Prime costs are the combination of direct labor costs and factory overhead costs.
a. True
b. False
Electricity purchased to operate factory machinery would be included as part of the cost
of products manufactured under the absorption costing concept.
a. True
b. False
If a company uses a process costing system to account for the costs in its five
production departments, how many work in process accounts will it use?
a. 6
b. 5
c. 4
d. 2
When a plantwide factory overhead rate is used, overhead costs are applied to all
products by a single rate.
a. True
b. False
At the beginning of the current year, the Grant Company’s work in process inventory
account had a balance of $30,000. During the year, $68,000 of direct materials were
used in production, and $66,000 of direct labor costs were incurred. Factory overhead
for the year amounted to $90,000. Cost of goods manufactured is $230,000. The
balance in work in process inventory on December 31 is
a. $24,000
b. $44,000
c. $66,000
d. $36,000
In contribution margin analysis, the increase or decrease in unit sales price or unit cost
on the number of units sold is referred to as the:
a. sales factor
b. cost of goods sold factor
c. quantity factor
d. unit price or unit cost factor
If 10,000 units that were 50% completed are in process at November 1, 90,000 units
were completed during November, and 20,000 were 20% completed at November 30,
the number of equivalent units of production for November was 90,000. (Assume no
loss of units in production and that inventories are costed by the first-in, first- out
method.)
a. True
b. False
Production estimates for July are as follows:
Estimated inventory (units), July 1 8,500
Desired inventory (units), July 31 10,500
Expected sales volume (units), July 76,000
For each unit produced, the direct materials requirements are as follows:
Direct material A ($5 per lb.) 3 lbs.
Direct material B ($18 per lb.) 1/2 lb.
The total direct materials purchases of materials A and B (assuming no beginning or
ending material inventory) required for July production is
a. $1,080,000 for A; $648,000 for B
b. $1,080,000 for A; $1,296,000 for B
c. $1,170,000 for A; $702,000 for B d. $1,125,000 for A; $675,000 for B
Ralston Company has income from operations of $75,000, invested assets of $360,000,
and sales of $790,000.
Use the DuPont formula to calculate the rate of return on investment, and show (a) the
profit margin, (b) the investment turnover, and (c) rate of return on investment. Round
the profit margin percentage to two decimal places and the investment turnover to three
decimal places.
In a process costing system, a separate work in process inventory account is maintained
for each customer’s job.
a. True
b. False
The profit margin for Division C is 6% and the investment turnover is 1.2. What is the
rate of return on investment for Division B?
a. 20%
b. 6.7%
c. 7.3%
d. 7.2%
Responsibility accounting reports for profit centers are normally in the form of income
statements.
a. True
b. False
Heart Company has two divisions. Division A is interested in purchasing 10,000 units
from Division B. Capacity is available for Division B to produce these units. The
per’“unit market price is $30 per unit, with a variable cost of $25. The manager of
Division A has offered to purchase the units at $22 per unit. In an effort to make this
transfer price beneficial for the company as a whole, what is the range of prices that
should be used during negotiations between the two divisions?
a. $22 to $30
b. $22 to $25
c. over $30
d. $25 to $30
Which of the following is a product cost?
a. salary of a sales manager
b. advertising for a particular product
c. drill bits for a drill press used in the plant assembly area
d. salary of the company receptionist
Myers Corporation has the following data related to direct materials costs for
November: actual costs for 5,000 pounds of material at $4.50; and standard costs for
4,800 pounds of material at $5.10 per pound.
What is the direct materials quantity variance?
a. $1,020 favorable
b. $1,020 unfavorable
c. $900 favorable
d. $900 unfavorable
At the end of the period, Carson Company had the following balances in selected
accounts:
Cavy Company completed 26,000 units during the year at a cost of $2,139,800. The
beginning finished goods inventory was 5,000 units valued at $405,000. Assuming a
FIFO cost flow, determine the cost of goods sold for 20,000 units.
Jamison Company produces and sells Product X at a total cost of $25 per unit, of which
$15 is product cost and $10 is selling and administrative expenses. In addition, the total
cost of $25 is made up of $14 variable cost and $11 fixed cost. The desired profit is $5
per unit. Determine the markup percentage on total cost.
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in
the month following the sale. Sales on account are budgeted to be $150,000 for March
and receipts from sales on account total $162,500 in April. What are budgeted sales on
account for April?
Compute the direct labor rate and time variances for Taylor Company.
The following data is given for the Taylor Company:
Overhead is applied based on standard labor hours.
An investment of $185,575 is expected to generate returns of $65,000 per year for each
of the next 4- years. What is the investment’s internal rate of return?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.