In a decentralized company, all the planning and controlling decisions are made by top
management.
The common factor in all quality management systems is the desire to improve the
business’s performance by providing quality products or services.
The Work-in-Process Inventory account of a department is credited when overallocation
of manufacturing overhead occurs in that department.
The accounting rate of return method focuses on operating income instead of net cash
inflow generated by an asset.
The payback method considers cash flows that occur both during and after the payback
period.
In a manufacturing company, the salary of the sales staff is an example of period cost.
A cost variance measures the difference in quantities of actual inputs used and the
standard quantity of inputs allowed for the actual number of units produced.
In many cases, the amount of the transfer price does not affect overall company profits.
The salary of a manufacturing plant manager will be included in manufacturing
overhead.
Just-in-time costing does not track the cost of products from Raw Materials Inventory
to Work-in-Process Inventory to Finished Goods Inventory.
Both job order costing and process costing track the product costs of direct materials,
direct labor, and manufacturing overhead through three inventory accounts on the
balance sheet.
Many service, merchandising, and manufacturing firms use discounted cash flow
methods to make capital investment decisions.
The amount of taxes and insurance incurred and paid for the plant of a manufacturing
company should be debited to the Manufacturing Overhead account.
The fixed overhead cost variance measures the difference between actual fixed
overhead and allocated fixed overhead.
Product costs, such as direct materials, are expensed in the period they are paid.
At the internal rate of return, the present value of net cash inflows will equal the
________.
A) initial cost of the investment
B) residual value
C) average operating income
D) profit from the project
On June 1, Dalton Productions had beginning balances as shown in the T-accounts
below.
Raw Materials Inventory
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
During June, the following transactions took place:
June 2: Issued $2,200 of direct materials and $700 of indirect materials to production.
What was the balance in the Manufacturing Overhead account following this
transaction?
A) $43,900
B) $43,200
C) $41,700
D) $41,000
Which of the following costs change in total in direct proportion to a change in volume?
A) fixed costs
B) variable costs
C) mixed costs
D) period costs
Wood Designs Company, a custom cabinet manufacturing company, is setting standard
costs for one of its products. The main material is cedar wood, sold by the square foot.
The current cost of cedar wood is $6.00 per square foot from the supplier. Delivery
costs are $0.20 per square foot. Carpenters’ wages are $20.00 per hour. Payroll costs are
$4.00 per hour, and benefits are $5.00 per hour. How much is the direct materials
standard cost per square foot?
A) $11.20
B) $10.20
C) $6.20
D) $6.00
Winter Wonderland sells hand-knit scarves. Each scarf sells for $50. The company pays
$30 to rent a vending space for one day. The variable costs are $10 per scarf. What total
revenue amount does the company need to earn to break even? (Round any percentages
to two decimal places and your final answer to the nearest cent.)
A) $66.67
B) $37.50
C) $12.50
D) $50.00
Centium Corporation sold goods to John Dunn for $1,000 on account. Cost of goods
sold was $745. Centium uses a perpetual inventory system and special journals. The
cost of goods sold is recorded in the ________ column of the sales journal.
A) Accounts Receivable DR, Sales Revenue CR
B) Cost of Goods Sold CR, Merchandise Inventory DR
C) Cost of Goods Sold DR, Merchandise Inventory CR
D) Sales Revenue DR, Accounts Receivable CR
Louise, Inc. has a cash balance of $20,000 on April 1. The company is now preparing
the cash budget for the second quarter. Budgeted cash collections and payments are as
follows:
There are no budgeted capital expenditures or financing transactions during the quarter.
Based on the above data, calculate the projected cash balance at the end of May.
A) $22,000
B) $53,400
C) $48,400
D) $43,800
Isabelle’s Furniture manufactures a small table and a large table. The small table sells
for $700, has variable costs of $560 per table, and takes 10 direct labor hours to
manufacture. The large table sells for $1,600, has variable costs of $970, and takes eight
direct labor hours to manufacture. The company has a maximum of 5,000 direct labor
hours per month when operating at full capacity. If there are no constraints on sales of
either product, and the company could choose any proportions of product mix that they
wanted, what is the optimum product mix to maximize operating income of the
company?
A) 500 units of small and 625 units of large
B) 0 units of small and 625 units of large
C) 625 units of small and 500 units of large
D) 500 units of small and 0 units of large
During September, the Filtering Department of Downtown Center, Inc. had a beginning
Work-in-Process Inventory of 600 units with costs of $72,000. During the month, 700
units were transferred in from the Milling Department with costs of $209,000. It had
600 units in ending Work-in-Process Inventory. What is the cost per equivalent unit of
production for the transferred in units that were transferred to the Filtering Department
in September under the first-in, first-out (FIFO) method? (Round your answer to the
nearest cent.)
A) $55.38 per equivalent unit of production for transferred in
B) $1.00 per equivalent unit of production for transferred in
C) $54.17 per equivalent unit of production for transferred in
D) $298.57 per equivalent unit of production for transferred in
Jetz, Inc. manufactures water bottles for children. Similar water bottles are available in
the market for $8.00. Jetz desires a 24% net profit margin. Jetz’s target cost is
________. (Round your answer to the nearest cent.)
A) $6.08
B) $9.92
C) $8.00
D) $1.92
Altima, Inc. finished Job A40 on the last working day of the year. It utilized $370 of
direct materials and $3,420 of direct labor. Altima uses a predetermined overhead
allocation rate based on a percentage of direct labor costs, which has been fixed at 40%.
The entry to record the completion of the job should involve a ________.
A) debit to Finished Goods Inventory $5,158 and a credit to Materials Inventory $5,158
B) debit to Cost of Goods Sold $5,158 and a credit to Finished Goods Inventory $5,158
C) debit to Finished Goods Inventory $5,158 and a credit to Work-in-Process Inventory
$5,158
D) debit to Work-in-Process Inventory $5,158 and a credit to Finished Goods Inventory
$5,158
Health Resources expects to sell 490 units of Product A and 420 units of Product B each
day at an average price of $16 for Product A and $27 for Product B. The expected cost
for Product A is 41% of its selling price and the expected cost for Product B is 63% of
its selling price. Health Resources has no beginning inventory, but it wants to have a
four-day supply of ending inventory for each product. Compute the company’s
budgeted sales for the next (seven-day) week. (Round the answer to the nearest dollar.)
A) $10,359
B) $76,720
C) $134,260
D) $19,180
Young Manufacturing uses a process costing system and manufactures its product in
three departments. Which of the following is not a way in which Young can use the cost
per unit of each process?
A) Young can look for ways to cut the costs when actual process costs are more than
planned process costs.
B) Young needs to set the selling price to cover the costs of making the product and
provide a profit.
C) Young can only use the cost per unit of each process if all units are fully completed
at the end of the accounting period.
D) Young needs to know the ending balances in the following accounts:
Work-In-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
Based on the following, what is the total direct materials variance?
A) $150 U
B) $300 F
C) $150 F
D) $300 U
At the beginning of the year, Judge 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:
The ending balance in the Finished Goods Inventory account is a ________.
A) debit of $509,700
B) debit of $501,700
C) debit of $8,000
D) debit of $571,900
Eleanor’s Mittens, Inc., a merchandising company, wants to prepare the budgeted
balance sheet for the next budget period. For this purpose, the amount of ending cash
balance can be retrieved from the ________.
A) capital expenditures budget
B) budgeted funds flow statement
C) cash budget
D) sales budget
Period costs under the variable costing method include ________.
A) variable manufacturing overhead
B) variable selling and administrative costs
C) direct materials
D) direct labor
Saffron Foods sells jars of special spices used in Spanish cooking. The variable cost is
$1 per unit. Fixed costs are $9,000,000 per year. It has $42,000,000 of average assets,
and the desired profit is a 4% return on assets. Saffron Foods sells 5,000,000 units per
year. The company uses cost-plus pricing because it is the only company that produces
this kind of product. Using cost-plus pricing methodology, determine the sales price per
unit. (Round your answer to the nearest cent.)
A) $1.25
B) $3.14
C) $2.80
D) $1.00
Which of the following is an example of how managers use product cost reports to
control costs?
A) setting product prices high enough for the company to be profitable
B) providing cost of goods sold for the income statement
C) determining if newer, more efficient equipment should be acquired
D) promoting products that are most profitable