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Direct costs and indirect costs can be easily traced directly to a cost object.
In deciding whether to accept a special pricing order, management should only consider
the quantitative data and disregard qualitative factors.
For short-term pricing decisions, variable costing is an appropriate costing method to
use.
When a manufacturing company uses a standard cost system, Work-in-Process
Inventory is debited at standard input quantities and standard costs.
During the year, a company incurred $520,000 of manufacturing overhead costs and
allocated $480,000 of manufacturing overhead costs. At year-end, the adjustment entry
needed to adjust the Manufacturing Overhead account balance to zero will include a
debit to Cost of Goods Sold.
One of the advantages of decentralization is that it allows top management to
concentrate on long-term strategic planning.
Operating leverage predicts the effects fixed costs have on changes in operating income
when sales volume changes.
Activity-based management (ABM) can be used to make pricing and product mix
decisions.
The payback method is a screening device and is rarely used as the sole method for
deciding whether to invest in an asset.
Verdant Avionics makes aircraft instrumentation. Their basic navigation radio requires
$140 in variable costs and requires $3,000 per month in fixed costs. If it processes the
radio further to enhance its functionality, it will require an additional $30 per unit of
variable costs and $300 per month in fixed costs. The marketing manager believes the
sales price of the radio can be increased from $250 to $280. In making this decision, the
amount of additional fixed costs per month is a relevant cost.
The traditional income statement format is prepared under absorption costing.
In absorption costing, the manufacturing costs expensed are greater than the amount
expensed in variable costing when units produced are less than sold because the units in
beginning inventory under absorption costing were assigned a greater cost in the
previous accounting period.
A cost-based transfer price considers the cost of producing the goods when determining
the price.
Which of the following will be recorded in the Other Accounts CR column of the cash
receipts journal?
A) cash sales
B) receipt of interest revenue
C) receipt of accounts receivable
D) sales discounts
Minnetonka, Inc. is a merchandiser of stone ornaments. The company sold 15,100 units
during the year. The company has provided the following information:
What is the unit cost per item sold? (Round your answer to the nearest cent.)
A) $19.21
B) $15.77
C) $22.85
D) $19.40
The static budget, at the beginning of the month, for Redwyne Company follows:
Static budget:
Sales volume: 2,000 units; Sales price: $50.00 per unit
Variable costs: $14.00 per unit; Fixed costs: $25,000 per month
Operating income: $47,000
Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,900 units; Sales price: $58.50 per unit
Variable costs: $16.00 per unit; Fixed costs: $33,000 per month
Operating income: $47,750
Calculate the flexible budget variance for variable costs.
A) $30,400 U
B) $4,350 U
C) $3,800 U
D) $26,600 F
Mist Beverages Company sells two products, A and B. Mist predicts that it will sell
2,500 units of A and 2,000 units of B during the next period. The unit contribution
margins are $4.00 and $4.80 for products A and B, respectively. What is the
weighted-average unit contribution margin? (Round your answer to the nearest cent.)
A) $4.36
B) $4.40
C) $4.44
D) $8.80
Uniq Works purchased raw materials amounting to $126,000 on account and $16,000
for cash. The materials will be used to manufacture upholstery for furniture
manufacturers on a contract basis. Which of the following journal entries correctly
records this transaction?
A)
B)
C)
D)
Under the first-in, first-out (FIFO) method, the current period equivalent units of
production for transferred in units in beginning inventory are zero because ________.
A) these units are transferred back to the previous department for further processing in
the current period
B) these units are expected to be sold by the receiving department without subjecting
them to further processing
C) no additional costs for these units were transferred in the current period
D) costs involved in inter-departmental transfers are accounted for only once when
sales are made to customers
Gainesville Company has provided the following information:
Calculate the contribution margin ratio. (Round your answer to two decimal places.)
A) 21.43%
B) 82.35%
C) 64.71%
D) 78.57%
Purchases of direct material for May were $105,000, while expected purchases for June
and July are $120,000 and $134,000, respectively. All purchases are paid 75% in the
month of purchase and 25% the following month. Calculate the budgeted payments for
the month of June.
A) $116,250
B) $108,750
C) $120,000
D) $30,000
The ________ system pulls materials, labor, and overhead costs into production under a
just-in-time management system.
A) purchase-push
B) demand-push
C) purchase-pull
D) demand-pull
J-Time, Inc. is planning to launch a new brand of watches for kids. Similar watches are
available in the market for $58. In order to penetrate the market, the company plans to
use target pricing and desires a 22% net profit markup on total cost. Calculate the target
cost. (Round your answer to the nearest cent.)
A) $70.76
B) $12.76
C) $47.54
D) $45.24
A company produces 400 microwave ovens per month, each of which includes one
electrical circuit. The company currently manufactures the circuit in-house but is
considering outsourcing the circuits at a contract cost of $48 each. Currently, the cost of
producing circuits in-house includes variable costs of $26 per circuit and fixed costs of
$7,000 per month. Assume the company could not reduce any fixed costs by
outsourcing and that there is no alternative use for the facilities presently being used to
make circuits. If the company outsources, operating income will ________.
A) increase by $19,200
B) decrease by $10,400
C) decrease by $8,800
D) stay the same
Which of the following statements is true of just-in-time management systems?
A) It involves ordering raw materials in large quantities to obtain volume discounts.
B) It triggers production after the customer places an order.
C) Its successful implementation is independent of vendor relationships.
D) It contracts with suppliers to deliver large quantities of goods once a year.
Darwin Company sells glass vases at a wholesale price of $4.50 per unit. The variable
cost to manufacture is $1.75 per unit. The monthly fixed costs are $8,500. Its current
sales are 29,000 units per month. If the company wants to increase its operating income
by 20%, how many additional units must it sell? (Round any intermediate calculations
to two decimal places and your final answer to the nearest whole number.)
A) 130,500 glass vases
B) 8,500 glass vases
C) 34,182 glass vases
D) 5,182 glass vases
Fernandez Manufacturing uses a standard cost system. Standard and actual data for
manufacturing overhead are as follows:
Variable overhead allocation rate: $30 per direct labor hour
Fixed overhead allocation rate: $10 per direct labor hour
Actual overhead incurred (variable and fixed): $45,600
Standards for direct labor are as follows:
Hours per unit 0.5, Direct labor cost per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Actual and planned production for the month: 3,000 units
Prepare the journal entry to allocate overhead cost (both variable and fixed) to
production.
State the purpose of a subsidiary ledger? What is included in the accounts receivable
subsidiary ledger?
Bridget Company manufactures candles. The standard direct materials quantity required
to produce one large candle is 1 pound at a cost of $5 per pound. Every candle requires
2 direct labor hours at a standard cost of $3 per direct labor hour. During November,
7,200 large candles were produced using 7,500 pounds costing $45,000. At the end of
November, an examination of the labor cost records showed that the company used
15,000 direct labor hours (DLHr) at a cost of $4 per hour.
Using the format below, prepare an analysis of the direct labor cost variances.
How does a service company calculate unit cost per service? Why do managers need to
know the unit cost per service?
Yates, Inc. is evaluating two possible investments in depreciable plant assets. The
company uses the straight-line method of depreciation. The following information is
available:
Compute the payback period for each investment. Show your calculations and round to
one decimal place.
Under what circumstances is the investment with the shortest payback the best choice?
How should managers use the payback method?
List the primary goals of performance evaluation systems.
What is the margin of safety? List three ways in which margin of safety can be
expressed.
