Standard variable overhead for actual units produced
Match the following formulas or descriptions with the term (a-e) it defines.
a. Direct materials price variance
b. Direct labor rate variance
c. Direct labor time variance
d. Direct materials quantity variance
e. Budgeted variable factory overhead
Answer:
A company is considering the purchase of a new machine for $48,000. Management
expects that the machine can produce sales of $16,000 each year for the next 10 years.
Expenses are expected to include direct materials, direct labor, and factory overhead
totaling $8,000 per year plus depreciation of $4,000 per year. All revenues and expenses
except depreciation are on a cash basis. The payback period for the machine is 12 years.
a. True
b. False
Answer:
Activity-based costing provides more accurate and useful cost data than traditional
systems.
a. True
b. False
Answer:
Penny, Inc. employs a process costing system. Direct materials are added at the
beginning of the process. Here is information about July’s activities:
Using the FIFO method, the number of equivalent units of conversion costs was
a. 14,400
b. 14,380
c. 14,550
d. 15,850
Answer:
Which of the following is an advantage of the cash payback method?
a. easy to use
b. takes into consideration the time value of money
c. includes the cash flow over the entire life of the proposal
d. emphasizes accounting income
Answer:
Which of the following can be used to place capital investment proposals involving
different amounts of investment on a comparable basis for purposes of net present value
analysis?
a. price-level index
b. future value index
c. rate of investment index
d. present value index
Answer:
Materials used by Jefferson Company in producing Division C’s product are currently
purchased from outside suppliers at a cost of $10 per unit. However, the same materials
are available from Division A. Division A has unused capacity and can produce the
materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of
$9.50 per unit is negotiated and 25,000 units of material are transferred, with no
reduction in Division A’s current sales.
How much will Division C’s income from operations increase?
a. $0
b. $75,000
c. $12,500
d. $50,000
Answer:
A cost that will not be affected by later decisions is termed a(n)
a. period cost
b. differential cost
c. sunk cost
d. replacement cost
Answer:
Department G had 3,600 units 25% completed at the beginning of the period, 11,000
units were completed during the period; 3,000 units were 20% completed at the end of
the period, and the following manufacturing costs debited to the departmental work in
process account during the period:
All direct materials are placed in process at the beginning of production and the first-in,
first-out method of inventory costing is used. What is the total cost of the units started
and completed during the period (round unit cost calculations to four decimal places)?
a. $211,200
b. $120,060
c. $190,275
d. $20,934
Answer:
Lee Industry sales are $525,000, variable costs are 53% of sales, and operating income
is $19,000. What is the contribution margin ratio?
a. 47%
b. 26.5%
c. 9.5%
d. 53%
Answer:
If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even
point amount to $2,500,000, and the maximum possible sales are $3,300,000, the
margin of safety is 11,500 units.
a. True
b. False
Answer:
Returned merchandise
Identity the following by their type of quality cost.
a. Preventive costs
b. Appraisal costs
c. Internal failure costs
d. External failure costs
Answer:
If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are
$22, what is the break-even sale (units) if fixed costs are reduced by $30,000?
a. 30,000 units
b. 8,710 units
c. 12,273 units
d. 20,000 units
Answer:
What term is commonly used to describe the concept whereby the cost of manufactured
products is composed of direct materials cost, direct labor cost, and variable factory
overhead cost?
a. Absorption costing
b. Differential costing
c. Standard costing
d. Variable costing
Answer:
Yakking Co. manufactures mobile cellular equipment and develops a price for the
product by using the variable cost concept. Yakking incurs variable costs of $1,900,000
in the production of 100,000 units while fixed costs total $50,000. The company
employs $4,725,000 of assets and wishes to earn a profit equal to a 10% rate of return
on assets.
(a) Compute a markup percentage based on variable cost.
(b) Determine a selling price.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
Answer:
Which of the following is the principle reason for preparing managerial accounting
reports?
a. usefulness to management
b. cost of preparation
c. clarity
d. GAAP
Answer:
Interpreting financial analysis should be considered in light of conditions peculiar to the
industry and the general economic conditions.
a. True
b. False
Answer:
an analysis of a company’s ability to pay its current liabilities
Match each definition that follows with the term (a’“h) it defines.
a. discontinued operations
b. extraordinary items
c. change from one generally accepted accounting principle to another
d. horizontal analysis
e. vertical analysis
f. common-sized financial statements
g. current position analysis
h. profitability analysis
Answer:
Reynold’s Grocery has fixed costs of $350,000, the unit selling price is $29, and the unit
variable costs are $20. What is the break-even sale (units) if the variable costs are
decreased by $4?
a. 26,923 units
b. 12,069 units
c. 21,875 units
d. 38,889 units
Answer:
Which of the following is an example of direct labor cost for a cell phone
manufacturer?
a. cost of oil lubricants for factory machinery
b. cost of wages of assembly worker
c. salary of plant supervisor
d. cost of phone components
Answer:
Which of the following expressions is termed the profit margin factor as used in
determining the rate of return on investment?
a. Sales/Income from operations
b. Income from operations/Sales
c. Invested assets/Sales
d. Sales/Invested assets
Answer:
Assuming that the quantities of inventory on hand during the current year were
sufficient to meet all demands for sales, a decrease in the inventory turnover for the
current year when compared with the turnover for the preceding year indicates an
improvement in inventory management.
a. True
b. False
Answer:
A company is planning to purchase a machine that will cost $24,000, have a 6-year life,
and have no salvage value. The company expects to sell the machine’s output of 3,000
units evenly throughout each year. Total income over the life of the machine is
estimated to be $12,000. The machine will generate net cash flows per year of $6,000.
The average rate of return for the machine is 50%.
a. True
b. False
Answer:
Direct labor hours is not a cost pool that is regularly used in the activity-based costing
method.
a. True
b. False
Answer:
Cranston Company estimates the following overhead costs for the coming year:
Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for
the coming year.
Answer:
The Cavy Company estimates that the factory overhead for the following year will be
$1,250,000. The company has determined that the basis for applying factory overhead
will be machine hours, which is estimated to be 40,000 hours. There are 4,780 machine
hours for all of the jobs in the month of April. What is the amount that will be applied to
all of the jobs for the month of April?
Answer:
Answer:
Diamond Company manufactures two models of cassette recorders, VCH and MTV.
Based on the following production data for April, prepare a production budget.
Answer:
The Cavy Company estimates that the factory overhead for the following year will be
$1,470,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. Calculate the
predetermined overhead rate to apply factory overhead.
Answer: