The following data is given for the Harry Company:
Overhead is applied on standard labor hours. (Round interim calculations to the nearest
cent.)
The direct labor time variance is
a. $6,000 favorable
b. $6,000 unfavorable
c. $33,000 unfavorable
d. $33,000 favorable
Answer:
Baker’s wages
Match the items below for a bakery to the type of cost (a-d).
a. Direct materials
b. Direct labor
c. Factory overhead
d. Non-manufacturing cost
Answer:
Costs of ending work in process inventory are included in the cost per equivalent unit
computation.
a. True
b. False
Answer:
If 16,000 units of materials enter production during the first year of operations, 12,000
of the units are finished, and 4,000 are 75% completed, the number of equivalent units
of production would be 15,000.
a. True
b. False
Answer:
applied overhead is more than actual overhead incurred
Match the following phrases with the term (a-g) that it most closely describes.
a. job order cost system
b. process cost system
c. activity-based costing
d. under applied overhead
e. over applied overhead
f. finished goods ledger
g. materials ledger
Answer:
Corporate annual reports typically do not contain
a. management discussion and analysis
b. an SEC statement expressing an opinion
c. accompanying notes
d. an auditor’s report
Answer:
Costs other than direct materials cost and direct labor cost incurred in the
manufacturing process are classified as
a. factory overhead cost
b. miscellaneous expense
c. product costs
d. period cost
Answer:
Assume in analyzing alternative proposals that Proposal F has a useful life of 6 years
and Proposal J has a useful life of 9 years. What is one widely used method to make the
net present values of the proposals comparable?
a. Ignore the fact that Proposal F has a useful life of 6 years and treat it as if it has a
useful life of 9 years.
b. Adjust the life of Proposal J to a time period that is equal to that of Proposal F by
estimating a residual value at the end of year 6.
c. Ignore the useful lives of 6 and 9 years and find an average (7 1/2 years).
d. Ignore the useful lives of 6 and 9 years and compute the average rate of return.
Answer:
In deciding whether to accept business at a special price, the short-run price should be
set high enough to cover all variable costs and expenses.
a. True
b. False
Answer:
The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability of this
investment:
The expected average rate of return for a proposed investment of $650,000 in a fixed
asset, with a useful life of 4 years, straight-line depreciation, no residual value, and an
expected total net income of $240,000 for the 4 years, is a. 13.9%
b. 36.9%
c. 18.5%
d. 9.25%
Answer:
If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are
$24, what is the break-even sale (units) if the variable costs are decreased by $2?
a. 2,127
b. 1,114
c. 2,340
d. 1,950
Answer:
A business operated at 100% of capacity during its first month and incurred the
following costs:
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the
month, what would be the amount of income from operations reported on the
absorption costing income statement?
a. $50,400
b. $70,000
c. $52,000
d. $68,400
Answer:
Which of the following is(are) reason(s) for easy identification and control of variable
manufacturing costs under the variable costing method?
a. variable and fixed costs are reported separately.
b. variable costs can be controlled by the operating management.
c. fixed costs, such as property insurance, are normally the responsibility of higher
management not the operating management.
d. All of the above are true.
Answer:
Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000,
respectively. Department 2 has transferred-in costs of $390,000 for the current period.
In addition, work in process at the beginning of the period for Department 2 totaled
$75,000, and work in process at the end of the period totaled $90,000. The journal entry
to record the flow of costs into Department 3 during the period is
a. Work in Process’”Department 3 Work in Process’”Department 2 375,000
375,000
b. Work in Process’”Department 3 Work in Process’”Department 2 570,000
570,000
c. Work in Process’”Department 3 Work in Process’”Department 2 490,000
490,000
d. Work in Process’”Department 3 Work in Process’”Department 2 555,000
555,000
Answer:
Production and sales estimates for June are as follows:
The number of units expected to be manufactured in June is a. 15,500
b. 17,500
c. 16,500
d. 13,500
Answer:
A process cost accounting system is best used by manufacturers of like units of product
that are not distinguishable from each other during a continuous production process.
a. True
b. False
Answer:
Falcon Inc. manufactures Product B, incurring variable costs of $15.00 per unit and
fixed costs of $70,000. Falcon desires a profit equal to a 12% rate of return on assets,
$785,000 of assets are devoted to producing Product B, and 100,000 units are expected
to be produced and sold.
