All of the following are examples of indirect labor except
a. maintenance personnel
b. janitorial personnel
c. machine operators
d. plant managers
Answer:
A manager in a cost center also has responsibility and authority over the revenues.
a. True
b. False
Answer:
Some items are omitted from each of the following condensed divisional income
statements of Demi Inc.
Eastern Division Western Division Central Division
Sales $ (a) $420,000 $580,000
Cost of goods sold 480,000 120,000 (e)
Gross profit $230,000 $ (c) $200,000
Operating expenses 95,000 160,000 (f)
Income from operations $ (b) $ (d) $ 75,000
(a) Determine the amount of the missing items, identifying them by letter (a’“f).
(b) Based on income from operations, which division is the most profitable?
Answer:
Vendor quality
Identity the following by their type of quality cost.
a. Preventive costs
b. Appraisal costs
c. Internal failure costs
d. External failure costs
Answer:
The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s profit margin?
a. 20%
b. 80%
c. 44.4%
d. 18%
Answer:
Given the following data:
What is cost of goods sold? a. $152,000
b. $142,000
c. $10,000
d. $128,000
Answer:
Mallard Corporation uses the product cost concept of product pricing. Below is cost
information for the production and sale of 45,000 units of its sole product. Mallard
desires a profit equal to a 12% rate of return on invested assets of $800,000.
The dollar amount of desired profit from the production and sale of the company’s
product is
a. $105,840
b. $225,000
c. $96,000
d. $220,500
Answer:
Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000,
operating expenses of $43,000, and invested assets of $150,000.
What is the rate of return on investment for Division A?
a. 9.3%
b. 99.3%
c. 74.6%
d. 4.6%
Answer:
Methods that ignore present value in capital investment analysis include the internal
rate of return method.
a. True
b. False
Answer:
Sifton Electronics Corporation manufactures and assembles electronic motor drives for
video cameras. The company assembles the motor drives for several accounts. The
process consists of a lean cell for each customer. The following information relates only
to one customer’s lean cell for the coming year. Projected labor and overhead,
$7,370,000; materials costs, $28 per unit. Planned production included 4,000 hours to
produce 27,500 motor drives. Actual production for August was 1,600 units, and motor
drives shipped amounted to 1,380 units.
From the foregoing information, determine the manufacturing cost per unit.
a. $240.00
b. $268.00
c. $296.00
d. $1,870.50
Answer:
Lubricants used on the bar stool manufacturing equipment
Bartel Corporation produces bar stools for restaurants. Indicate whether the cost
would typically be considered direct or indirect cost for the cost object given.
a. Direct
b. Indirect
Answer:
The estimated total factory overhead cost and total machine hours for Department 40
for the current year are $250,000 and 56,250, respectively. During January, the first
month of the current year, actual machine hours used totaled 5,100 and factory
overhead cost incurred totaled $22,000.
(a) Determine the factory overhead rate based on machine hours.
(b) Present the entry to apply factory overhead to production in Department 40 for
January.
(c) What is the balance of Factory Overhead’”Department 40 at January 31?
(d) Does the balance of Factory Overhead’”Department 40 at January 31 represent over
applied or under applied factory overhead?
Round total cost to nearest dollar value.
Answer:
Bentz Co. has two divisions, A and B. Invested assets and condensed income statement
data for each division for the year ended December 31, are as follows:
(a) Prepare condensed income statements for the past year for each division.
(b) Using the DuPont formula, determine the profit margin, investment turnover, and
rate of return on investment for each division. Round the profit margin percentage to
two decimal places and investment turnover to four decimal places.
Answer:
All of the following are characteristics of a process cost system except
a. the system may use several work in process inventory accounts
b. manufacturing costs are grouped by department rather than by jobs
c. the system accumulates costs per job
d. the system emphasizes time periods rather than the time it takes to complete a job
Answer:
Internal price wars
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
Answer:
The following production data were taken from the records of the Finishing Department
for June:
What is the number of material equivalent units of production in the June 30, Finishing
Department inventory, assuming that the first-in, first-out method is used to cost
inventories and materials were added at the beginning of the process?
a. 7,000 units
b. 68,000 units
c. 72,000 units
d. 76,000 units
Answer:
costing system used by a company producing computer chips
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
Answer:
Gilbert’s expects its September sales to be 20% higher than its August sales of
$150,000. Manufacturing costs were $100,000 in August and are expected to be
$120,000 in September. All sales are on credit and are collected as follows: 30% in the
month of the sale and 70% in the following month. Payments of manufacturing costs
are as follows: 25% in the month of production and 75% in the following month. The
beginning cash balance on September 1 is $7,500. The ending balance on September 30
would be
a. $61,500
b. $75,000
c. $72,300
d. $71,500
Answer:
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.
Using the tables above, what would be the internal rate of return of an investment of
$210,600 that would generate an annual cash inflow of $50,000 for the next 5 years?
a. 6% b. 10% c. 12% d. 14%
Answer:
Record the journal entries for the following transactions:
1) March 10: 500 units of raw materials were purchased on account at $4.00 per unit.
2) March 15: 250 units of raw materials were requisitioned at $4.50 per unit for
production, Job 872.
3) March 25: 215 units of raw materials were requisitioned at $5.00 per unit for
production, Job 879.
Answer:
Proposals L and K each cost $600,000, have 6-year lives, and have expected total cash
flows of $720,000. Proposal L is expected to provide equal annual net cash flows of
$170,000, while the net cash flows for Proposal K are as follows:
Determine the cash payback period for each proposal. Round your answers to two
decimal places.
Answer:
The Grant Company has sales of $300,000, and the break-even point in sales dollars if
$225,000. Determine the company’s margin of safety percentage.
Answer:
Steven Company has fixed costs of $160,000. The unit selling price, variable cost per
unit, and contribution margin per unit for the company’s two products are provided
below.
The sales mix for product X and Y is 60% and 40%, respectively. Determine the
break-even point in units of X and Y.
Answer:
At the beginning of the period, the Molding Department budgeted direct labor of
$33,000 and supervisor salaries of $24,000 for 3,000 hours of production. The
department actually completed 2,500 hours of production. Determine the budget for the
department assuming that it uses flexible budgeting?
Answer:
Prepare a flexible budget for Cedar Jeans Company using production levels of 16,000,
18,000, and 20,000 units produced. The following is additional information necessary
to complete the budget:
Variable costs:
Direct labor ($6.00 per unit) Direct materials ($8.00 per unit)
Variable manufacturing costs ($2.50 per unit)
Fixed costs:
Answer:
Net present value method
Match the methods that follow with the correct category (a’“b).
g. Methods that does not use present value
h. Methods that uses present value
Answer:
The process by which management allocates funds among various capital investment
proposals
Match the definition that follows with the term (a’“f) it defines.
g. Capital rationing
h. Annuity
i. Capital investment analysis
j. Internal rate of return method
k. Payback period
l. Accounting rate of return
Answer:
Proposals M and N each cost $550,000, have 6-year lives, and have expected total cash
flows of $750,000. Proposal M is expected to provide equal annual net cash flows of
$125,000, while the net cash flows for Proposal N are as follows:
Determine the cash payback period for each proposal.
Answer:
