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1) In a process costing system, the cost per equivalent unit is computed before
computing equivalent units.
2) The range of activity over which changes in cost are of interest to management is
called the relevant range.
3) The times interest earned ratio is calculated by dividing Bonds Payable by Interest
Expense.
4) For a month's transactions for a typical medium-sized business, the salary expense
account is likely to have only credit entries.
5) If the cost of employee wages is not a significant portion of the total product cost, the
wages are classified as direct materials cost.
6) A company is planning to purchase a machine that will cost $24,000, have a six-year
life, and have no salvage value. The company expects to sell the machines 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 cash flows per year of $6,000. The
payback period for the machine is 12 years.
7) A favorable cost variance occurs when actual cost is less than budgeted cost at actual
volumes.
8) The contribution margin ratio is the same as the profit-volume ratio.
9) Absorption costing is required for financial reporting under generally accepted
accounting principles.
10) Costs of controlling quality include prevention costs and internal failure costs.
11) Like many taxes deducted from employee earnings, federal income taxes are subject
to a maximum amount per employee per year.
12) Other income and expenses are items that are not related to the primary operating
activity.
13) When a corporation issues stock at a premium, it reports the premium as an other
income item on the income statement.
14) A plantwide factory overhead rate assumes that all overhead is directly related to
one activity representing the entire plant.
15) The lower of cost or market is a method of inventory valuation.
16) What is capital investment analysis? Why are capital investment analysis decisions
often difficult and risky?
17) The following information was taken from a recent annual report of Harrison
Company: (in millions)
Required:
18) Warmfeet manufactures comforters. Assume the estimated inventories on January 1,
2012, for finished goods, work in process, and materials were $39,000, $33,000 and
$27,000 respectively. Also assume the desired inventories on December 31, 2012, for
finished goods, work in process, and materials were $42,000, $35,000 and $21,000
respectively. Direct material purchases were $575,000. Direct labor was $212,000 for
the year. Factory overhead was $156,000. Prepare a cost of goods sold budget for
Warmfeet, Inc.
19) The prepaid insurance account had a beginning balance of $6,600 and was debited
for $2,300 of premiums paid during the year. Journalize the adjusting entry required at
the end of the year assuming the amount of unexpired insurance related to future
periods is $4,100.
20) Revenue and expense data for Young Technologies are as follows:
Required:
21) Remain the same in total dollar amount as the level of activity changes D. Relevant
range
5>The excess of sales revenues over variable costs E. Contribution margin