(a) Compute the markup percentage, using the total cost concept.
(b) Compute the selling price of Product B.
Round your intermediate calculations and final answer to two decimal places.
Answer:
A project has estimated annual cash flows of $90,000 for 3 years and is estimated to
cost $250,000. Assume a minimum acceptable rate of return of 10%. Using the
following tables, determine the (a) net present value of the project and (b) the present
value index, rounded to two decimal places.
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.
Answer:
Which of the following costs incurred by a paper manufacturer would be included in
the group of costs referred to as conversion costs?
a. accounting department costs
b. raw lumber
c. assembly labor’s wages
d. administrative salaries
Answer:
The ratio of sales to invested assets is termed the investment turnover component of the
rate of return on investment.
a. True
b. False
Answer:
The Kaumajet Factory produces two products’”table lamps and desk lamps. It has two
separate departments – Finishing and Production. The overhead budget for the Finishing
Department is $550,000, using 500,000 direct labor hours. The overhead budget for the
Production Department is $400,000 using 80,000 direct labor hours.
If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of
production, what is the total amount of factory overhead the Kaumajet Factory will
allocate to table lamps using the multiple production department factory overhead rate
method with an allocation base of direct labor hours, if 75,000 units are produced?
a. $368,250
b. $540,000
c. $832,500
d. $475,000
Answer:
Production and sales estimates for June are as follows:
The number of units expected to be manufactured in June is a. 11,000
b. 12,500
c. 15,500
d. 13,500
Answer:
Department S had 500 units 60% completed in process at the beginning of the period;
9,000 units completed during the period; and 600 units 30% completed at the end of the
period. What was the number of equivalent units of production for the period for
conversion if the first-in, first-out method is used to cost inventories? Assume the
completion percentage applies to both direct materials and conversion cost.
a. 8,880
b. 9,300
c. 8,700
d. 9,000
Answer:
The financial budgets of a business include the cash budget, the budgeted income
statement, and the budgeted balance sheet.
a. True
b. False
Answer:
What is a capital expenditures budget?
Answer:
Prepare a monthly flexible selling expense budget for Cottonwood Company for sales
volumes of $300,000,
$350,000, and $400,000, based on the following data
Answer:
Sunrise Inc. is considering a capital investment proposal that costs $227,500 and has an
estimated life of 4 years and no residual value. The estimated net cash flows are as
follows:
The minimum desired rate of return for net present value analysis is 10%. The present
value of $1 at compound interest rates of 10% for 1, 2, 3, and 4 years is 0.909, 0.826,
0.751, and 0.683, respectively. Determine the net present value. Round interim answers
to the nearest dollar.
Answer:
Compute the standard cost for one pair of boots, based on the following standards for
each pair of boots:
Answer:
Revenue forgone from an alternative use of an asset
Match the definitions that follow with the term (a’“e) it defines.
f. Opportunity cost
g. Sunk cost
h. Theory of constraints
i. Differential analysis
j. Product cost distortion
Answer:
The following information was taken from the financial statement of Fox Resources for
December 31 of the current fiscal year:
The net income was $600,000, and the declared dividends on the common stock were
$125,000 for the current year. The market price of the common stock is $20 per share.
Answer:
The Finishing Department of Pinnacle Manufacturing Co. prepared the following
factory overhead cost budget for October of the current year, during which it expected
to operate at a 100% capacity of 10,000 machine hours.
During October, the plant was operated for 9,000 machine hours and the factory
overhead costs incurred were as follows: indirect factory wages, $16,400; power and
light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000; depreciation of
plant and equipment, $8,800; insurance and property taxes, $3,200.
Prepare a factory overhead cost variance report for October. (The budgeted amounts for
actual amount produced should be based on 9,000 machine hours).
Answer:
The following data (in thousands of dollars) have been taken from the accounting
records of Rayburn Corporation for the current year.
Answer:
Jimmy Co. is considering a 12-year project that is estimated to cost $1,050,000 and has
no residual value. Jimmy Co. seeks to earn an average rate of return of 18% on all
capital projects. Determine the necessary average annual income (using straight-line
depreciation) that must be achieved on this project for it to be acceptable to Jimmy Co.
Answer:
Keeton Company had the following data:
Calculate the cost of goods sold.
Answer: