Springer Products manufactures three different product lines, Model X, Model Y, and
Model Z. Considerable market demand exists for all models. The following per unit
data apply:
Model X Model Y Model Z
Selling price $50 $66 $80
Direct materials 10 10 10
Direct labor ($15 per hour) 15 15 30
Variable support costs ($5 per machine-hour) 5 10 10
Fixed support costs 12 12 12
Which model has the greatest contribution margin per unit?
A) Model X
B) Model Y
C) Model Z
D) Both Model X and Model Y have the highest and same contribution margin per unit
Nantucket Industries manufactures and sells two models of watches, Prime and
Luxuria. It expects to sell 3,500 units of Prime and 1,500 units of Luxuria in 2019.The
following estimates are given for 2019:
Nantucket had an inventory of 200 units of Prime and 105 units of Luxuria at the end of
2018. It has decided that as a measure to counter stock outages it will maintain ending
inventory of 400 units of Prime and 230 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $12.
There were 120 units of Crimpson in stock at the end of 2018. The management does not
want to have any stock of Crimpson at the end of 2019.
What is the total budgeted cost of goods sold for Nantucket Industries in 2019?
A) $1,325,000
B) $1,415,000
C) $1,433,000
D) $1,625,000
Monticello Corp manufactures expensive tables. Its varnishing department is fully
automated and requires substantial inspection to keep the machines operating properly.
An improperly varnished table is very expensive to correct. Inspection hours for the
5800 tables varnished in September totaled 1700 hours by 10 employees. Eight quarts
of varnish were used, on average, for each table. The standard amount of varnish per
table is nine quarts. The cost of inspection for September was equal to the budgeted
amount of $40,100.
The $40,100 represents a(n) ________.
A) activity cost pool
B) possible cost allocation base
C) internal failure cost
D) work-in-process control
A company has $25,000 of depreciation on plant assets and paid $12,000 for repairs
also to plant assets. Which of the following journal entries would be required?
A) Depreciation Expense $25,000
Repairs Expense $12,000
Cash $37,000
B) Manufacturing overhead control $37,000
Accumulated Depreciation Control $25,000
Cash $12,000
C) Depreciation Expense $25,000
Repairs Expense $12,000
Accumulated Depreciation Control $37,000
D) Depreciation Expense $25,000
Repairs Expense $12,000
Manufacturing Overhead Control $37,000
Which of the following will increase a company’s breakeven point?
A) increasing variable cost per unit
B) increasing contribution margin per unit
C) reducing its total fixed costs
D) increasing the selling price per unit
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 175 customers in 2017 and 180 customers in 2018.
What is the revenue effect of the growth component?
A) $3,780,000 F
B) $1,200,000 U
C) $3,780,000 U
D) $1,200,000 F
Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may
be allocated to the two departments in various ways.
If advertising expense of $140,000 is allocated on the basis of sales, the amount allocated
to the Car Rental Department would be ________. (Do not round interim calculations.
Round the final answer to the nearest whole dollar.)
A) $92,477.06
B) $47,522.94
C) $90,077.52
D) $88,421.05
The management accountant for Giada’s Book Store has prepared the following income
statement for the most current year:
Cookbook Travel Book Classics Total
Sales $63,000 $179,000 $60,000 $302,000
Cost of goods sold 37,000 70,000 23,000 130,000
Contribution margin 26,000 109,000 37,000 172,000
Order and delivery processing 19,000 26,000 9,000 54,000
Rent (per sq. foot used) 3,000 3,000 3,000 9,000
Allocated corporate costs 10,000 10,000 10,000 30,000
Corporate profit $ (6,000) $70,000 $15,000 $79,000
If the cookbook product line had been discontinued prior to this year, the company
would have reported ________.
A) greater corporate profits
B) the same amount of corporate profits
C) less corporate profits
D) resulting profits cannot be determined
Direct Disk Drive Company operates a computer disk manufacturing plant. Direct
materials are added at the end of the process. The following data were for June 2017:
How many units must be accounted for during the period?
