The master budget is an example of a flexible budget.
Manufacturing Overhead is a temporary account that must have a zero balance at the
end of the accounting period.
The inventories used in a process costing system are the same as those used in a job
order costing system.
The first step in calculating the net present value of a product is to determine the
appropriate discount rate.
Selling expenses are expenses that are associated with only the delivery of products to
the customer.
The matching principle states that expenses should be matched with the revenues they
generate.
The direct labor quantity standard is the number of products that can be produced in one
hour.
The option of accepting a special order should always be chosen if the price exceeds the
relevant costs to produce and deliver the order to the customer.
The return on common stockholders’ equity measures
a. How well operations have provided funds to common stockholders.
b. How well the funds provided by common stockholders have been used to generate a
return for the company.
c. How well the funds provided by common stockholders have been converted to cash.
d. None of these answer choices are correct.
The payback period measures
a. The present value of an investment.
b. The actual cost of an investment.
c. The time, in years, for an investment to return the original amount of invested capital.
d. None of these answer choices are correct.
The amount of manufacturing overhead applied to a particular job is calculated as
a. (predetermined overhead rate) x (budgeted activity level of application base).
b. (predetermined overhead rate) x (actual activity level of application base).
c. (predetermined overhead rate) x (budgeted total manufacturing overhead).
d. (predetermined overhead rate) x (actual total manufacturing overhead).
Backyard Creations purchased 7,200 feet of copper tubing at a price of $2.60 per foot
and used 7,500 feet during the period. The standard price of the copper tubing was
$2.70 per foot. What is Backyard Creations’ direct materials price variance for the
period?
a. $720 favorable
b. $720 unfavorable
c. $750 favorable
d. $750 unfavorable
Assume sales of $10,000, variable costs of $7,000, and fixed costs of $2,000. Calculate
contribution margin and operating income.
a.Contribution margin = $3,000; Operating income = $1,000
b.Contribution margin = $5,000; Operating income =$1,000
c.Contribution margin = $8,000; Operating income = $1,000
d.Contribution margin = $6,000; Operating income = $1,000
You and two friends decide to rent an apartment off campus. You have found an
apartment for $750 per month. You and your two friends will share the rent equally.
This is an example of a
a.Fixed cost.
b.Variable cost.
c.Mixed cost.
d.Step cost.
If the amount of overapplied or underapplied manufacturing overhead is small, most
companies will generally make an adjustment to
a. Work in Process Inventory.
b. Finished Goods Inventory.
c. Cost of Goods Sold.
d. All of these answer choices are correct.
The process of using activity-based costing information to manage a business’s
activities, and thus its costs, is called
a. Activities’ management.
b. Product management.
c. Activity-based management.
d. None of these answer choices are correct..
When does a traceable fixed cost become a common cost?
a. When it is at a lower level than where it is incurred.
b. When it is at a higher level than where it is incurred.
c. A traceable fixed cost is always a common cost at another level.
d. A traceable fixed cost is never a common cost at another level.
Windows of the World (WOW) produces decorative windows in several styles and
finishes. The company uses a job order costing system to accumulate product costs.
Because much of the production process is automated, WOW has selected machine
hours as its overhead application base.
In May, WOW worked on three jobs. Job 69 was started in April and completed and
delivered to customers in May. Job 70 was started and finished in May, and at the end
of May, the windows from the job were in the warehouse. Job 71 was started but not
completed at the end of May.
Required
a. Calculate the total manufacturing cost for May.
b. Calculate the total cost of each of the three jobs as of the end of May.
c. Calculate the balance in the Work in Process Inventory account at the end of May.
d. Calculate the cost of goods manufactured for May.
e. Calculate the Cost of Goods Sold for May.
f. Calculate the Finished Goods Inventory balance at the end of May.
Your friend who has had the first accounting course understands the items that appear
on the balance sheet and income statement. However, when you told her your
homework involved preparing a Schedule of Cost of Goods Manufactured she was
confused and ask if that was the cost of goods sold that appears on the income
statement. Explain to your friend the purpose of the Schedule of Cost of Goods
Manufactured, how it is prepared, and its relationship to the balance sheet and income
statement.
As a service to the public, the accounting department at a major university provides
speakers for budgeting seminars at functions such as club meetings, couples ‘ retreats,
and at several local half-way houses and women ‘s shelters. Speakers, who hold
doctorate degrees in accounting, are paid by the college of business an hourly rate of
$75 plus fringe benefits estimated at 30% of their hourly rate. Since all speaking
engagements are in the local area, speakers are paid 10% of their hourly rate for
transportation costs. Speakers are paid for their speaking time plus their travel and
preparation time. The standard time estimated for each speaking engagement is 1 hour
and 30 minutes.
Required:
Calculate the standard cost for each engagement.
Changing a company’s cost structure affects its operating leverage and may have
behavioral implications for the employees.
Assume your roommate is a management major and must take this course next
semester. You have explained some of the things you have learned thus far, but your
roommate states, “I don ‘t know why I would need to know anything about managerial
accounting! I am not an accounting major and will NEVER be preparing any
managerial accounting reports. As long as I make a profit for the company I will work
for, who cares what the accountants ‘ reports say?” How would you respond?
A disadvantage of decentralized decision making is that two or more operational
managers may evaluate and make the same decision, duplicating their efforts.
Why must manufacturing overhead be allocated, what is the predetermined overhead
rate and how is it calculated?
Berry Products Company manufactures and sells a single product. Each unit requires
three feet of tubing. Berry ‘s budgeted production is as follows:
Berry budgets monthly ending inventories to be equal to 20% of the following month ‘s
production needs. The January beginning inventory meets this requirement. The tubing
costs $0.80 per foot.
Required:
Prepare the direct material purchases budget for tubing for the first quarter.
University Hospital provided the following income statement for two of its divisions:
Diagnostic and Outpatient.
The CEO of the hospital is not pleased with the division ‘s performance, and he believes
that the Diagnostic division is responsible for its dismal result and wants to consider
outsourcing diagnostic procedures.
Required:
The controller has determined that the hospital ‘s headquarters allocated $98,000 and
$32,000 in common administrative fixed costs, respectively, to Diagnostic and
Outpatient divisions. Prepare a segment margin income statement that will provide the
CEO with a better basis for evaluating the two divisions ‘ performance.
Identify which costing method is more likely to be used to accumulate costs for the
following products or services by marking an ‘œX’ in the appropriate column.
At the breakeven point, sales revenue is exactly equal to total costs, and there is no
profit or loss.