D. 12,000 units

ANSWER: B