When products are completed, which of the following accounts is increased?
a. Raw Materials Inventory.
b. Work in Process Inventory.
c. Finished Goods Inventory.
d. Cost of Goods Sold.
If a company incurs a lot of different variable overhead costs and the activity base is
only slightly related to their consumption, which of the following statements is True?
a. The variable overhead efficiency variance will be meaningless.
b. The variable overhead spending variance will be meaningless.
c. Both the variable overhead efficiency variance and the variable overhead spending
variance will be meaningless.
d. None of these answer choices are correct.
The Melina Corporation has gathered the following data on its copy machine costs for
the first eight months of the year.
Required:
a.Prepare a scattergraph of the cost information and then choose a line that you believe
best represents the cost function. Represent your chosen line with a cost equation of the
form y = mx + . Show your calculations.
b.Using the high-low method, what is the variable cost per copy?
c.Using the high-low method, what is the fixed cost per month?
d.Using the high-low method, represent the cost function with a cost equation of the
form y = mx + .
e.Using your cost equation from part (d), provide your best estimate of the copy costs
for September if 68,000 copies will be made. Why does your estimate differ from the
$7,000 cost incurred in March, when 70,000 copies were made rather than 68,000?
Assume a sales price per unit of $20, variable cost per unit $16, and total fixed costs of
$168,000. What is the breakeven point?
a. 42,000 units
b. 10,500 units
c. $42,000
d. $10,500
Ans: a
In setting the direct labor quantity standard, allowances are made for such items as rest
time and machine down-time, based on estimates made by
a. Controller.
b. Engineering department.
c. Human resources department.
d. None of these answer choices are correct.
The decision to replace old equipment with new equipment can be analyzed by
a. Incremental analysis
b. Calculating the cost of each decision separately – keep or replace
c. Both incremental analysis and calculating the cost of each decision separately – keep
or replace
d. Neither incremental analysis nor calculating the cost of each decision separately –
keep or replace
The selling price of a unit is $20 and the variable product cost per unit is $14. In
addition, a sales commission of 5% is paid on each sale. If the variable cost per unit
(excluding sales commission)) increases by 1%, what will be the new total cost per
unit?
a. $14.84
b. $14.85
c. $14.90
d. $15.14
Mounce’s Market operates with a 20% contribution margin. If Mounce’s sales decrease
by $10,000, operating income will decrease by
a.$200
b.$250
c.$2,000
d.$2,500
The process of determining how much an amount of money to be received in the future
is worth today is called
a. Present value
b. Hurdling
c. Discounting
d. None of these answer choices are correct
Blanco Corporation ‘s Cajun Spice division has a segment margin is $432,500 for the
current reporting period. The division has an asset turnover of 1.6. Segment margin as a
percentage of sales is 10%. What is the division ‘s ROI?
a. 16%
b. 10%
c. 6%
d. The answer cannot be determined from the information given.
Answer the following questions regarding costing systems.
a. What is the difference between a normal costing system and a standard costing
system?
b. What adjustments are required at the end of each period for each?
c. What is an advantage of standard costing?
d. Are inventory and costs of goods sold accounts reported on financial statements at
actual cost or standard cost?
Measuring and evaluating performance is important to managers. They need to explore
how individual and performance measures and other measures can be combined to
create a better tool for measuring past performance and driving the future achievement
of strategic goals.
Required:
Define the following terms and give one example of each that you can use in this class.
a. Lagging indicator
b. Leading indicator
c. Nonfinancial measure
d. Benchmarking
e. Best practices
Hannah Corporation purchased merchandise totaling $180,000 during the year. At the
end of the year, the income statement showed $200,000 of cost of goods sold and
ending inventory to $40,000. What was Hannah’s inventory turnover?
Wil Wheaton, Kirk Enterprises’ controller, is preparing the financial statements for
2013. He has completed the comparative balance sheets and income statement, which
follow, and has gathered this additional information:
ï€ï€ On December 31, 2013, Kirk sold a piece of equipment with an original cost of
$25,000 for $10,000 cash. The equipment had a book value of $13,000.
ï€ï€ On February 1, 2013, Kirk issued $60,000 of common stock to raise cash in
anticipation of the purchase of a new building later in the year.
ï€ï€ On February 2, 2013, Kirk took out a ten-year $110,000 long-term loan to provide
the remaining funds needed to purchase the building.
ï€ï€ On May 15, 2013, Kirk paid $162,000 for the new building.
ï€ï€ The company paid a cash dividend of $9,500.
Required:
Using the indirect method, prepare Kirk Enterprises’ statement of cash flows for 2013.
The following labor standards have been set for a product:
The following data pertain to operations for the period.
Required
Calculate the direct labor rate and efficiency variances and indicate whether the
variances are favorable or unfavorable.
List three specific capital assets each of the following companies would acquire?
1> Toyota
2> Dole Pineapple Company
3> McDonalds
4> Delta Airlines
5> St. Jude’s Hospital
Determine the qualitative and quantitative impacts of special order pricing.
Burton Company’s current asset and liability balances for the past two years are as
follows. Net income for the year was $120,000 and depreciation expense was $15,000.
Required:
Using the indirect method, prepare the cash flows provided by operating activities
section of the statement of cash flows.
Brown Company makes copper fire pits. Each job is unique in size and design. Brown
has provided you with the following January 1, 2014 account balances.
During 2014, the following transactions occurred:
1> Brown purchased raw materials for $125,000 on account.
2> Brown used $150,000 of raw materials in production. Ninety percent were direct
materials and 10 percent were indirect materials.
3> $72,000 of direct labor and $30,000 of indirect labor was incurred and paid.
4> Other manufacturing overhead incurred and paid totaled $55,000.
5> Brown completed production on goods costing $275,000
6> Brown’s sales revenue was $520,000. All goods were sold on account.
7> Brown cost of goods sold was $330,000 before adjusting for over-/under-applied
overhead.
8> Brown applies overhead at 150% of direct labor cost.
9> Brown collected $530,000 from customers and paid $140,000 to vendors.
10> Brown closes over-/under-applied overhead to Cost of Goods Sold.a. Record the
transactions above in the appropriate T-accounts and calculate the ending balances.
b. Calculate total manufacturing costs.
The contribution margin ratio for Stanley Company is 25%. The breakeven point is
$200,000. If Stanley wishes to have operating income of $60,000, how much must the
company have in sales?
The goal in setting a transfer price is to maximize the benefits to both divisions
participating in the exchange.
The following table shows inventory balances, in units, for years 1, 2 and 3. Total fixed
costs were $20,000 for each of the last three years. The units in year 1 beginning
inventory were based on production of 500 units.
Required:
For each year, calculate the difference between absorption costing and variable costing
operating income. Indicate which costing system has the highest income each year.
Assume the LIFO method is used in year three.