Companies evaluate investment centers using the same measures as the profit centers.
The total amount of manufacturing overhead costs incurred during the period is
recorded on the credit side of the Manufacturing Overhead account.
Return on investment measures the profitability of an investment center but not the
efficiency in using its assets.
In general, calculating ROI based on the gross book value of assets gives managers an
incentive to continue using old, outdated equipment.
Mumbai Travel Services provided the following information:
Direct labor rate: $40 per hour
Predetermined overhead allocation rate for indirect costs: $22 per direct labor hour
If Mumbai Travel earns $350 for a job requiring 5 hours of direct labor, then Mumbai
Travel will make a profit of $40.
Process costing is the most appropriate costing method for a restaurant serving specialty
cuisine.
The IMA Standards of Ethical Practice include confidentiality, competence, credibility,
and integrity.
Under a just-in-time costing system, the journal entry that is recorded when the goods
are completed and moved to Finished Goods Inventory is ________.
A)
B)
C)
D)
In deciding whether to drop its electronics product line, a company’s manager should
ignore ________.
A) the variable and fixed costs it could save by dropping the product line
B) the revenues it would lose from dropping the product line
C) the effect of dropping the electronics product line on the sales of its other products
D) the amount of unavoidable fixed costs
Bentley Manufacturing, Inc. provided the following information for the year:
The inventory account balances as of January 1 are given below.
What is the ending balance in the Work-in-Process Inventory account?
A) $15,960
B) $1,000
C) $50,000
D) $45,000
Gardner Sail Makers manufactures sails for sailboats. The company has the capacity to
produce 37,000 sails per year and is currently producing and selling 30,000 sails per
year. The following information relates to current production:
Assume that a special pricing order is accepted for 5,500 sails at a sales price of $150
per unit. This special order requires both variable manufacturing and variable selling
and administrative costs, as well as incremental fixed costs of $400,000. What will be
the impact on operating income?
A) Operating income decreases by $363,000.
B) Operating income decreases by $37,000.
C) Operating income increases by $363,000.
D) Operating income increases by $37,000.
In its first year of business, Greenlam, Inc. produced 600 units and sold 400 units. If
Greenlam uses variable costing, ________.
A) its operating income for the period will be higher than under absorption costing
B) its operating income for the period will be lower than under absorption costing
C) its value of ending Finished Goods Inventory reported in the balance sheet will be
higher than under absorption costing
D) its operating income will be the same as under absorption costing
Briar Company provides cleaning services to commercial and residential customers.
The commercial business segment provided services to 270 customers and the
residential business segment provided services to 595 customers.
State which segment has the higher average variable cost per unit and provide the
amount of the average variable cost per unit for that segment. (Round the answer to the
nearest dollar.)
A) Residential, $124
B) Commercial, $86
C) Residential, $86
D) Commercial, $124
Happy Clicks, Inc. uses a predetermined overhead allocation rate of $5.50 per machine
hour. Actual overhead costs incurred during the year are as follows:
What is the amount of manufacturing overhead cost allocated to Work-in-Process
Inventory during the year?
A) $38,747
B) $8,900
C) $29,847
D) $41,800
A manufacturing company’s budgeted income statement includes the following data:
The budget assumes that 60% of commission expenses are paid in the month they are
incurred and the remaining 40% are paid one month later. In addition, 50% of salaries
expenses are paid in the same month, and the remaining 50% are paid one month later.
Miscellaneous expenses, rent expense, and utilities expenses are assumed to be paid in
the same month in which they are incurred. Insurance has been paid in advance for the
year on January 1.
Calculate total budgeted cash payments for selling and administrative expenses for the
month of April.
A) $52,000
B) $60,500
C) $57,900
D) $64,700
Candy Man, Inc. reports the following information:
What is the unit product cost using variable costing? (Round your answer to the nearest
cent.)
A) $69.45
B) $44.00
C) $52.45
D) $98.18
The records at Smith and Jones, Inc. show that Job 110 is charged with $10,000 of
direct materials and $13,000 of direct labor. Smith and Jones, Inc. allocate
manufacturing overhead at 80% of direct labor cost. What is the total cost of Job No.
110?
A) $31,000
B) $33,400
C) $23,000
D) $13,000
Santora Company manufactures two products’”toaster ovens and bread machines. The
following data are available:
Santora can manufacture six toaster ovens per machine hour and four bread machines
per machine hour. Santora’s production capacity is 2,000 machine hours per month, and
it can sell as many units of either type as it can produce. Which product and how many
units should the company produce in a month to maximize profits? (Round machine
hour per unit to two decimal places and your final answer to the nearest whole dollar.)
A) 8,000 bread machines
B) 6,000 toaster ovens and 4,000 bread machines
C) 8,000 toaster ovens and 6,000 bread machines
D) 12,000 toaster ovens
Irene Manufacturing uses a predetermined overhead allocation rate based on a
percentage of direct labor cost. At the beginning of the year, the company estimated
total manufacturing overhead costs at $1,000,000 and total direct labor costs at
$830,000. In June, Job 711 was completed. The details of Job 711 are shown below.
How much was the cost per unit of finished product? (Round any percentages to two
decimal places and your final answer to the nearest cent.)
A) $80.00
B) $101.58
C) $85.20
D) $111.20
Margin, Inc. has two products’”picture frames and candle holders. Financial data for
both the products follows:
Margin has two sales representatives’”Jack Lynch and Peter Cho. Each sales
representative sold a total of 1,400 units during the month of March. Jack had a sales
mix of 80% picture frames and 20% candle holders. Peter had a sales mix of 70%
picture frames and 30% candle holders. What is the contribution margin ratio for
picture frames and candle holders, respectively?
A) 56%; 35%
B) 49%; 31%
C) 7%; 4%
D) 44%; 65%
Boylan Company manufactures two products’”toaster ovens and bread machines. The
following data are available:
Boylan can manufacture six toaster ovens per machine hour and four bread machines
per machine hour. Boylan’s production capacity is 1,800 machine hours per month.
Marketing limitations indicate that Boylan can sell a maximum of 5,100 toasters and
4,100 bread machines per month. Which product and how many units should the
company produce in a month to maximize profits? (Round machine hour per unit to two
decimal places and your final answer to the nearest whole dollar.)
A) 7,200 bread machines
B) 4,650 toaster ovens and 4,100 bread machines
C) 5,400 toaster ovens and 3,600 bread machines
D) 10,800 toaster ovens
