As of January 1 of the current year, the Grackle Company had accounts receivables of
$50,000. The sales for January, February, and March were as follows: $120,000,
$140,000, and $150,000, respectively. Of each month’s sales, 20% are for cash. Of the
remaining 80% (the credit sales), 60% are collected in the month of sale, with the
remaining 40% collected in the following month. What is the total cash collected (both
from accounts receivable and for cash sales) in the month of February?
a. $129,600
b. $62,400
c. $133,600
d. $91,200
Answer:
Truliant Co. sells a product called Withitall and has predicted the following sales for the
first four months of the current year:
Ending inventory for each month should be 20% of next month’s sales. How many units
should be produced in February?
a. 1,940
b. 1,800
c. 1,900
d. 1,850
Answer:
Which of the following conditions normally would not indicate that standard costs
should be revised?
a. The engineering department has revised product specifications in responding to
customer suggestions.
b. The company has signed a new union contract that increases the factory wages on
average by $3.50 an hour.
c. Actual costs differed from standard costs for the preceding week.
d. The average price of raw materials increased from $4.68 per pound to $4.82 per
pound.
Answer:
Multiple production department factory overhead rates are most useful when production
departments significantly differ in their manufacturing processes.
a. True
b. False
Answer:
Accountants prefer the variable costing method over absorption costing method for
evaluating the performance of a company because
a. by using the absorption costing method, income could appear to be higher by
producing more inventory.
b. by using the absorption costing method, income could appear to be lower by
producing more inventory.
c. by using the variable costing method, the cost of goods sold will be higher as more
units are manufactured and sales remain the same.
d. by using the variable costing method, all fixed and variable costs are included in the
unit cost of the product manufactured.
Answer:
A company reports the following:
Net income $160,000
Preferred dividends $10,000
Shares of common stock outstanding 20,000
Market price per share of common stock $35
The company’s earnings per share on common stock is a. $13.33
b. $8.50
c. $7.50
d. $35.00
Answer:
Standard and actual costs for direct labor for the manufacture of 300 units of product
were as follows:
Determine the direct labor (a) time variance, (b) rate variance, and (c) total cost
variance.
Answer:
Electricity costs to run the factory
Indicate whether the cost would typically be considered product or period cost for the
cost object given.
a. Product
b. Period
Answer:
Materials purchased on account during the month amounted to $190,000. Materials
requisitioned and placed in production totaled $156,000. The entry to record the
transaction for materials requisitioned by the production department is
a. Materials Work in Process 156,000
156,000
b. Work in Process Materials 190,000
190,000
c. Work in Process Materials 156,000
156,000
d. Work in Process Cash 156,000
156,000
Answer:
Discontinuing a product or segment is a huge decision that must be carefully analyzed.
Which of the following would be a valid reason not to discontinue an operation?
a. losses are minimal
b. variable costs are less than revenues
c. variable costs are more than revenues
d. allocated fixed costs are more than revenues
Answer:
The following data relate to direct labor costs for the current period:
What is the direct labor time variance?
a. $18,000 favorable
b. $18,000 unfavorable
c. $17,550 unfavorable
d. $17,550 favorable
Answer:
What term refers to the cost of changing direct materials into a finished manufactured
product?
a. factory overhead cost
b. period cost
c. conversion cost
d. direct labor cost
Answer:
The Kaumajet Factory produces two products’”table lamps and desk lamps. It has two
separate departments – Finishing and Production. The overhead budget for the Finishing
Department is $550,000, using 500,000 direct labor hours. The overhead budget for the
Production Department is $400,000 using 80,000 direct labor hours.
If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of
production, how much factory overhead will the Kaumajet Factory allocate to each unit
of desk lamps using the multiple production department factory overhead rate method
with an allocation base of direct labor hours?
a. $11.10
b. $4.91
c. $5.00
d. $7.20
Answer:
When using the total cost concept of applying the cost-plus approach to product pricing,
what is included in the markup?
a. total selling and administrative expenses plus desired profit
b. total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
c. total costs plus desired profit
d. desired profit
Answer:
A process cost accounting system provides for a separate record of the cost of each
particular quantity of product that passes through the factory.
a. True
b. False
Answer:
Leverage implies that a company
a. contains debt financing
b. contains equity financing
c. has a high current ratio
d. has a high earnings per share
Answer:
Make-to-order companies produce mainly to stock inventory.
a. True
b. False
Answer:
Indirect costs incurred in a manufacturing environment that cannot be traced directly to
a product are treated as
a. period costs and expensed when incurred
b. product costs and expensed when the goods are sold
c. product costs and expensed when incurred
d. period costs and expensed when the goods are sold
Answer:
It would be acceptable to have the selling price of a product just above the variable
costs and expenses of making and selling it in:
a. the long run
b. the short run
c. both the short run and long run
d. neither in the short run nor the long run
Answer: