A process-oriented layout segments production facilities into functional departments.
a. True
b. False
Answer:
Fashion Jeans, Inc. sells two lines of jeans; Simple Life and Fancy Life. Simple Life
sells for $85, and Fancy Life sells for $100. The company sells all of its jeans on credit
and estimates that 60% is collected in the month of the sale, 35% is collected in the
following month, and the rest is considered to be uncollectible. The estimated sales for
Simple are: January, 20,000 jeans; February, 27,500 jeans; and March, 25,000 jeans.
The estimated sales for Fancy are: January, 18,000 jeans; February, 19,000; and March,
20,500 jeans. What are the expected cash receipts for the month of March?
a. $3,988,125
b. $2,505,000
c. $2,125,000
d. $4,175,000
Answer:
A cost that will not be affected by later decisions is termed a sunk cost.
a. True
b. False
Answer:
Differential analysis can aid management in making decisions on a variety of
alternatives, including whether to discontinue an unprofitable segment and whether to
replace usable plant assets.
a. True
b. False
Answer:
In contribution margin analysis, the effect of a difference in unit sales price or unit cost
on the number of units sold is termed the quantity factor.
a. True
b. False
Answer:
For a period during which the quantity of inventory at the end was larger than that at the
beginning, income from operations reported under variable costing will be smaller than
income from operations reported under absorption costing.
a. True
b. False
Answer:
A department store apportions payroll costs on the basis of the number of payroll
checks issued. Accounting costs are apportioned on the basis of the number of reports.
The payroll costs for the year were $231,000, and the accounting costs for the year
totaled $75,500. The departments and the number of payroll checks and accounting
reports for each are as follows:
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to
each department.
Answer:
The balance sheet data of Randolph Company for two recent years appears below:
(a) Using horizontal analysis, show the percentage change for each balance sheet item
using Year 1 as a base year.
(b) Using vertical analysis, prepare a comparative balance sheet.
Round percentages to one decimal place.
Answer:
When production departments differ significantly in their manufacturing process, it is
recommended that the single plantwide factory overhead rate be used for allocating
factory overhead.
a. True
b. False
Answer:
The ratio of fixed assets to long-term liabilities provides a measure of a firm’s ability to
pay dividends.
a. True
b. False
Answer:
Activity-based costing is much easier to apply than single plantwide factory overhead
allocation.
a. True
b. False
Answer:
In a process costing system, indirect materials are charged to Work in Process.
a. True
b. False
Answer:
The percent of fixed assets to total assets is an example of
a. vertical analysis
b. solvency analysis
c. profitability analysis
d. horizontal analysis
Answer:
If variable costs per unit increased because of an increase in hourly wage rates, the
break-even point would
a. decrease
b. increase
c. remain the same
d. increase or decrease, depending upon the percentage increase in wage rates
Answer:
The three categories of manufacturing costs comprising the total cost of work in process
are direct labor, direct materials, and
a. selling expenses
b. direct expenses
c. accounting salaries expense
d. factory overhead
Answer:
Which of the following costs is an example of a cost that remains the same in total as
the number of units produced changes?
a. direct labor
b. salary of a factory supervisor
c. units-of-production depreciation on factory equipment
d. direct materials
Answer:
Kilbuck Manufacturing operates in a lean manufacturing environment. Kilbuck’s actual
conversion costs for the month of May follow:
The journal entry to record May’s conversion costs will include:
a. a credit to Work in Process Inventory
b. a debit to Raw Materials Inventory
c. a credit to Raw and In Process Inventory
d. a debit to Raw and In Process Inventory
Answer:
In using the product cost concept of applying the cost-plus approach to product pricing,
selling expenses, administrative expenses, and profit are covered in the markup.
a. True
b. False
Answer:
Use of a plantwide factory overhead rate does not distort product costs when there are
differences in the factory overhead rates across different production departments.
a. True
b. False
Answer:
The Beauty Beyond Words 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:
Calculate the cost of services for a haircut.
a. $4.00
b. $7.50
c. $3.50
d. $11.50
Answer:
Which of the following is required by the Sarbanes-Oxley Act?
a. a price-earnings ratio
b. a report on internal control
c. a vertical analysis
d. a common-sized statement
Answer:
The ratio of income from operations to sales is termed the profit margin component of
the rate of return on investment.
a. True
b. False
Answer:
Total fixed costs change as the level of activity changes.
a. True
b. False
Answer:
An 8-year project is estimated to cost $400,000 and have no residual value. If the
straight-line depreciation method is used and the average rate of return is 5%, determine
the estimated annual net income.
Answer:
The Cavy Company accumulated 560 hours of direct labor on Job 345 and 800 hours on
Job 777. The direct labor was incurred at a rate of $20 per direct labor hour for Job 345
and $21 per direct labor for Job 777. Journalize the entry to record the flow of labor
costs into production.
Answer:
Information for the Nichols Manufacturing Company for the month of May is as
follows:
Prepare a cost of production report for the month of May, using the FIFO method.
Answer:
Sleep Tight manufactures comforters. The estimated inventories on January 1 for
finished goods, work in process, and materials were $39,000, $33,000, and $27,000,
respectively. The desired inventories on December 31 for finished goods, work in
process, and materials were $42,000, $35,000, and $21,000, respectively. Direct
material purchases were $575,000, direct labor was $212,000 for the year, and factory
overhead was $156,000. Prepare a cost of goods sold budget for Sleep Tight, Inc.
Answer:
If a company records inventory purchases at standard cost and also records purchase
price variances, prepare the journal entry for a purchase of widgets that were bought at
$7.45 per unit and have a standard cost of $7.15. The total amount owed to the vendor
for this purchase is $33,525.
Answer:
Income statement information for Lucy Company is provided below:
Prepare a vertical analysis of the income statement for Lucy Company.
Answer:
