The cost of goods manufactured is recorded with a debit to the Work-in-Process
Inventory account and a credit to the Cost of Goods Manufactured account.
The accounting rate of return is calculated by dividing the average annual operating
income by the average amount invested.
When a job is completed, the total cost of the job is recorded with a debit to Finished
Goods Inventory and a credit to Work-in-Process Inventory.
Managers do not consider sales mix for making decisions because it does not affect the
overall profitability of the company.
A predetermined overhead allocation rate is used to allocate direct materials costs to
various processes or departments.
Enterprise resource planning systems are software systems that can integrate all of a
company’s functions, departments, and data into a single system.
Fixed costs per unit decrease as production levels decrease.
The sales mix provides the weights that make up total product sales.
The sale of merchandise inventory for cash is recorded in the ________.
A) general journal
B) cash receipts journal
C) sales journal
D) accounts receivable journal
Modiste, Inc. manufactures two kinds of bags-totes and satchels. The company allocates
manufacturing overhead using a single plantwide rate with direct labor cost as the
allocation base. Estimated overhead costs for the year are $24,000. Additional estimated
information is given below.
Calculate the predetermined overhead allocation rate. (Round your answer to two
decimal places.)
A) 90.57%
B) 48.31%
C) 96.58%
D) 1.36%
A company produces 100 microwave ovens per month, each of which includes one
electrical circuit. The company currently manufactures the circuits in-house but is
considering outsourcing the circuits at a contract cost of $30 each. Currently, the cost of
producing circuits in-house includes variable costs of $24 per circuit and fixed costs of
$6,000 per month. Assume the company could eliminate all 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 $600
B) decrease by $3,000
C) decrease by $600
D) increase by $5,400
A company seeking investment opportunities has collected the following information:
If the company makes a decision based on the net present value, which project will be
selected?
A) Project A
B) Project B
C) Project C
D) Project D
CM Company manufactures a component used in the production of one of its main
products. The following cost information is available:
A supplier has offered to sell the component to CM for $650 per unit. If CM buys the
component from the supplier, the released facilities can be used to manufacture a
product that would generate a contribution margin of $10,000 annually. Assuming that
CM needs 4,000 components annually and that the fixed manufacturing overhead is
unavoidable, what would be the impact on operating income if CM outsources?
A) Operating income would decrease by $150,000.
B) Operating income would increase by $10,000.
C) Operating income would decrease by $10,000.
D) Operating income would increase by $160,000.
Fogelin Promotional Services uses a job order system for costing and billing
promotional services for dance and ballet performances. Fogelin has four public
relations specialists and office staff. At the beginning of the year, Fogelin estimated the
total cost of salaries and benefits for the public relations specialists at $403,900 and a
total of 7,200 billable hours for the year. The office and administrative costs were
estimated at $679,000. What direct labor rate would Fogelin use for the cost of its
specialists? (Round your answer to the nearest cent.)
A) $94.31 per hour
B) $150.40 per hour
C) $38.21 per hour
D) $56.10 per hour
An unfavorable flexible budget variance in variable costs suggests a(n) ________.
A) increase in sales price per unit
B) decrease in sales volume
C) increase in variable cost per unit
D) decrease in fixed costs
A profit center responsibility report ________.
A) should not include costs for which the profit center manager is not accountable
B) does not include revenues since that information only appears on the revenue center
responsibility report
C) includes traceable fixed expenses
D) is the same as a performance report
Which of the following statements is true of an activity-based costing system?
A) It uses separate predetermined overhead allocation rates for each activity.
B) It is not as accurate or precise as traditional costing systems.
C) It accumulates overhead costs by processing departments.
D) It is not as complex or as costly as traditional systems.
McDaniel Company sells two products’”J and B. McDaniel predicts that it will sell
7,400 units of J and 6,500 units of B in the next period. The unit contribution margins
are $2.90 and $6.30 for products J and B, respectively. What is the weighted-average
unit contribution margin? (Round your answer to the nearest cent.)
A) $4.60
B) $1.54
C) $2.95
D) $4.49
Fulkron, Inc. provides the following data taken from its third quarter budget:
The cash balance on June 30 is projected to be $11,000. Based on the above data,
calculate the shortfall the company is projected to have at the end of August.
A) $35,000
B) $(59,000)
C) $(48,000)
D) $14,000
Which of the following is the primary focus of financial accounting?
A) providing information that managers need to make operational decisions
B) providing summarized information on operational results to investors and creditors
C) providing budgets for future periods
D) providing highly detailed information on product lines, regions, and divisions
When preparing the report to analyze a proposed quality improvement program, which
of the following are included in the costs to continue without the quality improvement
program?
A) prevention and appraisal
B) prevention and internal failure
C) internal and external failure
D) appraisal and external failure
How is the unit contribution margin calculated?
List and briefly discuss the three basic components of an accounting information
system.
Patrick Manufacturing Systems uses job order costing and a perpetual inventory
system. When recording the sale of a job, which account(s) is(are) credited?
Cardec, Inc., a leading manufacturer of car spare parts, divided its manufacturing
process into two
Departments – Production and Packing. The estimated overhead costs for the Production
and Packing
departments amounted to $14,000,000 and $20,000,000, respectively. The company
produces two types of parts – Part 1 and Part 2. The total estimated labor hours for the
year were 40,000, and estimated machine hours were 35,000. The Production
department is mechanized, whereas the Packing department is labor oriented. Calculate
departmental predetermined overhead allocation rates.
Classify each cost of a furniture manufacturer as either product cost (PR) or period cost
(PE).
At the end of the year, Delta, Inc. has an unadjusted debit balance in the Manufacturing
Overhead account of $3,950. Provide the year-end adjusting entry needed to adjust the
account.
A company spent $750,000 to produce 225,000 gallons of a chemical free product that
can be sold for $6.00 per gallon. This product can be further processed into a household
cleaning solution that can be sold for $8.50 per gallon. It will cost $360,000 to process
the chemical free product into the household cleaning solution.
Prepare a differential analysis to determine if the product should be processed further.
Discuss the results.
From the following details provided by NutShell, Inc., prepare the manufacturing
overhead budget for the year. Also, calculate the predetermined overhead allocation
rate, using direct labor hours as the allocation base.
