The dollars available from each unit of sales to cover fixed cost and profit is the unit
variable cost.
a. True
b. False
The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability of this
investment:
The net present value for this investment is
a. $(118,145)
b. $118,145
c. $19,875
d. $(19,875)
On August 1, Jones Corporation’s Packaging Department had work in process inventory
of 8,000 units that were 75% complete with respect to materials and 30% complete with
respect to conversion costs. The cost of these units was $99,525 ($62,000 transferred-in
from previous departments, $28,775 in materials, and $8,750 in labor and overhead).
During August, 125,000 units were transferred into the department. These units had
accumulated costs in previous departments of $1,418,560. The packaging department
incurred costs of $799,225 for materials and $498,010 for conversion costs in August
and transferred 131,000 units out of the department. The 2,000 units remaining in
ending inventory are 50% complete with respect to materials and 20% complete with
respect to conversion costs. Jones uses the average cost method to cost its inventories.
(a) Calculate the cost per equivalent unit for transferred-in costs, materials, and
conversion costs.
(b) Calculate the cost of the units transferred out of the department.
(c) Calculate the cost of the ending inventory.
Farris Company is considering a cash outlay of $500,000 for the purchase of land,
which it could lease out for $40,000 per year. If alternative investments are available
that yield a 15% return, the opportunity cost of the purchase of the land is
a. $75,000
b. $40,000
c. $44,000
d. $7,500
The Aleutian Company produces two products, Rings and Dings. They are
manufactured in two departments’”Fabrication and Assembly. Data for the products
and departments are listed below.
All of the machine hours take place in the Fabrication Department, which has an
estimated overhead of $90,000. All of the labor hours take place in the Assembly
Department, which has an estimated total overhead of $105,000.
The Aleutian Company uses departmental overhead rates. The Fabrication Department
uses machine hours for an allocation base, and the Assembly Department uses labor
hours.
What is the overhead cost per unit for Rings?
a. $65.25
b. $23.25
c. $44.10
d. $64.50
The actual price for a product was $50 per unit, while the planned price was $44 per
unit. The volume increased by 4,000 to 60,000 total units. Determine (a) the quantity
factor and (b) the price factor for sales.
Figure 21-1
Which of the graphs in Figure 21-1 illustrates the nature of a mixed cost?
a. Graph 2
b. Graph 3
c. Graph 4
d. Graph 1
Strait Co. manufactures office furniture. During the most productive month of the year,
3,000 desks were manufactured at a total cost of $59,000. In the month of lowest
production the company made 1,125 desks at a cost of $38,000. Using the high-low
method of cost estimation, total fixed costs are
a. $21,000
b. $25,400
c. $42,000
d. $13,000
The rates at which centralized services are charged to each division are called service
department charge rates.
a. True
b. False
Which of the following is the correct flow of manufacturing costs?
a. raw materials, work in process, finished goods, cost of goods sold
b. raw materials, finished goods, cost of goods sold, work in process
c. work in process, finished goods, raw materials, cost of goods sold
d. cost of goods sold, raw materials, work in process, finished goods
The process by which management allocates available investment funds among
competing capital investment proposals is termed capital rationing.
a. True
b. False
The Swan Company produces its product at a total cost of $43 per unit. Of this amount,
$8 per unit is selling and administrative costs. The total variable cost is $30 per unit and
the desired profit is $20 per unit.Determine the markup percentage on total cost.
a. 100%
b. 110%
c. 80%
d. 46.5%
The Winston Company estimates that the factory overhead for the following year will
be $1,250,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 50,000 hours. The total machine
hours for the year was 54,300. The actual factory overhead for the year was $1,348,800.
a) Determine the total factory overhead amount applied.
b) Calculate the over- or under applied amount for the year.
c) Prepare the journal entry to close Factory Overhead into Cost of Goods Sold.
The Zoe Corporation has the following information for the month March. Determine
the (a) cost of goods manufactured, and (b) cost of goods sold.
A company is considering purchasing a machine for $21,000. The machine will
generate income from operations of $2,000; annual net cash flows from the machine
will be $3,500. The payback period for the new machine is 10.5 years.
a. True
b. False
A balance sheet that displays only component percentages is a
a. trend balance sheet
b. comparative balance sheet
c. condensed balance sheet
d. common-sized balance sheet
Design engineering
Identify the following quality control activities as either value-added or
non-value-added.
a. Value-added
b. Non-value-added
If fixed costs increased and variable costs per unit decreased, the break-even point
would
a. increase
b. decrease
c. remain the same
d. cannot be determined from the data provided
Use of a plantwide factory overhead rate distorts product costs when there are
differences in the factory overhead rates across different production departments and
when products require different ratios of allocation-base usage in each production
department.
a. True
b. False
The lean philosophy attempts to reduce setup times, which will:
a. increase batch sizes
b. not affect batch sizes
c. increase within-batch wait time
d. decrease within-batch wait time
Given the following cost and activity observations for Smithson Company’s utilities,
use the highÂlow method to calculate Smithson’s fixed costs per month. Do not round
your intermediate calculations.
a. $1,533
b. $2,530
c. $22,800
d. $50,600
Spice Inc.’s unit selling price is $60, the unit variable costs are $35, fixed costs are
$125,000, and current sales are 10,000 units. How much will operating income change
if sales increase by 8,000 units?
a. $150,000 decrease
b. $175,000 increase
c. $200,000 increase
d. $150,000 increase
The level of inventory of a manufactured product has increased by 7,000 units during a
period. The following data are also available:
What would be the effect on income from operations if absorption costing is used rather
than variable costing?
a. $42,000 decrease
b. $42,000 increase
c. $52,500 increase
d. $52,500 decrease
The following account appears in the ledger after only part of the postings have been
completed for July, the first month of the current fiscal year:
Work in Process
Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual
factory overhead incurred for July was $75,000. Jobs completed during the month
totaled $301,200.
(a) Prepare the journal entries to record (1) the application of factory overhead to
production during July and (2) the jobs completed during July.
(b) What is the balance of the factory overhead account on July 31?
(c) Was factory overhead over applied or under applied on July 31?
(d) Determine the balance of Work in Process on July 31.
The standard costs and actual costs for direct labor in the manufacture of 2,500 units of
product are as follows:
The direct labor time variance is
a. $1,180 favorable
b. $1,140 unfavorable
c. $1,180 unfavorable
d. $1,140 favorable