The journal entry to record the transfer of 1,600 units of part number 1177 with a value
of $2.50 each, to work in process is
a. Materials Work in Process 4,000
4,000
b. Work in Process Factory Overhead 4,000
4,000
c. Work in Process Materials 4,000
4,000
d. Work in Process Cash 4,000
4,000
Answer:
Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and
loss from operations is $(50,000). Determine the (a) unit contribution margin (b)
contribution margin ratio, and (c) fixed costs per unit at production of 25,000 units.
Answer:
Mighty Safe Fire Alarm is currently buying 50,000 motherboards from MotherBoard,
Inc. at a price of $65 per board. Mighty Safe is considering making its own boards. The
costs to make the board are as follows: direct materials, $32 per unit; direct labor, $10
per unit; and variable factory overhead, $16.00 per unit. Fixed costs for the plant would
increase by $75,000. Which option should be selected and why?
a. buy, $75,000 more in profits
b. make, $275,000 increase in profits
c. buy, $275,000 more in profits
d. make, $350,000 increase in profits
Answer:
The FIFO method separates work done on beginning inventory in the previous period
from work done on it in the current period.
a. True
b. False
Answer:
In applying the first-in, first-out method of costing inventories, if 8,000 units which are
30% completed are in process at June 1, 28,000 units are completed during June, and
4,000 units were 80% completed at June 30, the number of equivalent units of
production for June was 28,600.
a. True
b. False
Answer:
The following production data were taken from the records of the Finishing Department
for June:
What is the number of conversion equivalent units of production in the June 30
Finishing Department inventory, assuming that the first-in, first-out method is used to
cost inventories?
a. 68,000 units
b. 70,400 units
c. 66,200 units
d. 4,200 units
Answer:
An employee of Morgan Corporation has found some partially completed units of
Model X in a dusty corner of the warehouse. A job ticket attached to the units indicates
that a total of $750 in manufacturing costs have been used to bring the materials to this
point in the manufacturing process. The units can be sold in their current condition for
$275 to a scrap metal dealer. If Morgan spends $250 to complete the units, they could
be sold for $600.
(a) What should Morgan do? Why?
(b) Identify the sunk cost, if any.
Answer:
Which of the following will not be found on the balance sheet of a manufacturing
company?
a. cost of goods sold
b. materials
c. work in process
d. finished goods
Answer:
Which of the following are basic phases of the management process?
a. supervising and directing
b. decision making and supervising
c. organizing and directing
d. planning and controlling
Answer:
The budget that summarizes future plans for the acquisition of fixed assets is
a. direct materials purchases budget
b. production budget
c. sales budget
d. capital expenditures budget
Answer:
Current position analysis measures a company’s ability to pay its current liabilities.
a. True
b. False
Answer:
When Isaiah Company has fixed costs of $120,000 and the contribution margin is $30,
the break-even point is
a. 16,000 units
b. 8,000 units
c. 6,000 units
d. 4,000 units
Answer:
In the absorption costing income statement, deduction of the cost of goods sold from
sales yields net profit.
a. True
b. False
Answer:
A job order cost accounting system provides for a separate record of the cost of each
particular quantity of product that passes through the factory.
a. True
b. False
Answer:
Timmer Corporation just started business in January. There were no beginning
inventories. During the year, it manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000, and fixed selling and administrative costs were
$6,000.
What would Timmer’s net income be for the year using variable costing?
a. $114,000
b. $110,000
c. $ 4,000
d. $106,000
Answer:
Total variable costs change as the level of activity changes.
a. True
b. False
Answer:
The profit margin component of rate of return on investment analysis focuses on
profitability by indicating the rate of profit earned on each sales dollar.
a. True
b. False
Answer:
Bryce Co. sales are $914,000, variable costs are $498,130, and operating income is
$196,000. What is the contribution margin ratio?
a. 52.2%
b. 28.4%
c. 54.5%
d. 45.5%
Answer:
The budgeted cell conversion cost rate includes which of the following?
a. only factory overhead
b. only direct labor and direct materials
c. direct labor, direct materials, and factory overhead
d. only direct labor and factory overhead
Answer:
Greyson Company produced 8,300 units of product that required 4.25 standard hours
per unit. Determine the standard fixed overhead cost per unit at 27,000 hours, which is
100% of normal capacity, if the favorable fixed factory overhead volume variance is
$14,895.
Answer:
Answer:
Strategy that focuses on reducing bottlenecks
Match the definitions that follow with the term (a’“e) it defines.
k. Opportunity cost
l. Sunk cost
m. Theory of constraints
n. Differential analysis
o. Product cost distortion
Answer:
A quality control activity analysis indicated the following four activity costs of a hotel.
Sales are $750,000 for the year. Prepare a cost of quality report.
Answer:
The Anazi Leather Company manufactures leather handbags and moccasins. The
company has been using the factory overhead rate method but has decided to evaluate
the multiple production department factory overhead rate to allocate factory overhead.
The factory overhead estimated per unit together with direct materials and direct labor
will help determine selling prices.
Handbags = 60,000 units, 3 hours of direct labor
Moccasins= 40,000 units, 2 hours of direct labor
Total budgeted factory overhead cost = $360,000
The company has two different production departments: Cutting and Sewing. The
Cutting Department has a factory overhead budget of $80,000. Each unit will require 1
direct labor hour or a total of 100,000 direct labor hours.
The Sewing Department estimates factory overhead in the amount of $280,000.
Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of
160,000 labor hours.
Calculate the total factory overhead to be allocated to each product using direct labor
hours.
Answer:
The length of time it will take to recover through cash inflows the dollars of a capital
outlay
Match the definition that follows with the term (a’“f) it defines.
ee. Capital rationing
ff. Annuity
gg. Capital investment analysis
hh. Internal rate of return method
ii. Payback period
jj. Accounting rate of return
Answer:
Prepare an income statement for the year ended December 31, through the gross profit
for Baxter Company using the following information. Baxter Company sold 8,600 units
at $125 per unit. Normal production is 9,000 units. (Do not round fixed overhead rate
calculation when determining fixed factory overhead volume variance.)
Answer:
Louis Company sells a single product at a price of $65 per unit. Variable costs per unit
are $45 and total fixed costs are $625,500. Louis is considering the purchase of a new
piece of equipment that would increase the fixed costs to $800,000, but decrease the
variable costs per unit to $42.
If Louis Company expects to sell 44,000 units next year, should they purchase this new
equipment?
Answer:
The cost of energy consumed in producing good units in the Bottling Department of
Mountain Springs Water Company was $36,850 and $39,060 for June and July,
respectively. The number of equivalent units produced in June and July was 55,000 and
62,000 liters, respectively. Evaluate the change in the cost of energy between the two
months.
Answer: