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A backflush accounting system uses work in process inventories as control points
between each process step.
a. True
b. False
The difference between the standard cost of a product and its actual cost is called a
variance.
a. True
b. False
Earnings per share amounts are only required to be presented for income from
continuing operations and net income on the face of the statement.
a. True
b. False
Income statement information for Sadie Company is below:
Using vertical analysis of the income statement for Sadie Company, determine the gross
profit margin.
a. 100%
b. 66%
c. 34%
d. 29%
The factory superintendent's salary would be included as part of the cost of products
manufactured under the absorption costing concept.
a. True
b. False
The Thomlin Company forecasts that total overhead for the current year will be
$15,500,000 with 250,000 total machine hours. Year to date, the actual overhead is
$16,000,000 and the actual machine hours are 330,000 hours. The predetermined
overhead rate based on machine hours is
a. $48 per machine hour
b. $62 per machine hour
c. $45 per machine hour
d. $50 per machine hour
If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each)
and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75
each), the effect of the quantity factor on the change in contribution margin is:
a. $5,000 decrease
b. $5,000 increase
c. $5,750 increase
d. $5,750 decrease
In preparing flexible budgets, the first step is to identify the fixed and variable
components of the various costs and expenses being budgeted.
a. True
b. False
Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company
uses a single plantwide factory overhead rate for allocating overhead to products.
However, management is considering moving to a multiple department rate system for
allocating overhead. The following table presents information about estimated
overhead and direct labor hours.
Determine the overhead rate in the Painting Department for each unit of Product B if
Blue Ridge Marketing Inc. uses a multiple department rate system.
a. $49.60 per unit
b. $99.20 per unit
c. $28.80 per unit
d. $64.00 per unit
On the variable costing income statement, variable costs are deducted from contribution
margin to yield manufacturing margin.
a. True
b. False
Managers use managerial information to evaluate performance of a company's
operation.
a. True
b. False
The following information pertains to Dallas Company. Assume that all balance sheet
amounts represent both average and ending balance figures and that all sales were on
credit.
Assets
Liabilities and Stockholders' Equity
Income Statement
Sales $90,000
Cost of goods sold 45,000
Gross margin $45,000
Operating expenses 15,000
Net income $30,000
Number of shares of common stock
6,000
Market price of common stock $20
Dividends per share $1.00
Cash provided by operations $40,000
What is the rate earned on stockholders' equity?
a. 7.3%
b. 13.6%
c. 20.5%
d. 40.9%
Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12 per unit, respectively. The
desired ending inventory of Product A is 20% higher than its beginning inventory of
2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Total budgeted sales of both products for the year would be
a. $42,000
b. $200,000
c. $264,000
d. $464,000
Department E had 4,000 units in Work in Process that was 40% completed at the
beginning of the period at a cost of $12,500. 14,000 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 3,000 units were 75% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for materials if the average
cost method is used to cost inventories was
a. 15,650
b. 18,000
c. 17,250
d. 17,700
Which of the following activity bases would be the most appropriate for gasoline costs
of a delivery service?
a. number of truck drivers
b. total of miles driven
c. how many trucks are in service
d. number of packages picked up
Operating expenses directly traceable to or incurred for the sole benefit of a specific
department and usually subject to the control of the department manager are
a. miscellaneous administrative expenses
b. direct operating expenses
c. indirect expenses
d. fixed expenses
The debits to Work in Process'”Assembly Department for April, together with data
concerning production, are as follows:
All direct materials are placed in process at the beginning of the process and the
average cost method is used to cost inventories.
The materials cost per equivalent unit (to the nearest cent) for April is
a. $2.60
b. $2.81
c. $3.02
d. $2.26
Transformations Hair Salon uses an activity-based costing system in its beauty salon to
determine the cost of services. The salon has determined the costs of services by
activity as follows:
(a) Using the information provided, determine the cost of services for each of the
following services provided by the salon:
(b) If the company budgets 10,000 haircuts, 4,000 complete styles, 3,500 perms, and
5,500 highlights, determine the budget for cost of services.
Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is
an example of a fixed cost.
a. True
b. False
a process costing method that costs each period's equivalent units of work with that
period's costs per equivalent unit
Match each phrase that follows with the term (a-h) it describes.
a. direct labor and factory overhead
b. direct labor and direct materials
c. transferred in costs
d. equivalent units
e. process costing
f. job order costing
g. first-in, first-out method
h. cost of production report
Costs are transferred, along with the units, from one work in process inventory account
to the next in a process costing system.
a. True
b. False
