Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs from Department 1 into Department 2 is
a. Work in Process’”Department 2 Work in Process’”Department 1 390,000
390,000
b. Work in Process’”Department 2 Work in Process’”Department 1 330,000
330,000
c. Work in Process’”Department 2 Work in Process’”Department 1 215,000
215,000
d. Work in Process’”Department 2 Work in Process’”Department 1 375,000
375,000
Answer:
For a manufacturing business, products that are in the process of being manufactured
are referred to as
a. supplies inventory
b. work in process inventory
c. finished goods inventory
d. direct materials inventory
Answer:
The Nelson Company’s radio division currently is purchasing transistors from the
Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month.
Nelson Company’s electronics division can produce the transistors for a cost of $4.00
each and they have plenty of capacity to manufacture the units. The $4 is made up of
$3.25 in variable costs, and $0.75 in allocated fixed costs. What should be the range of
a possible transfer price?
a. $3.26 to $3.49
b. $3.51 to $3.99
c. $3.26 to $3.99
d. $3.25 to $3.50
Answer:
A mixed cost has characteristics of both a variable and a fixed cost.
a. True
b. False
Answer:
Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company
uses a single plantwide factory overhead rate for allocating overhead to products.
However, management is considering moving to a multiple department rate system for
allocating overhead. The following table presents information about estimated
overhead and direct labor hours.
Determine the overhead from both production departments allocated to each unit of
Product B if Blue Ridge Marketing Inc. uses a multiple department rate system.
a. $425.60 per unit
b. $115.20 per unit
c. $214.40 per unit
d. $320.00 per unit
Answer:
Generally provides the most useful report for controlling costs.
Match each phrase that follows with the term (a-c) it describes.
a. Absorption costing only
b. Variable costing only
c. Both absorption and variable costing
Answer:
The cash payback method of capital investment analysis is one of the methods referred
to as a present value method.
a. True
b. False
Answer:
Since there are few rules to restrict how an organization chooses to arrange its own
internal data for decision making, managerial accounting provides ample opportunity
for creativity and change.
a. True
b. False
Answer:
Costs that are incurred in generating revenues during the period, but are not involved in
the manufacturing process are referred to as
a. period costs
b. conversion costs
c. factory overhead costs
d. product costs
Answer:
Under the negotiated price approach, the transfer price is the price at which the product
or service transferred could be sold to outside buyers.
a. True
b. False
Answer:
A financial statement showing each item on the statement as a percentage of one key
item on the statement is called a common-sized financial statement.
a. True
b. False
Answer:
Financial reporting systems that are guided by the principle of exceptions concept focus
attention on variances from standard costs.
a. True
b. False
Answer:
Which of the following describes the behavior of the fixed cost per unit?
a. decreases with increasing production
b. decreases with decreasing production
c. remains constant with changes in production
d. increases with increasing production
Answer:
What cost concept used in applying the cost-plus approach to product pricing covers
selling expenses, administrative expenses, and desired profit in the markup?
a. total cost concept
b. product cost concept
c. variable cost concept
d. sunk cost concept
Answer:
Operator training
Identity the following by their type of quality cost.
a. Preventive costs
b. Appraisal costs
c. Internal failure costs
d. External failure costs
Answer:
Compute conversion costs given the following data: Direct Materials, $347,500; Direct
Labor, $196,300; Factory Overhead, $187,900; and Selling Expenses, $45,290.
a. $543,800
b. $187,900
c. $731,700
d. $384,200
Answer:
Accounting designed to meet the needs of decision makers inside the business is
a. general accounting
b. financial accounting
c. managerial accounting
d. external accounting
Answer:
Selected accounts with some amounts omitted are as follows
If the balance of Work in Process at October 31 is $21,000, what was the amount of
factory overhead applied in October?
a. $63,300
b. $21,300
c. $42,300
d. $11,300
Answer:
Which of the following are reported on the income statement as part of cost of goods?
a. administrative expenses
b. period costs
c. cost of goods manufactured
d. operating expenses
Answer:
estimates the number of units to be manufactured to meet sales and inventory levels
Match the phrase that follows with the term (a-e) it describes.
a. static budget
b. flexible budget
c. master budget
d. sales budget
e. production budget
Answer:
Bob’s Biscuit Corporation budgeted $1,200,000 of factory overhead cost for the coming
year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours.
Budgeted units to be produced are 200,000 units. Bob’s plantwide factory overhead rate
is $12.00 per machine hour.
a. True
b. False
Answer:
A company records inventory purchases at standard cost and also records purchase
price variances. Prepare the journal entry for a purchase of 6,000 widgets that were
bought at $8.00 and have a standard cost of $8.15.
Answer:
Job order manufacturing and process manufacturing are two major costing systems used
in manufacturing. Briefly contrast the characteristics of these two systems.
Answer:
Doran Technologies produces a single product. Expected manufacturing costs are as
follows:
Estimate manufacturing costs for production levels of 25,000 units, 30,000 units, and
35,000 units per month.
Answer:
Diamond Boot Factory normally sells their specialty boots for $375 a pair. An offer to
buy 100 boots for $275 per pair was made by an organization hosting a national event
in Norfolk. The variable cost per boot is $250 and special stitching will add another $20
per pair to the cost. Determine the differential income or loss per pair of boots from
selling to the organization.
Answer:
A $550,000 capital investment proposal has an estimated life of 4 years and no residual
value. The estimated net cash flows are as follows:
The minimum desired rate of return for net present value analysis is 12%. The present
value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712,
and 0.636, respectively.
Answer: