ACC 255 | Course Paper

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Four common cost behavior patterns that serve as the foundation for cost-volume-profit

analysis are

a.Variable cost, fixed cost, mixed cost, and step cost.

b.Variable cost, fixed cost, selling cost, and administrative cost.

c.Cost of goods sold, period cost, other cost, and depreciation.

d.Selling cost, administrative cost, cost of goods sold, and depreciation.

Managerial accounting is used by managers to

a.Plan.

b.Evaluate.

c.Control.

d.All of these answer choices are correct.

Morgan Creations sells monogrammed baby blankets. The blankets sell for $36 each.

Variable costs are $12 per blanket and fixed costs total $45,000. Morgan wishes to have

operating income of $9,000.

Required:

a. How many blankets must Morgan sell to meet her target operating income?

b. If Morgan can cut her fixed cost by 20%, to reach her target income how many

blankets will she need to sell?

Which of the following is a similarity between job order costing and process costing

systems?

a. Both accumulate product costs throughout the production process and assign those

costs to individual units of production

b. Both track individual product costs

c. Both accumulate product costs in each production department during the period

d. Both accumulate costs on a job cost sheet

Adobe Company produces electric lawn mowers suitable for home and industrial use.

During the year Adobe produced 54,000 mowers, using 163,000 direct labor hours.

Adobe’s fixed overhead rate is $12 per direct labor hour and the company budgeted

166,500 direct labor hours. Actual fixed overhead for the year was $1,996,000. What is

Adobe’s fixed overhead spending variance?

a. $2,000 unfavorable

b. $2,000 favorable

c. $40,000 favorable

d. $42,000 favorable

Wrightsville Beach Company produces ice packs and various sizes of cooler bags. The

Lunch Box division would like to buy 125,000 units from the Ice Pack division, which

currently has excess capacity of 250,000 units. The ice packs are normally sold for

$1.65. The Ice Pack division ‘s variable cost per pack is $.95 and fixed cost per pack are

$.30. The ice packs could be purchased from another company for $1.75. Both the Ice

Pack and the Lunch Box divisions are operated as profit centers. If Wrightsville Beach

Company choses to use a cost-plus-based transfer price based on variable cost for the

ice packs, what transfer price would the company use assuming a 20% markup?

a. $1.14

b. $1.25

c. $1.65

d. $1.75

Buttermilk Bakery has provided the following cost data for the last year when 5,000

Danish pastries were produced and sold.

Required:

a. How many units would the company need to sell to earn $3,000 in operating income?

b. How many units would the company need to sell to earn $1,000 in net income if the

tax rate is 20%?

Noble Corporation had sales of $3,000,000 and operating income of $500,000. Noble

also had $900,000 of assets on January 1 and $800,000 on December 31. What is the

corporation ‘s ROI for the year?

a. 26.7%

b. 35.3%

c. 58.8%

d. 59.9%

Mounce Corporation leases a color copier for a monthly fee of $75 plus a charge of

$0.02 per copy. Mounce’s copy cost is classified as a:

a.Variable cost.

b.Fixed cost.

c.Step variable cost.

d.Mixed cost.

The first step in implementing an activity-based costing system begins with

a. Developing activity cost pools

b. Identifying activities

c. Calculating activity cost pool rates

d. Calculate the unit product cost

You are considering moving off campus. You have found a two-bedroom apartment for

$1,200 per month, but you cannot afford that much rent. You are considering inviting up

to three of your friends to become your roommates. The relationship between the

number of roommates, the total cost, and the cost per person is:

This is an example of

a.A fixed cost.

b.A variable cost.

c.A mixed cost.

d.A step cost.

The flexible budget breaks down into the price and quantity variances for direct

materials. Required: a. List two reasons why actual prices might differ from standard

prices, resulting in a direct materials price variance. b. List two reasons why actual

materials usage might differ from standard material usage, resulting in a direct materials

quantity variance.

Hobart Company manufactures patio umbrellas. The direct labor standard for each

umbrella is 1.25 direct labor hours at a standard rate of $12.00 per hour. During June,

Hobart used 36,000 direct labor hours to produce 30,000 umbrellas. Hobart’s direct

labor payroll totaled $428,400. What is Hobart’s direct labor efficiency variance for

November?

a. $3,600 unfavorable

b. $3,600 favorable

c. $18,000 favorable

d. $18,000 unfavorable

R&N Manufacturing produces music boxes. This year’s budget was based on the

production of 3,000 music boxes using a standard of 3 direct labor hours per music box

and $3.10 variable overhead per direct labor hour. R&N incurred 9,500 hours to

produce 2,950 music boxes. If actual variable overhead for the year is $32,000, what is

R&N’s variable overhead spending variance?

a. $2,550 favorable

b. $2,550 unfavorable

c. $4,100 favorable

d. $4,100 unfavorable

Which of the following is not one of the top ten reasons companies outsource their

operations?

a. Releases capital funds for use in other projects

b. Always less costly to outsource

c. Provides external expertise to improve difficult-to-manage processes

d. Accelerates the benefits of process reengineering

Compute product costs using a job order costing system.

Evaluate an operating segment or project using return on investment.

Companies that carry a high level of fixed costs relative to variable costs are considered

to have greater risk than companies with a high level of variable costs relative to fixed

costs.

Candi ‘s Wholesale Foods specializes in providing hors d’oeuvres at a wholesale price to

pastry cream, 8 ladyfinger cookies, and 2 cups of fruit (strawberries, raspberries, or

cost is $0.80 per pint of pastry cream, $0.90 for a box of 24 ladyfingers, and $0.25 for a

one person 4 minutes preparation time and 2 minutes of packaging time for one batch of

labor cost.

Required:

Companies that use job order costing often have under- or overapplied overhead.

Discuss three reasons to apply overhead and explain how overhead is applied. Give two

reasons why overhead might be under- or overapplied and discuss the two methods

companies use to dispose of over- or underapplied overhead.

Ans :

Because overhead is not easily traceable back to a job, overhead must be divided among

the different jobs or products during the year. Dividing or allocating overhead to various

jobs is called overhead application. Three additional reasons to allocate overhead are

(1) the amount of overhead actually incurred may not be known at the time a job is

being worked on, (2) some overhead costs are seasonal and should be spread over

production for the entire year, and (3) fixed manufacturing overhead costs are not

related to the number of units products and should be spread among all units produced.

Overhead is applied using a predetermined overhead rate. The rate is calculated by

dividing the estimated overhead costs for the period by the total estimated application

base. Reasons why overhead does not equal actual overhead might be that the estimated

overhead failed to include some items that would be incurred or included some items

that should not be incurred, the application base was not appropriate (did not drive

overhead costs), or that unexpected actual overhead occurred. If manufacturing

overhead is over-applied or under-applied, the balance is closed at the end of the period

by increasing or decreasing Cost of Goods Sold if the amount is insignificant and

pro-rated among Work-in-Process, Finished Goods and Cost of Goods Sold if the

amount is large.

List the three tests of an ethical business decision posed by the Institute of Business

Ethics.