Ratchford Clocks manufactures alarm clocks and wall clocks and allocates overhead
based on direct labor hours. The production process is set up in three departments:
Assembly, Finishing, and Calibrating. The following is information regarding the direct
labor used to produce one unit of the two clocks:
The budget includes the following factory overhead by department:
Ratchford Clocks is planning to manufacture 50,000 alarm clocks and 10,000 wall
clocks.
(a) Determine the total number of hours that will be needed by department.
(b) Determine the factory overhead rate by department using the multiple production
department factory overhead rate method.
(c) Determine the amount of factory overhead to be allocated to each unit of alarm
clocks and wall clocks.
(d) Determine the amount of total factory overhead to be allocated to the alarm clocks
and wall clocks.
The Ramapo Company produces two products, Blinks and Dinks. They are
manufactured in two departments, Fabrication and Assembly. Data for the products
and departments are listed below.
All of the machine hours take place in the Fabrication department, which has an
estimated overhead of $84,000. All of the labor hours take place in the Assembly
department, which has an estimated total overhead of $72,000.
The Ramapo Company uses a single overhead rate to apply all overhead costs based on
labor hours. What is the overhead cost per unit for Dinks?
a. $77.00
b. $39.00
c. $19.50
d. $59.92
The Central Division of the Nebraska Company has a rate of return on investment of
28% and a profit margin of 14%. What is the investment turnover?
a. 0.2
b. 2.0
c. 5.0
d. 0.5
Airflow Company sells a product in a competitive marketplace. Market analysis
indicates that the product would probably sell at $28.00 per unit. Airflow management
desires a profit equal to a 20% rate of return on invested assets of $1,400,000. Airflow
anticipates selling 50,000 units. The current full cost per unit for the product is $25 per
unit.
(a) What is the amount of profit per unit?
(b) What is the target cost per unit if Airflow meets the market dictated price and
management’s desired profit?
All lead times are considered to be value-added lead time.
a. True
b. False
A company manufactured 50,000 units of a product at a cost of $450,000. It sold 45,000
units at $15 each. The gross profit is
a. $750,000
b. $240,000
c. $600,000
d. $270,000
For higher levels of management, responsibility accounting reports
a. are more detailed than for lower levels of management
b. are more summarized than for lower levels of management
c. contain about the same level of detail as reports for lower levels of management
d. are rarely provided or reviewed
Which of the following would not be used in preparing a cash budget for October?
a. beginning cash balance on October 1
b. budgeted salaries expense for October
c. estimated depreciation expense for October
d. budgeted sales and collections for October
A manufacturing business reports just two types of inventory on its balance sheet: work
in process inventory and finished goods inventory.
a. True
b. False
The manufacturing cost of Calico Industries for three months of the year are provided
below:
Using the high-low method, the variable cost per unit and the total fixed costs are
a. $0.78 per unit and $4,000
b. $0.40 per unit and $8,000
c. $4.00 per unit and $800
d. $7.80 per unit and $4,000
Separate office staff
Match each of the following phrases as describing (a) an advantage, (b) a
disadvantage, or (c) neither of decentralization.
a. Advantage of decentralization
b. Disadvantage of decentralization
c. Neither an advantage or disadvantage
Hsu Company produces a part with a standard of 5 yards of material per unit. The
standard price of one yard of material is $8.50. During the month, 8,800 parts were
manufactured, using 45,700 yards of material at a cost of $8.30.
Determine the (a) price variance, (b) quantity variance, and (c) cost variance.
As production increases, the fixed cost per unit
a. increases
b. decreases
c. remains the same
d. either increases or decreases, depending on the variable costs
A variant of fiscal-year budgeting whereby a twelve-month projection into the future is
maintained at all times is termed
a. flexible budgeting
b. continuous budgeting
c. zero-based budgeting
d. master budgeting
Separation of businesses into more manageable operating units is termed
decentralization.
a. True
b. False
Accounting systems that use standards for product costs are called budgeted cost
systems.
a. True
b. False
In a lean environment, raw materials are delivered less frequently than in a traditional
environment.
a. True
b. False
Under absorption costing, which of the following costs would not be included in
finished goods inventory?
a. hourly wages of assembly worker
b. straight-line depreciation on factory equipment
c. overtime wages paid to factory workers
d. the salaries for salespeople
Under absorption costing, the cost of finished goods includes direct materials, direct
labor, and all factory overhead.
a. True
b. False
On January 1 of the current year, Townsend Co. commenced operations. It operated its
plant at 100% of capacity during January. The following data summarized the results
for January:
(a) Prepare an income statement using absorption costing.
(b) Prepare an income statement using variable costing.
The methods of evaluating capital investment proposals can be separated into two
general groups’”present value methods and
a. past value methods
b. straight-line methods
c. reducing value methods
d. methods that ignore present value
Given the following data:
Direct materials used is
a. $2,000
b. $4,000
c. $8,000
d. $14,000
If the standard to produce a given amount of product is 600 direct labor hours at $15
and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.
a. True
b. False