Mendel Company makes the following journal entry:
Which of the following statements is true of the given journal entry?
A) A variable manufacturing overhead cost of $179,000 is written-off.
B) An unfavorable spending variance of $57,000 is recorded.
C) A favorable efficiency variance of $7,000 is recorded.
D) A favorable flexible-budget variance of $50,000 is recorded.
________ is relevant in a decision to replace equipment.
A) Warehouse rent costs
B) Book value of old equipment
C) Accumulated depreciation on old equipment
D) Salvage value
The production-volume variance may also be referred to as the ________.
A) flexible-budget variance
B) denominator-level variance
C) spending variance
D) efficiency variance
The sales-volume variance is sometimes due to ________.
A) the difference between selling price and budgeted selling price
B) quality problems leading to customer dissatisfaction
C) unexpected increase in manufacturing labor time
D) unexpected increase in the use of quantities of inputs of raw material
Which of the following is true of variable costing?
A) It expenses administrative costs as cost of goods sold.
B) It treats direct manufacturing costs as a product cost.
C) It includes fixed manufacturing overhead as an inventoriable cost.
D) It is required for external reporting to shareholders.
With a constraining resource, managers should choose the product with the ________.
A) lowest contribution margin per unit of the constraining resource
B) highest sales price
C) highest contribution margin per unit of the constraining resource
D) highest gross profit
Which of the following is a storage cost?
A) labor cost
B) materials handling
C) direct material
D) overhead cost
A flexible-budget variance is $600 favorable for unit-related costs. This indicates that
costs were ________.
A) $600 more than the master budget
B) $600 less than for the planned level of activity
C) $600 more than standard for the achieved level of activity
D) $600 less than standard for the achieved level of activity
Stefan Ceramics is in the business of selling ceramic vases. It has two departments –
molding and finishing. Molding department purchases tungsten carbide and produces
ceramic vases out of it. Ceramic Vases are then transferred to finishing department,
which designs it as per the requirement of the customers.
During the month of July, molding department purchased 500 kgs of tungsten carbide at
$60 per kg. It started manufacture of 4000 vases and completed and transferred 3900
vases during the month. It has 100 vases in the process at the end of the month. It
incurred direct labor charges of $1400 and other manufacturing costs of $600, which
included electricity costs of $500. Stefan had no inventory of tungsten carbide at the
end of the month. It also had no beginning inventory of vases. The ending inventory
was 55% complete in respect of conversion costs.
Which of the following journal entries would be correct to record direct labor for July?
A)
B)
C)
D)
Harry and Sally are starting a new business venture and are in the process of evaluating
their product lines. Information for one new product, hand-made lamps, is as follows:
∙ Every six months a new lamp pattern will be put into production. Each new pattern
will require $8,000 in setup costs.
∙ The lamp product line incurred $40,000 in development costs and is expected to be
produced over the next six years.
∙ Direct costs of producing the lamps average $144 each. Each lamp requires 12
labor-hours and 2 machine-hours.
∙ Indirect manufacturing costs are estimated at $168,000 per year.
∙ Customer service expenses average $16 per lamp.
∙ Current sales are expected to be 2,000 units of each lamp pattern. Each lamp sells for
$300.
∙ Sales units equal production units each year.
Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income for the first year?
Which of the following is true regarding estimates of completion of units in a process
costing system?
A) estimating the degree of completion with regards to conversion costs is more of a
science than an art
B) estimating the degree of completion with regards to conversion costs is usually
easier and more accurate than estimating the degree of completion with regards to direct
materials
C) estimating the degree of completion with regards to direct materials is usually easier
and more accurate than estimating the degree of completion with regards to conversion
costs
D) when estimating degree of completion, the degree of completion with regards to
conversion costs is usually a portion similar to the degree of completion with regards to
direct materials
Assume you are evaluating a manufacturing company. Match the various organizational
activities and concepts with the performance measures listed. Some items may have
more than one match.
Activities:
1. Change in revenues
2. Cycle time
3. Economic order quantity
4. Manufacturing defects
5. Market share
6. New products
7. On-time delivery
8. Operating income
9. Product reliability
10. Time-to-market
Performance measure:
________ a. Profitability
________ b. Customer satisfaction
________ c. Innovation
________ d. Efficiency, quality, and time
Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the
purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling.
Setup costs are batch-level costs because they are associated with batches rather than
individual units of products. A separate Setup Department is responsible for setting up
machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are
fixed with respect to the number of setup-hours. The following information pertains to
June 2015:
Calculate the flexible-budget variance for variable overhead setup costs. (Round all
intermediary calculations two decimal places and your final answer to the nearest whole
number.)
A) $1,178 favorable
B) $1,222 favorable
C) $1,222 unfavorable
D) $1,178 unfavorable
Which of the following is included in product cost for pricing and product-mix
decisions?
A) marketing costs
B) sunk costs
C) opportunity costs
D) cost of capital
Vision Company manufactures digital cameras. For May, there were no beginning
inventories of direct materials and no beginning or ending work-in -process.
Conversion costs is the only indirect manufacturing cost category currently used.
Journal entries are recorded when materials are purchased and when units are sold.
If the two trigger points are completion of good finished units of product and sale of
finished goods, which of the following entries would be used to record cost of finished
units completed under backflush costing? (Round intermediate calculations to the nearest
cent and final calculations to the nearest dollar.)
A)
B)
C)
D)
Which of the following sentences is true of normal spoilage and abnormal spoilage?
A) Normal spoilage costs are inventoriable and are added to the cost of good units
produced, while abnormal spoilage costs are deducted from the cost of good units
produced.
B) Abnormal spoilage costs are inventoriable and are deducted from the cost of good
units produced, while normal spoilage costs are expensed in the accounting period in
which they occur.
C) Abnormal spoilage costs are inventoriable and are added to the cost of good units
produced, while normal spoilage costs are expensed in the accounting period in which
they occur.
D) Normal spoilage costs are inventoriable and are deducted from the cost of good units
produced, while abnormal spoilage costs are expensed in the accounting period in
which they occur.
Which of the following capital budgeting methods uses discounted cash flows?
A) accrual accounting rate-of-return method
B) net present value method
C) projected income method
D) payback method
Following a strategy of product differentiation, Izzy’s Limited Company makes a
high-end Appliance, XT15. Izzy’s Limited presents the following data for the years
2017 and 2018:
Izzy’s Limited produces no defective units but it wants to reduce direct materials usage per
unit of XT15. Manufacturing conversion costs in each year depend on production capacity
defined in terms of XT15 units that can be produced. Selling and customer-service costs
depend on the number of customers that the customer and service functions are designed to
support. Izzy’s Limited had 160 customers in 2017 and 165 customers in 2018.
What is the cost effect of the growth component? (Round any intermediary calculations to
two decimals and your final answer to the nearest dollar.)
A) $280,500 U
B) $1,449,700 U
C) $1,449,700 F
D) $280,500 F
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then
prepares the frozen fish fillets for distribution to its retail sales department. Direct
materials are added at the initiation of the cycle. Conversion costs are incurred evenly
throughout the production cycle. Before inspection, some fillets are spoiled due to
undetectable defects. Spoiled fillets generally constitute 5% of the good fillets. Data for
April 2017 are as follows:
Normal spoilage totals ________.
A) 9200 units
B) 0 units
C) 22,000 units
D) 12,800 units
When making decisions ________.
A) qualitative factors are not relevant as they can’t be quantified
B) more weight should be given to quantitative factors
C) appropriate weight must be given to both quantitative and qualitative factors
D) quantitative factors are relevant but qualitative factors are rarely relevant
Which of the following best explains why the net present value method of capital
budgeting is preferred over the internal rate-of-return method?
A) the net present value method is expressed as a percentage of initial investment
B) the net present values of individual projects can be added to determine the effects of
accepting a combination of projects
C) the percentage return computed under the net present value method is very easy to
compare
D) the calculation under the net present value method is easy as it does not use time
value of money
Which of the following is an example of scrap?
A) short lengths from woodworking operations that must be discarded
B) defective units of laptops detected after the production process but reworked before
the units are sold as good products to customers
C) defective aluminum cans sold to aluminum manufacturers for remelting to produce
other aluminum products
D) defective shirts, jeans, shoes, and carpeting sold as seconds
Torid Company processes 17,750 gallons of direct materials to produce two products,
Product X and Product Y. Product X sells for $7 per gallon and Product Y, the main
product, sells for $160 per gallon. The following information is for December:
The manufacturing costs totalled $27,000.
The production method will report Product X in the balance sheet at ________.
A) $0
B) $4800
C) $875
D) $20,000
________ is the level of capacity utilization that managers expect for the current budget
period, which is typically one year.
A) Practical capacity
B) Master-budget capacity utilization
C) Theoretical capacity
D) Normal capacity utilization
Genent Industries, Inc. (GII), developed standard costs for direct material and direct
labor. In 2017, GII estimated the following standard costs for one of their major
products, the 30-gallon heavy-duty plastic container.
During July, GII produced and sold 4,000 containers using 600 pounds of direct materials
at an average cost per pound of $26 and 1,290 direct manufacturing labor hours at an
average wage of $18.40 per hour.
The direct manufacturing labor price variance during July is ________.
A) $1,620.00 unfavorable
B) $516.00 favorable
C) $480.00 favorable
D) $3,600.00 unfavorable
Stewart Corporation plans to grow by offering a sound system, the SS3000, that is
superior and unique from the competition. Stewart believes that putting additional
resources into R&D and staying ahead of the competition with technological
innovations is critical to implementing its strategy. To further company strategy,
measures on the balanced scorecard would most likely include ________.
A) number of process improvements
B) manufacturing quality
C) yield
D) an increase in operating income from productivity gains
Which of the following information is required by a company’s manager while
preparing a manufacturing overhead costs budget?
A) estimated incentives to be paid to marketing personnel
B) estimated expense for office supplies
C) estimated expense for maintenance of factory building
D) rent expense for lease of office building
Which of the following is true of refinement of a costing system?
A) While refining a costing system, companies should identify as many indirect costs as
is economically feasible.
B) A homogeneous cost pool will use multiple cost drivers to allocate costs.
C) It reduces the use of broad averages for assigning the cost of resources to cost
objects.
D) It is likely to yield the most decision-making benefits when direct costs are a high
percentage of total costs.
The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Annual demand is 33,000 packages per year. The purchase price per package is $49.
What are the relevant total costs at the economic order quantity?
A) $18,780
B) $20,387
C) $11,223
D) $12,694
Which of the following is an example of spoilage?
A) short lengths from woodworking operations that cannot be used to make another
product
B) edges from plastic molding operations that result from the main product’s
manufacturing process but have little or no value
C) defective units of laptops detected after the production process but reworked before
the units are sold as good products to customers
D) defective men’s button down cotton collar dress shirts that have small pulls in the
material and must be sold as discounted “seconds” in the factory store
Outputs with a negative sales value because of disposal costs have which of the
following impact on costs?
A) added to cost of goods sold
B) added to joint production costs and allocated to joint or main products
C) added to joint production costs and allocated to byproducts and scrap
D) subtracted from product revenue