Romano Company
The following information pertains to Romano Company for September:
Romano Company applies overhead for Job #323 at 140 percent of direct labor cost and
at 150 percent of direct labor cost for Jobs #325 and #401. The total cost of Jobs #323
and #325 is identical.
Refer to Romano Company Assume that Jobs #323 and #401 are incomplete at the end
of September. What is the balance in Work in Process Inventory at that time?
a. $18,920
b. $22,620
c. $28,920
d. $30,120
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume the material cost per EUP is $8.00
and the conversion cost per EUP is $15 in Decorating. What is the cost of completing
the units in beginning inventory?
a. $ 960
b. $ 1,380
c. $ 1,860
d. $11,940
Which of the following would be considered a discrete loss in a production process?
a. adding the correct ingredients to make a bottle of ketchup
b. putting the appropriate components together for a stereo
c. adding the wrong components when assembling a stereo
d. putting the appropriate pieces for a bike in the box
____ is a characteristic of a company that is best suited for open-book management.
a. Large size
b. Decentralized management
c. Centralized management
d. Service-oriented
Chandler Industries has two departments. Department 1 uses FIFO costing and
Department 2 uses weighted average.
Units are introduced into the process in Department 1 (this is the only material added in
Department 1). Spoilage occurs continuously through the department and normal
spoilage should not exceed 10 percent of the units started.
Department 2 adds material (packaging) at the 75 percent completion point; this
material does not cause an increase in the number of units being processed. A quality
control inspection takes place when the goods are 80 percent complete. Spoilage should
not exceed 5 percent of the units transferred in from Department 1.
The following production cost data are applicable for operations for August of the
current year:
*This may not be the same amount determined for Department 1; ignore any difference
and use this figure.
Required:
A purpose of standard costing is to
a. replace budgets and budgeting.
b. simplify costing procedures.
c. eliminate the need for actual costing for external reporting purposes.
d. eliminate the need to account for year-end underapplied or overapplied
manufacturing overhead.
Abnormal spoilage can be
a. yes no
b. no no
c. yes yes
d. no yes
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Using the step method, what amount of Administration
costs is allocated to A (round to the nearest dollar)?
a. $72,973
b. $291,892
c. $145,946
d. $389,189
Joplin Corporation produces three products from a common manufacturing process.
The total joint cost of producing 2,000 pounds of Product A; 1,000 pounds of Product
B; and 1,000 pounds of Product C is $7,500. Selling price per pound of the three
products are $15 for Product A; $10 for Product B; and $5 for Product C. Joint cost is
allocated using the sales value method.
Required:
If a firm produces more units than it sells, absorption costing, relative to variable
costing, will result in
a. higher income and assets.
b. higher income but lower assets.
c. lower income but higher assets.
d. lower income and assets.
The three primary inventory accounts in a manufacturing company are
a. Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
b. Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory.
c. Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
d. Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.
Life-cycle costing is especially important in which of the following types of
companies?
a. yes yes yes yes
b. no yes yes no
c. yes no no yes
d. yes no yes yes
If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and
overhead is applied on a DLH basis, a(n)
a. favorable variable overhead spending variance exists.
b. favorable variable overhead efficiency variance exists.
c. favorable volume variance exists.
d. unfavorable volume variance exists.
In a joint costing process, which of the following would not be considered a sunk cost?
a. direct material cost
b. direct labor cost
c. joint cost
d. costs incurred to further refine a product created by the process
Epplin Company
The following information is provided for Epplin Company for the month of
September:
Refer to Epplin Company. What is the volume variance?
a. $590 U
b. $590 F
c. $190 F
d. $190 U
A service organization would be most likely to use a predetermined overhead rate based
on
a. machine hours.
b. standard material cost.
c. direct labor.
d. number of complaints.
Patterson Publishers is considering an investment that would require an initial cash
outlay of $400,000 and would have no salvage value. The project would generate
annual cash inflows of $75,000. The firm’s discount rate is 8 percent. How many years
must the annual cash flows be generated for the project to generate a net present value
of $0? Present value tables or a financial calculator are required.
a. between 5 and 6 years
b. between 6 and 7 years
c. between 7 and 8 years
d. between 8 and 9 years
In the formula y = a + bX, y represents
a. fixed costs.
b. total cost.
c. variable costs.
d. mixed costs.
Glassman Company
Glassman Company produces two products: A and B. The company has three overhead
functions that are required for both products.
Below is production information for Products A and B:
The company produces 800 units of Product A and 8,000 units of Product B each
period.
The overhead functions have the following hourly costs:
Refer to Glassman Company If total overhead is assigned to A and B on the basis of
overhead activity hours used, the total product cost per unit assigned to Product B will
be
a. $115.50
b. $73.32
c. $34.60
d. None of the responses are correct.
Which of the following would be leastlikely to be supported by subsidiary accounts or
ledgers in a company that employs a job-order costing system?
a. Work in Process Inventory
b. Raw Material Inventory
c. Accounts Payable
d. Supplies Inventory
Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit. Standard
capacity is 100,000 units per year; 100,000 units were produced and 80,000 units were
sold during the year. Manufacturing costs and selling and administrative expenses are
presented below.
