more Managerial Accounting Chapter 2

Haan Inc. is a merchandising company. Last month the company's cost of goods sold was $66,000. The company's beginning merchandise inventory was $14,000 and its ending merchandise inventory was $16,000. What was the total amount of the company's merchandise purchases for the month? A. $68,000 B. $96,000 C. $64,000 D. $66,000

A. $68,000

Abbott Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $23,000, the manufacturing overhead is: A. $9,500 B. $152,000 C. $5,750 D. $15,250

A. $9,500

Which of the following terms could be used to correctly describe the wages paid to the workers that cut up the cloth into the jean pattern shapes? A. conversion cost and variable cost B. conversion cost C. variable cost D. neither conversion cost or variable cost

A. conversion cost and variable cost

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

A. direct labor

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

A. has its primary emphasis on the future

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

A. product cost

Walton Manufacturing Company gathered the following data for the month. Cost of goods sold: $35,000 Sales: $89,000 Selling expenses: $16,000 Administration expenses: $21,000 How much net operating income will be reported for the period? A. $54,000 B. $17,000 C. $52,000 D. Cannot be determined

B. $17,000

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

B. $23,000

The Lyons Company's cost of goods manufactured was $120,000 when its sales were $360,000 and its gross margin was $220,000. If the ending inventory of finished goods was $30,000, the beginning inventory of finished goods must have been: A. $20,000 B. $50,000 C. $110,000 D. $150,000

B. $50,000

At an activity level of 4,000 machine-hours in a month, Curt Corporation's total variable production engineering cost is $154,200 and its total fixed production engineering cost is $129,000. What would be the total production engineering cost per unit, both fixed and variable, at an activity level of 4,300 machine-hours in a month? Assume that this level of activity is within the relevant range. A. $68.33 B. $68.55 C. $70.80 D. $65.86

B. $68.55

Direct materials used in production totaled $330,000. Direct labor was $415,000 and manufacturing overhead was $220,000. What were the total manufacturing costs incurred for the month? A. $530,000 B. $965,000 C. $745,000 D. $635,000

B. $965,000

Data for Cost A and Cost B appear below: Cost A: Units produced: 1 10 100 1,000 Cost Per unit: ? ? ? ? Total cost: $10 $100 $1,000 $10,000 Cost B: Units produced: 1 10 100 1,000 Cost per unit: $5,000 $500 $50 $5 Total cost: ? ? ? ? Which of the above best describes the behavior of Costs A and B? A. Cost A is fixed, Cost B is variable B. Cost A is variable, Cost B is fixed C. Both Cost A and Cost B are variable D. Both Cost A and Cost B are fixed

B. Cost A is variable, Cost B is fixed

Which of the following costs, if expressed on a per unit basis, would be expected to decrease as the level of production and sales increases? A. Sales commissions B. Fixed manufacturing overhead C. Variable manufacturing overhead D. Direct materials

B. Fixed manufacturing overhead

Which costs will change with a decrease in activity within the relevant range? A. Total fixed costs and total variable cost B. Unit fixed costs and total variable cost C. Unit variable cost and unit fixed cost D. Unit fixed cost and total fixed cost

B. Unit fixed costs and total variable cost

Which of the following terms could be used to correctly describe the wages paid to the data entry clerk who enters customer order information into the company's computer system? A. period cost and product cost B. period cost C. product cost D. neither period or product cost

B. period cost

An opportunity cost is: A. the difference in total costs which results from selecting one alternative instead of another B. the benefit forgone by selecting one alternative instead of another C. a cost which may be saved by not adopting an alternative D. a cost which may be shifted to the future with little or no effect on current operations

B. the benefit forgone by selecting one alternative instead of another

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

B. variable costs per unit are constant and fixed costs per unit fluctuate

Eddy Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. Production volume: 6,000 units 7,000 units Direct materials: $582,600 $679,700 Direct labor: $136,200 $158,900 Manufacturing overhead: $691,800 $714,700 The best estimate of the total variable manufacturing cost per unit is: A. $22.90 B. $119.80 C. $142.70 D. $97.10

C. $142.70

How much opportunity cost is represented in the following information concerning a machine? Annual operating cost: $80,000 Fixed operating costs other than depreciation: $14,000 Resale value, if sold now: $25,000 Original cost machine: $68,000 A. $80,000 B. $14,000 C. $25,000 D. $68,000

C. $25,000

At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs. If volume increases to 9,000 units and both 8,000 units and 9,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of: A. $22,500 B. $32,000 C. $34,500 D. $20,000

C. $34,500

The following costs were incurred in August: Direct materials: $37,000 Direct labor: $14,000 Manufacturing overhead: $38,000 Selling expenses: $10,000 Administrative expenses: $28,000 Conversion costs during the month totaled: A. $127,000 B. $51,000 C. $52,000 D. $75,000

C. $52,000

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,400 and is paid at the beginning of the first year. Seventy percent of the premium applies to manufacturing operations and thirty percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? Product Period A. $800 $0 B. $0 $800 C. $560 $240 D. $240 $560

C. $560 product cost and $240 period cost

Werner Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost. According to the cost formula, the variable cost per unit of activity is $2 per machine-hour. Total electrical power cost at the high level of activity was $9,400 and at the low level of activity was $9,000. If the high level of activity was 2,200 machine hours, then the low level of activity was: A. 1,800 machine hours B. 1,900 machine hours C. 2,000 machine hours D. 1,700 machine hours

C. 2,000 machine hours

A sunk cost is: A. A cost which may be saved by not adopting an alternative B. A cost which may be shifted to the future with little or no effect on current operations C. A cost which cannot be avoided because it has already been incurred D. A cost which does not entail any dollar outlay but which is relevant to the decision-making process

C. A cost which cannot be avoided because it has already been incurred

In describing the cost equation, Y = a + bX, "a" is: A. The dependent variable cost B. The independent variable the level of activity C. The total fixed cost D. The variable cost per unit of activity

C. The total fixed cost

The corporate controller's salary would be considered a(n): A. manufacturing cost B. product cost C. administrative cost D. selling expense

C. administrative cost

Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that: A. expense A has remained unchanged B. expense B has decreased C. expense A has decreased D. expense B has increased

C. expense A has decreased

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

C. opportunity cost

Green Company's costs for the month of August were as follows: Direct materials: $27,000 Direct labor: $34,000 Selling: $14,000 Administrative: $12,000 Manufacturing overhead: $44,000 The beginning work in process inventory was $16,000 and the ending work in process inventory was $9,000. What was the cost of goods manufactured for the month? A. $105,000 B. $132,000 C. $138,000 D. $112,000

D. $112,000

A partial listing of costs incurred during December at Rooks Corporation appears below: Factory supplies: $7,000 Administrative wages and salaries: $92,000 Direct materials: $176,000 Sales staff salaries: $32,000 Factory depreciation: $52,000 Corporate headquarters building rent: $47,000 Indirect labor: $23,000 Marketing: $136,000 Direct labor: $82,000 The total of the period costs listed above for December is: A. $82,000 B. $340,000 C. $389,000 D. $307,000

D. $307,000

Last month a manufacturing company had the following operating results: Beginning finished goods inventory: $90,000 Ending finished goods inventory: $63,000 Sales: $412,000 Gross margin: $62,000 What was the cost of goods manufactured for the month? A. $350,000 B. $385,000 C. $377,000 D. $323,000

D. $323,000

Anderson Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. Production volume: 4,000 units 5,000 units Direct materials: $99.20 per unit $99.20 per unit Direct labor: $45.50 per unit $45.50 per unit Manufacturing overhead: $94.00 per unit $77.60 per unit The best estimate of the total monthly fixed manufacturing cost is: A. $388,000 B. $954,800 C. $376,000 D. $328,000

D. $328,000

Consider the following costs incurred in a recent period: Direct materials: $33,000 Depreciation on factory equipment: $12,000 Factory janitor's salary: $23,000 Direct labor: $28,000 Utilities for factory: $9,000 Selling expenses: $16,000 Production supervisor's salary: $34,000 Administrative expenses: $21,000 What was the total amount of the period costs listed above for the period? A. $78,000 B. $71,000 C. $46,000 D. $37,000

D. $37,000

The following costs were incurred in August: Direct materials: $20,000 Direct labor: $18,000 Manufacturing overhead: $21,000 Selling expenses: $16,000 Administrative expenses: $21,000 Prime costs during the month totaled: A. $39,000 B. $59,000 C. $96,000 D. $38,000

D. $38,000

A partial listing of costs incurred at Gilhooly Corporation during September appears below: Direct materials: $183,000 Utilities, factory: $9,000 Administrative salaries: $90,000 Indirect labor: $25,000 Sales commissions: $33,000 Depreciation of production equipment: $25,000 Depreciation of administrative equipment: $32,000 Direct labor: $124,000 Advertising: $148,000 The total of the manufacturing overhead costs listed above for September is: A. $669,000 B. $366,000 C. $34,000 D. $59,000

D. $59,000

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

D. $81,000

An example of a discretionary fixed cost would be: A. Taxes on the factory B. Depreciation on manufacturing equipment C. Insurance D. Research and development

D. Research and development

Contribution margin means: A. What remains from total sales after deducting fixed expenses B. What remains from total sales after deducting cost of goods sold C. The sum of cost of goods sold and variable expenses D. What remains from total sales after deducting all variable expenses

D. What remains from total sales after deducting all variable expenses

A lawnmower manufacturer computed a cost per unit of $53 by adding together last month's direct labor, direct materials, and manufacturing overhead and dividing that total by the 10,000 units produced last month. (There were no beginning or ending inventories.) If 9,000 units are going to be manufactured this month, we would expect that the: A. cost per unit will remain the same B. cost per unit will decrease C. direction of change in unit costs cannot be determined D. cost per unit will increase

D. cost per unit will increase

The costs of direct materials are classified as: A. conversion cost, manufacturing cost, prime cost B. no cost C. conversion cost and manufacturing cost D. manufacturing cost and prime cost

D. manufacturing cost and prime cost

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

D. manufacturing overhead

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

D. rent on headquarters building