A) 216,300 units
B) 190,500 units
C) 169,945 units
D) 139,700 units
Quantum Company uses the high-low method to estimate the cost function. The
information for 2017 is provided below:
Machine-hours Labor Costs
Highest observation of cost driver 1,000 $32,000
Lowest observation of cost driver 200 $16,000
What is the constant for the estimated cost equation?
A) $12,000
B) $16,000
C) $20,000
D) $32,000
Which of the following inventory costing methods results in the least amount of costs
being inventoried?
A) absorption costing
B) variable costing
C) throughput costing
D) direct costing
Technical consideration ________.
A) help managers make wise economic decisions by providing them with the desired
information
B) focuses on encouraging individuals to do their jobs better
C) focuses on compensating the managers for good performance
D) emphasize on different costs for different purposes
The Swivel Chair Company manufacturers a standard recliner. During February, the
firm’s Assembly Department started production of 145,000 chairs. During the month,
the firm completed 184,000 chairs and transferred them to the Finishing Department.
The firm ended the month with 19,000 chairs in ending inventory. All direct materials
costs are added at the beginning of the production cycle. Weighted-average costing is
used by Swivel. What were the equivalent units for materials for February?
A) 203,000 chairs
B) 184,000 chairs
C) 164,000 chairs
D) 191,250 chairs
The Esther Valve Corporation was recently formed to produce a brass valve that forms
an essential part of a compressor manufactured by a major corporation. The direct
materials are added at the start of the production process while conversion costs are
added uniformly throughout the production process. September is Parson’s first month
of operations, and therefore, there was no beginning inventory. Direct materials cost for
the month totaled $2,800,000, while conversion costs equaled $3,600,000. Accounting
records indicate that 1,600,000 valves were started in September and 1,400,000 valves
were completed.
Ending inventory was 20% complete as to conversion costs.
Required:
a. What is the total manufacturing cost per valve for September?
b. Allocate the total costs between the completed valves and the valves in ending
inventory.
When the amount of scrap is material and the scrap is sold immediately after it is
produced, which of the following is the journal entry if the scrap attributable to a
specific job is sold on account?
A) Scrap Revenues
Accounts Payable
B) Work-in-Process Control
Accounts Receivable
C) Accounts Receivable
Work-in-Process Control
D) Work-in-Process Control
Accounts Payable
A flexible budget ________.
A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results
Which of the following is regarded as a purpose of cost allocation?
A) It helps in identifying the potential customers for a product.
B) It provides the profit margin earned.
C) It helps in maintaining decorum among managers.
D) It provides information for economic decisions.
For a manufacturing company, direct labor costs would be included in ________.
A) only the direct materials inventory to reflect the cost of labor that has worked using
those materials
B) only in the merchandise inventory to reflect the value added in the production
process
C) only in both work-in-process inventory and finished goods inventory
D) direct materials inventory, work-in-process inventory, and finished goods inventory
accounts
Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing
system uses two cost categories, direct materials and conversion costs. Each product
must pass through the Assembly Department and the Testing Department. Direct
materials are added at the beginning of the production process. Conversion costs are
allocated evenly throughout production. Timekeeper Inc. uses weighted-average
costing.
What amount of conversion costs is assigned to the ending Work-in-Process account for
June? (Round any intermediary calculations to the nearest cent.)
A) $81,588.24
B) $46,709.60
C) $289.71
D) $404,000.00
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 2,700 pounds of direct
materials at an average cost per pound of $19 and 1,290 direct manufacturing labor hours
at an average wage of $14.30 per hour.
The direct manufacturing labor flexible-budget variance during July is ________.
A) $1,260.00 unfavorable
B) $900.00 favorable
C) $1,647.00 unfavorable
D) $3,300.00 favorable
Which variance is calculated by using the formula: (AP – BP) AQ is the ________.
A) efficiency variance
B) price variance
C) total flexible-budget variance
D) material spending variance
For each item below indicate the source documents that would most likely authorize the
journal entry in a job-costing system.
Required:
a. direct materials purchased
b. direct materials used
c. direct manufacturing labor
d. indirect manufacturing labor
e. finished goods control
f. cost of goods sold
A company decided to replace an old machine with a new machine. Which of the
following is considered a relevant cost?
