When using a periodic inventory system, the Merchandise Inventory DR column, in the
purchases journal, is replaced with a column titled Cost of Goods Sold DR.
In selecting machine usage as the primary cost driver for the Production Department,
management feels that there is a direct relationship between the number of machine
hours used and the amount of overhead costs incurred.
The calculation of contribution margin ratio for service companies is significantly
different from that of manufacturing companies.
The only difference between the present value and future value of a lump sum is the
amount of interest that is earned in the intervening time span.
Repair and maintenance costs of vehicles used to deliver products to the customers are
included in manufacturing overhead.
The total production cost flexible budget variance is obtained by adding direct labor
efficiency variance and fixed overhead volume variance.
A favorable variance reflects a decrease in operating income.
Job order costing is well suited for the service industry.
The cost of goods manufactured is recorded with a debit to the Finished Goods
Inventory account and a credit to the Work-in-Process Inventory account.
Keeping merchandise inventory at the maximum level that meets the needs of providing
goods to customers, with turning over the merchandise inventory efficiently, helps
reduce inventory storage costs, insurance costs, and warehousing costs.
Residual income compares the division’s actual operating income with the minimum
operating income expected by top management for the given size of the division’s
average total assets.
Special pricing orders increase operating income if the special price exceeds the
differential costs of filling the special order.
A budget is a managerial accounting tool used in the planning process.
Production cost reports prepared using the first-in, first-out (FIFO) method assume that
the first units started in the production process are the last units completed and sold.
The journal entry to issue indirect materials to production should include a debit to the
________.
A) Finished Goods Inventory account
B) Raw Materials Inventory account
C) Manufacturing Overhead account
D) Work-in-Process Inventory account
A company produces 1,000 packages of chicken feed per month. The sales price is $5
per pack. Variable cost is $1.50 per unit, and fixed costs are $1,700 per month.
Management is considering adding a vitamin supplement to improve the value of the
product. The variable cost will increase from $1.50 to $1.80 per unit, and fixed costs
will increase by 20%. The CEO wants to price the new product at a level that will bring
operating income up to $3,000 per month. What sales price should be charged? (Round
your answer to the nearest cent.)
A) $3.50
B) $6.84
C) $5.00
D) $3.20
The income statement for Bedtime Company is divided by its two product lines,
blankets and pillows, as follows:
Bedtime is considering eliminating the pillows product line. If this line is eliminated,
Bedtime will be able to eliminate $73,000 of total fixed costs. How would this business
decision impact operating income?
A) increase of $73,000 in operating income
B) decrease of $60,000 in operating income
C) increase of $136,000 in operating income
D) increase of $13,000 in operating income
Regarding controllable costs, which of the following statements is incorrect?
A) The production manager cannot make the decision to replace older equipment.
B) All costs are ultimately controllable at the upper levels of management.
C) The production manager is not responsible for avoiding waste of direct materials.
D) The production manager must be able to control all costs of his or her department.
Allentown Aqua, Inc. has provided the following information for the year.
What is the unit product cost using variable costing?
A) $55
B) $105
C) $125
D) $168
Period costs are the ________.
A) product costs that must be paid in the accounting period in which they are incurred
B) costs that are incurred and expensed during the same accounting period
C) costs related to production of products the company purchases and sells
D) same as manufacturing overhead costs
Huang Consumer Products has a small car division that operates as a profit center.
Below is a partially completed responsibility report for the first quarter.
Responsibility Report
Compute the percentage variance for the flexible budget variance for sales revenue.
(Round your answer to two decimal places.)
A) 1.71% F
B) 1.71% U
C) 4.04% U
D) 4.04% F
Houston Corporation reports the following cost information for March:
What is the amount of direct materials used by the company in March?
A) $10,990
B) $8,510
C) $18,100
D) $19,500
Uncle’s Caps, Inc., a merchandising company, has provided the following budgeted
amounts for the next budget period.
A minimum cash balance of $250,000 is required to be maintained. The company can
borrow in increments of $10,000 as and when required. Assume the company can
borrow the needed funds at the end of the period. Calculate the ending cash balance for
the budget period.
A) $713,400
B) $254,700
C) $204,700
D) $733,000
In the graph below, the area between the lines AC and OB to the right of point E
represents ________.
A) fixed costs
B) breakeven point
C) operating loss
D) operating income
Which of the following is an example of appraisal costs?
A) employee training cost
B) product testing cost
C) warranty costs
D) equipment maintenance costs
Percentage of market share and rate of on-time deliveries are indicators of the
________ perspective.
A) quality management
B) internal business
C) customer
D) learning and growth
A company has prepared the operating budget and the cash budget and is now preparing
the budgeted balance sheet. The balance of Accounts Receivable can be obtained from
the ________.
A) schedule of inventory, purchases, and cost of goods sold budget
B) cash receipts from customers
C) capital expenditures budget
D) selling and administrative expenses budget