There were no variances from the standard variable costs. Any under- or overapplied
overhead is written off directly at year-end as an adjustment to cost of goods sold.
Hahn Corporation had no inventory at the beginning of the year.
Refer to Hahn Corporation. What is the net income under variable costing?
a. $50,000
b. $80,000
c. $90,000
d. $120,000
The formula for a chemical compound requires one pound of Chemical X and one
pound of Chemical Y. One pound of Chemical X is processed in Department A and
transferred to Department B for further processing where one pound of Chemical Y is
added when the process is 50 percent complete. When the processing is complete in
Department B, the finished compound is transferred to finished goods. The process is
continuous, operating 24 hours a day.
Normal spoilage occurs in Department A. Five percent of material is lost in the first few
seconds of processing. No spoilage occurs in Department B.
The following data are available for the month of October:
Required:
a. Prepare a schedule showing finished equivalents for Chemical X and conversion for
Department A using the FIFO method.
b. Determine for Department B the number of units of good product completed during
October and the number of units in process on October 31.
c. Prepare a schedule for Department B showing finished equivalents for preceding
department cost, cost of Chemical Y, and conversion cost using the FIFO method.
An example of a recurring short-term plan is
a. a probable product line change.
b. expansion of plant and facilities.
c. a unit sales forecast.
d. a change in marketing strategies.
A management decision may be beneficial for a given profit center, but not for the
entire company. From the overall company viewpoint, this decision would lead to
a. goal congruence.
b. centralization.
c. suboptimization.
d. maximization.
Most managers evaluate decision alternatives based on how
a. much the decision will increase or decrease organizational profits.
b. the outcomes may affect selected performance measurement and reward criteria.
c. much the outcome will reduce the organization’s cost of capital.
d. easily the decision impacts can be quantified in the organization’s cost management
system.
Ellis Retail
Ellis Retail is considering an investment in a delivery truck. Ellis has found a used truck
that he can purchase for $8,000. He estimates the truck would last six years and
increase his store’s net cash revenues by $2,000 per year. At the end of six years, the
truck would have no salvage value and would be discarded. Ellis will depreciate the
truck using the straight-line method.
Refer to Ellis Retail. What is the payback period on the investment in the new truck?
a. 12 years
b. 6 years
c. 4 years
d. 2 years
Benchmarking
a. yes no
b. no yes
c. yes yes
d. no no
The net present value method assumes that all cash inflows can be immediately
reinvested at the
a. cost of capital.
b. discount rate.
c. internal rate of return.
d. rate on the corporation’s short-term debt.
Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of product.
Each unit should take 4 direct labor hours. Bailey Corporation applies variable
overhead to production on a direct labor hour basis. The variable overhead efficiency
variance
a. will be unfavorable.
b. will be favorable.
c. will depend upon the capacity measure selected to assign overhead to production.
d. is impossible to determine without additional information.
Treasures Company manufactures picture frames of all sizes and shapes and uses a
job-order costing system. There is always some spoilage in each production run. The
following costs relate to the current run:
The actual cost of a spoiled picture frame is $7.00. During the year 170 frames are
considered spoiled. Each spoiled frame can be sold for $4. The spoilage is considered a
part of all jobs.
Required:
a. Labor hours are used to determine the predetermined overhead rate. What is the
predetermined overhead rate per direct labor hour?
b. Prepare the journal entry needed to record the spoilage.
c. Prepare the journal entry if the spoilage relates only to Job #12 rather than being a
part of all production runs.
Three methods of job-cost valuation are normal, standard, and
Briefly discuss the six steps in the allocation process.
Kennedy Company
The following information is available for Kennedy Company for March of the current
year. All materials are added at the start of production.
Refer to Kennedy Company. Prepare a cost of production report for March using FIFO.
Discuss the relationship between benchmarking and total quality management (TQM).
A flexible budget is a planning document that presents expected variable and fixed
overhead costs at different activity levels.
Burns Corporation
Information relating to the current operations of Burns Corporation follows:
Refer to Burns Corporation. Burns’s break-even point was 1,000 units. Compute Burns’s
sales price per unit.
When a relationship between one independent variable and one dependent variable is
analyzed, the regression is referred to as ____________________.
Incremental analysis focuses on factors that change from one decision to another.
ABC has been criticized for a variety of reasons. Discuss these criticisms.
Using FIFO costing, equivalent units of production (EUP) can be determined by
subtracting EUP’s in Beginning work in process from weighted average EUP.
In a _________________________________ project situation, if one project is chosen,
all related projects are also chosen.
The usage variance reflects the difference between the quantity of inputs used and the
standard quantity allowed for the output of a period.
The theory that the flow of goods through a production process cannot be at a faster
rate than the slowest constraint in the process is known as
________________________________________.
Building depreciation is generally considered an organizational or facility cost.