A) the book value of the old equipment
B) the depreciation expense on the old equipment
C) the loss on the disposal of the old equipment
D) the setup cost of the new equipment
Comfort chair company manufacturers a standard recliner. During February, the firm’s
Assembly Department started production of 73,100 chairs. During the month, the firm
completed 78,000 chairs, and transferred them to the Finishing Department. The firm
ended the month with 10,800 chairs in ending inventory. There were 15,700 chairs in
beginning inventory. All direct materials costs are added at the beginning of the
production cycle and conversion costs are added uniformly throughout the production
process. The FIFO method of process costing is used by Comfort. Beginning work in
process was 30% complete as to conversion costs, while ending work in process was
75% complete as to conversion costs.
What were the equivalent units for conversion costs during February?
A) 81,390
B) 83,900
C) 73,100
D) 77,810
Management accountants serve as key business partners in the planning process
because they understand the key ________ factors that create ________.
A) success … value
B) accounting …. profits
C) financial … value.
D) success ….. income
Olive Branch Company recently acquired an olive oil processing company that has an
annual capacity of 2,000,000 liters and that processed and sold 1,400,000 liters last year
at a market price of $4 per liter. The purpose of the acquisition was to furnish oil for the
Cooking Division. The Cooking Division needs 800,000 liters of oil per year. It has
been purchasing oil from suppliers at the market price. Production costs at capacity of
the olive oil company, now a division, are as follows:
Management is trying to decide what transfer price to use for sales from the newly
acquired company to the Cooking Division. The manager of the Olive Oil Division argues
that $4, the market price, is appropriate. The manager of the Cooking Division argues that
the cost of $2.14 should be used, or perhaps a lower price, since fixed overhead cost
should be recomputed with the larger volume. Any output of the Olive Oil Division not
sold to the Cooking Division can be sold to outsiders for $4 per liter.
Required:
a. Compute the operating income for the Olive Oil Division using a transfer price of $4.
b. Compute the operating income for the Olive Oil Division using a transfer price of $2.20.
c. What transfer price(s) do you recommend? Compute the operating income for the Olive
Oil Division using your recommendation.
An understanding of life-cycle costs can lead to which of the following?
A) additional costs during the manufacturing cycle
B) less need for evaluation of the competition
C) the accumulation of information for strategically evaluating pricing decisions
D) mutually beneficial relationships between buyers and sellers
Which of the following statements is true of main products and byproducts?
A) A byproduct will never become a main product.
B) A main product will never become a byproduct.
C) Product classifications may change over time.
D) Product classifications remains constant over time.
Stella Company sells only two products, Product A and Product B.
Stella sells two units of Product A for each unit it sells of Product B. Stella faces a tax rate
of 40%. Stella desires a net after-tax income of $54,000. The breakeven point in units
would be ________.
A) 25,250 units of Product A and 50,500 units of Product B
B) 27,500 units of Product A and 55,000 units of product B
C) 50,500 units of Product A and 25,250 units of Product B
D) 55,000 units of Product A and 27,500 units of Product B
Giant Company has three products, A, B, and C. The following information is available:
Product A Product B Product C
Sales $70,000 $97,000 $23,000
Variable costs 37,000 51,000 15,000
Contribution margin 33,000 46,000 8,000
Fixed costs:
Avoidable 10,000 20,000 2,000
Unavoidable 7,000 12,000 9,400
Operating income $16,000 $14,000 $ (3,400)
Giant Company is thinking of dropping Product C because it is reporting a loss.
Assuming Giant drops Product C and does NOT replace it, operating income will
________.
A) increase by $3,400
B) increase by $2,000
C) decrease by $6,000
D) decrease by $11,400
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $320,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $200,000 are allocated based on the
number of employees. The costs of operating departments A and B are $208,000 and
$312,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Production
Support Departments Departments
Using the step-down method, what amount of Maintenance Department cost will be
allocated to Department B if the service department with the highest percentage of
interdepartmental support service is allocated first? (Do not round any intermediary
calculations.)
A) $31,079
B) $79,424
C) $49,640
D) $88,489