A production cost report helps managers identify the costs that can be reduced in the
production process.
A production cost report can help managers identify the most profitable products.
In the first step in developing an activity-based costing system, the management team
must think about how each activity for a product or service might be improved or
whether is it necessary at all.
A cost management system in which a company produces just in time to satisfy
customer needs is known as just-in-time management.
Sensitivity analysis is a what-if technique.
A manufacturer produced 7,500 total units. The cost of goods manufactured is $88,000
and the cost of goods sold is $71,000. The unit product cost is $9.47.
Fixed costs are relevant to a special pricing decision if they are subject to change as a
result of the special order.
Developing a budget reduces coordination and communication at different levels in an
organization.
In preparing the master budget, the manufacturing overhead is the last period cost to
consider.
An investment today of $8,424 at 6% will yield total payments of $10,000 over five
years. The reason for this increase is that the interest is being earned on principal that is
left invested each year.
The adjusting entry for overallocated or underallocated manufacturing overhead is
usually prepared at the beginning of the accounting period.
Which of the following is the correct order of the four steps of tracking product costs?
A) assign → accumulate → allocate → adjust
B) accumulate → assign → allocate → adjust
C) adjust → allocate → accumulate → assign
D) allocate → adjust → accumulate → assign
The contribution margin approach helps managers in short-term decision making
because it ________.
A) treats fixed manufacturing overhead as product cost
B) reports only mixed costs
C) reports costs and revenues at present value
D) isolates costs by behavior
An unfavorable flexible budget variance in operating income might be due to 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
Smith Industries is considering replacing a machine that is presently used in its
production process.
Which of the following is irrelevant to the replacement decision?
Which of the information provided in the table is irrelevant to the replacement
decision?
A) the sales price of the new machine
B) the original cost of the old machine
C) the current disposal value of the old machine
D) the annual cash operating costs
Off Road Concepts, Inc. produces a special kind of light-weight, recreational vehicle
that has a unique design. It allows the company to follow a cost-plus pricing strategy. It
has $9,000,000 of average assets, and the desired profit is a 7% return on assets.
Assume all products produced are sold. Additional data are as follows:
Using the cost-plus pricing approach, what should be the sales price per unit?
A) $3,065
B) $8,000
C) $1,070
D) $1,000
A new factory manager was hired for a company that was experiencing slow production
rates and lower production volumes than demanded by management. Upon
investigation, the manager found that the workers were poorly motivated and not
closely supervised. Midway through the quarter, an incentive program was initiated,
and cash bonuses were given when workers hit their production targets. Within a short
time, production output increased, but the bonuses had to be charged to the direct labor
budget, and the manager was worried about the impact of these costs on operating
income. This could produce a(n) ________.
A) unfavorable direct materials cost variance
B) unfavorable direct materials efficiency variance
C) favorable direct labor efficiency variance
D) favorable direct labor cost variance
The fixed costs per unit will ________.
A) increase as production decreases
B) decrease as production decreases
C) remain the same as production levels change
D) increase as production increases
Leslie’s Sunglass Company’s western territory’s forecasted income statement for the
upcoming year is as follows:
The company’s management is considering dropping the western territory and has
determined that $310,000 of the fixed expenses is avoidable. What is the change in
Leslie’s Sunglass Company’s forecasted operating for the upcoming year if the western
territory is dropped? Assume the company predicts an operating loss across the entire
company.
A) Operating loss will increase by $20,000.
B) Operating profit will increase by $330,000.
C) Operating loss will decrease by $20,000.
D) Operating profit will decrease by $330,000.
When a division is operating at capacity, the transfer price should be ________.
A) based on opportunity cost
B) a market-based transfer price
C) a cost-based transfer price
D) the total manufacturing cost
An intentional understatement of expected revenues or overstatement of expected
expenses by managers in order to have a favorable performance evaluation is known as
________.
A) benchmarking
B) appropriation
C) budgetary slack
D) variance analysis
Gatherer, Inc. uses a process costing system. It prepares a production cost report for
each processing department. How will the managers of Gatherer use these production
cost reports to prepare the balance sheet at the end of an accounting period?
A) to determine the amount of current liabilities of the period
B) to determine the balance of inventory accounts
C) to determine the cost of goods sold during the period
D) to determine the amount of revenues generated during the period
Evanston Manufacturing, Inc. reported the following information for the year:
What was the unit product cost? (Round your answer to the nearest cent.)
A) $4.32
B) $0.86
C) $0.85
D) $1.76
D&I Supplies, Inc. selected cost data for the year are shown below:
Assuming manufacturing overhead costs of $27,800, what is the amount of direct labor
incurred by D&I Supplies, Inc. during the year?
A) $64,300
B) $190,040
C) $61,240
D) $128,800
Zertrax, Inc. reports the following information for July:
What is the total fixed cost using variable costing?
A) $800,000
B) $390,000
C) $260,000
D) $560,000
Which of the following best describes a standard?
A) a sales price, cost, or quantity that is expected under normal conditions
B) costs incurred to produce a product
C) budgeted amount for total product cost
D) actual sales price, cost, or quantity
Glendale Brands Company uses standard costs for its manufacturing division. Standards
specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static
budget for variable overhead costs included the following data:
At the end of the year, actual data were as follows:
What is the variable overhead efficiency variance? (Round any intermediate
calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $1,866 F
B) $1,866 U
C) $2,534 F
D) $2,534 U
Differential analysis is a method that ________.
A) evaluates both relevant and irrelevant information
B) considers all areas of the traditional income statement
C) is not used for short-term decision making
D) looks at how operating income would differ under each decision alternative
Nimtrans, Inc. reports the following information for August:
Calculate the gross profit for August using absorption costing.
A) $845,000
B) $740,000
C) $700,000
D) $655,000
During the month, Diamond Manufacturing incurred $45,000 in direct labor costs in
Department 1, $22,000 direct labor costs in Department 2, and $3,500 of indirect labor
costs. Which of the following is not part of the summary journal entry to record these
transactions?
A) debit to Manufacturing Overhead for $3,500
B) debit to Work-in-Process Inventory for $70,500
C) credit to Wages Payable for $70,500
D) debit to Work-in-Process Inventory’”Department 1 for $45,000
The following information is provided by Dinovo Systems:
Calculate the profitability index for Project B. Show your calculations and round to two
decimal places.
List and describe the three types of budgets that are included in the master budget.
At the beginning of the year, Barrington Manufacturing had the following account
balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
Record these transactions in the T-accounts and calculate the ending balances for
Work-in-Process Inventory, Finished Goods Inventory, and Manufacturing Overhead
accounts (unadjusted).
Why would the manager of a service company need to use job order costing?
Superior Containers produces restaurant storage containers . The company makes two
sizes of containers: regular (55 gallon) and large (100 gallon). Demand for the products
is so high that Superior can sell as many of each size as it can produce. The company
uses the same machinery to produce both sizes. The machinery can be run for only
2,500 hours per period. Superior can produce 20 regular containers every hour, whereas
it can produce 8 large containers in the same amount of time. Fixed costs amount to
$250,000 per period. Sales prices and variable costs are as follows:
To maximize profits, how many of each size container should Superior produce?
Given this product mix, what will the company’s operating income be?
Tobin Sugar, Inc. has six processing departments for refining sugar-Affination,
Carbonation, Decolorization, Boiling, Recovery, and Packaging. Conversion costs are
added evenly throughout each process, and materials are added at the beginning of each
process. Data from August for the Recovery Department are as follows:
In August, 15,000 metric tons were completed and sent to the Packaging Department.
The ending Work-in-Process Inventory was 50% complete with respect to conversion
costs. Prepare a production cost report for the Recovery Department to show the
equivalent units for direct materials and conversion costs. The weighted-average
method is used.
Fly GenX, Inc. has the following budgeted sales for the next quarter.
Inventory of finished goods on hand at the beginning of the quarter is 4,000 units. The
company desires to maintain ending inventory equal to beginning inventory plus 1,000
units every month.
Calculate the quantity to be produced during the quarter.