A company with different segments using different software configurations can easily
combine budget data of different segments to create the master budget.
Fixed costs divided by the contribution margin ratio equals the breakeven point in sales
dollars.
When a manufacturing company uses a standard cost system, an unfavorable variance is
a contra expense.
In a standard cost system, the manufacturing overhead allocated to production equals
the standard overhead allocation rate multiplied by the standard quantity of the
allocation base allowed for expected output.
During the current year, Simpson, Inc. incurred $9,000 in fixed costs and $13,000 in
variable costs. If the number of units produced is halved next year, the company will
incur $4,500 as fixed costs and $6,500 as variable costs.
Under the first-in, first-out (FIFO) method, prior period costs are not merged with
current period costs.
Managers can use CVP relationships to conduct sensitivity analysis.
Setting standard costs is a function of the company’s production department and does
not require input from other departments.
The following information relates to Washington, Inc.:
How much were Washington’s product costs?
A) $604,650
B) $252,000
C) $510,600
D) $86,620
The level of employee satisfaction is a key performance indicator of the ________
perspective of a balanced scorecard.
A) financial
B) learning and growth
C) internal business
D) customer
Worthington Sailboats Company manufactures 100 luxury yachts per month. Included
in each yacht is a compact media center. Worthington Sailboats manufactures the media
center in-house. The company is considering the possibility of outsourcing the
production of the media centers in order to close down some of its facilities and reduce
the administrative costs. At present, the variable cost per unit is $275, and fixed costs
are $44,000 per month. Assume that if it outsources, fixed costs could be reduced by
60%. The production manager advised the company to contract with a foreign supplier
who offered a contract cost of $410 per unit. If it outsources the media center, how
would that affect operating income?
A) Operating income would improve by $12,900.
B) Operating income would improve by $26,400.
C) Operating income would decline by $12,900.
D) Operating income would remain the same.
Contribution margin is calculated by deducting ________ from sales revenue.
A) total product costs
B) total selling and administrative costs
C) total fixed costs
D) total variable costs
Five Seasons is a merchandiser of packed foods. The company provides the following
information for the year:
How much was the unit cost per item of product sold? (Round your answer to the
nearest cent.)
A) $4.52
B) $5.00
C) $2.21
D) $100.48
Adelphia Manufacturing issued $70,000 of direct materials and $10,000 of indirect
materials for production. Which of the following journal entries would correctly record
the transaction?
A)
B)
C)
D)
Carlos Naturals manufactures bulk quantities of cleaning fluids. The company currently
sells 700 containers a month at a sales price of $22 per unit. The addition of a new
disinfectant will result in a sales price of $25 per unit for the improved product. It
would cost a total of $3,800 per month to make the alteration. Operating income would
________.
A) decline by $15,400
B) increase by $3,800
C) increase by $1,700
D) decline by $1,700
A company is most likely to use value engineering ________.
A) to allocate manufacturing overhead to departments
B) to reduce costs in order to achieve target costs
C) to determine accurate product costs for pricing
D) to make product mix decisions
A company sells two products with information as follows:
The products are machine made. Four units of product A can be made with one machine
hour, and two units of product B can be made with one machine hour. The company has
a maximum of 6,000 machine hours available per month. Assume there are no
constraints on sales of either product, and the company can choose any product mix
they wish. What is the maximum amount of contribution margin that the company
could earn in a month?
A) $336,000
B) $144,000
C) $192,000
D) $12,000
A company is analyzing its month-end results by comparing it to both static and flexible
budgets. During the previous month, the actual sales volume was lower than the
expected sales volume as per the static budget. This difference results in an unfavorable
________.
A) flexible budget variance for variable costs
B) sales volume variance for variable costs
C) flexible budget variance for sales revenue
D) sales volume variance for sales revenue
Selected production and cost data of Westgate Manufacturing Company follow for
June:
On June 30, the Mixing Department ending Work-in-Process Inventory was 80%
complete for materials and 40% complete for conversion costs. The Finishing
Department ending Work-in-Process Inventory was 75% complete for materials and
60% complete for conversion costs.
Requirements:
1. Compute the equivalent units of production for direct materials and for conversion
costs for the Mixing Department.
2. Compute the equivalent units of production for transferred in costs, direct materials,
and conversion costs for the Finishing Department.
Adriano Corp. sold 2,500 cell phones on account for $700 each. The standard direct
materials and conversion costs of each unit are $173.85 and $57.95, respectively.
Record the journal entries for this transaction under the just-in-time costing system.
What is cost of goods sold? Describe the flow of this cost through the job order costing
system. Your answer should include the accounts involved and whether the flow
involves a debit or credit.
Stephen Company provides cleaning services for residential and commercial customers.
Following are data for the month of June:
For each type of customer, determine both the contribution margin per customer and the
contribution margin ratio. Round to two decimal places. Show your computations. What
type of service is more profitable?
List three questions managers should consider when deciding whether to drop a product
or a business segment.
What is the final step in the master budget process?
Define period cost. Give three examples of period costs of a merchandising company.
Broxsie Fabrication, Inc. issued $60,000 of direct materials and $15,500 of indirect
materials to production. Prepare the journal entry to record the transaction.
What is the decision rule for outsourcing?
Howard Consumer Products has a small car division that operates as a profit center.
Below is a partially completed responsibility report for the first quarter. Complete the
responsibility report. (Round percentages to one decimal place.)
Howard Consumer Products
Responsibility Report
