Net present value is defined as the difference between the present value of the
investment’s net cash inflows and the investment’s initial cost.
The cost of goods sold is added to net sales revenue to determine gross profit.
Within the relevant range, the total fixed costs and the variable cost per unit remain the
same.
Under absorption costing, the more units added to ending Finished Goods Inventory,
the less fixed manufacturing overhead is ‘”hidden” in ending Finished Goods Inventory
at the end of the accounting period.
The cost accountant works directly with the corporate president to develop the selling
and administrative expense budget.
A static budget is prepared for only one level of sales volume.
When a manufacturer changes from using a single plantwide predetermined overhead
rate to multiple predetermined overhead allocation rates, the product unit cost may be
more accurate.
When raw materials are requisitioned for a job, the Raw Materials Inventory account is
debited.
Davie, Inc. used estimated direct labor hours of 250,000 and estimated manufacturing
overhead costs of $1,150,000 in establishing its predetermined overhead allocation rate
for the year. Actual results showed the following:
What was the number of direct labor hours worked during the year? (Round any
intermediate calculations to two decimal places, and your final answer to the nearest
whole number.)
A) 173,913 hours
B) 265,625 hours
C) 250,000 hours
D) 184,783 hours
The Assembling Department of Oberon, Inc. had 11,000 units in process on December
1 and received 30,400 units from the Sewing Department. During the month, it
completed 20,700 units and transferred them to the Packaging Department. Calculate
the number of units accounted for by the Assembling Department for December. The
company uses the FIFO method.
A) 20,700 units
B) 41,400 units
C) 11,000 units
D) 30,400 units
Which of the following will be recorded in the general journal when using a manual
accounting information system?
A) adjusting and closing entries
B) payment of accounts payable
C) purchase of merchandise inventory on account
D) sale of merchandise inventory on account
The static budget, at the beginning of the month, for Keats Company follows:
Static budget:
Sales volume: 2,100 units; Sales price: $52.00 per unit
Variable costs: $12.00 per unit; Fixed costs: $26,000 per month
Operating income: $58,000
Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,850 units; Sales price: $59.00 per unit
Variable costs: $18.00 per unit; Fixed cost: $37,000 per month
Operating income: $38,850
Calculate the sales volume variance for operating income.
A) $9,150 U
B) $250 F
C) $10,000 U
D) $10,000 F
An accounting information system is said to have good compatibility, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
Which of the following statements is true of variable costing?
A) It considers variable manufacturing overhead as period costs.
B) It considers fixed manufacturing overhead as product costs.
C) It considers variable selling and administrative costs as product costs.
D) It considers fixed selling and administrative costs as period costs.
Blair Stationery Company is a price-taker and uses target pricing. The company has just
done an analysis of its revenues, costs, and desired profits and has calculated its target
full product cost. Assume all products produced are sold. Refer to the following
information:
Actual costs are currently higher than target full product cost. Assuming that fixed costs
cannot be reduced, what are the target total variable costs?
A) $260,000
B) $456,000
C) $250,000
D) $510,000
Malloy Company, a manufacturer of small appliances, had the following activities,
allocated costs, and allocation bases:
The above activities are carried out at two of its regional offices.
How much of the account inquiry cost will be assigned to the Midwest Office? (Round
any intermediate calculations to two decimal places and your final answer to the nearest
dollar.)
A) $16,500
B) $77,000
C) $27,500
D) $8,250
While preparing the budgeted income statement of a merchandising company, the
amount of cost of goods sold can be taken from the ________.
A) budgeted balance sheet
B) budgeted cash flow statement
C) inventory, purchases, and cost of goods sold budget
D) capital expenditures budget
Which is the following is the most appropriate reason that sales mix decisions should be
made using variable costing?
A) All costs, including fixed costs, are controllable by upper management in the long
run.
B) To increase profits, businesses should emphasize the products with the highest
contribution margin.
C) Sales mix decisions primarily focus on fixed costs.
D) Fixed costs do not affect the operating income in the long run.
Which of the following is a benefit of using a computerized accounting information
system?
A) The software can accurately measure the intrinsic value of the firm using the built-in
simulation techniques.
B) There is no need to review the financial statements for accuracy.
C) The software is easy to use, thus no training or review is necessary.
D) The software automatically transfers the amounts from the general ledger to the
financial statements.
A CR.5 posting reference in a subsidiary ledger signifies that the ________.
A) posting is transferred from the cash receipts journal, page 5
B) transaction on page number 5 is credited
C) amount credited is after a 5% discount
D) sales on credit is expected to be paid within five days
Ace Plastics produces different kinds of products, all in one manufacturing facility.
They have identified four activities for their costing system:
Materials management-allocated by number of purchase orders
Chemical processing-allocated on metric tons
Molding-allocated on direct labor hours
Packaging-allocated by number of units produced
The activity rates are as follows:
Materials management $12.00 Per purchase order
Chemical processing $7.50 Per metric ton
Molding $24.00 Per direct labor hour
Packaging $0.10 Per unit
Engineering design shows that the order will require direct materials that cost $540;
direct labor cost will be $90. The order will also require four purchase orders to be
placed, use two metric tons of chemical base, and need eight direct labor hours. The
size of the order is to produce 3,000 units of product. Calculate the total production of
the order.
Search Engine Corp. has provided the following details concerning budgeted sales:
Budgeted Sales
Jan $75,000
Feb 69,000
March 80,000
April 82,000
May 80,500
June 92,000
The collection policy of the company is to collect 20% in the month of sale, 40% in the
following month, and remaining 40% in the second month after the month of sale. All
sales are made on account.
Calculate the cash receipts from customers for the first six months.
From the following details, provided by a merchandising company, prepare the selling
and administrative expenses budget for the first quarter of the next year.
Danby, Inc. has the following cost data:
Calculate the unit product cost using absorption costing when production is 200 units,
400 units, and 800 units.
Top managers of Marshall Industries predicted annual sales of 23,600 units of its
Product at a unit price of $5.00. Actual sales for the year were 22,800 units at $5.50
each. Variable costs were budgeted at $2.45 per unit, and actual variable costs were
$2.40 per unit. Actual fixed costs of $45,000 exceeded budgeted fixed costs by $2,000.
Prepare Marshall’s flexible budget performance report.
Vincent Jardine, a CPA, has a firm in the state of New York. Vincent uses ABC to
allocate overhead costs and has computed the following predetermined overhead
allocation rates:
Activity Allocation Base Allocation Rate
Photocopy expenses Number of pages $0.75 per page
Cost of maintenance Number of labor hours $10.00 per hour
Vincent has important contacts in the northeastern parts of New York. During the past
month, Vincent completed a job for Nurix, Inc. The job required 135 labor hours and
4,000 photocopies. Determine the amount of indirect costs to be allocated to the job.
Provide answers to the following just-in-time costing questions.
( To
Ken Jones has just won the state lottery. The state offers the following three payout
options for after-tax prize money:
1. $50,000 per year at the end of each of the next six years
2. $300,000 (lump sum) now
3. $400,000 (lump sum) six years from now
Calculate the present value of each scenario using an 8% annual discount rate. Round to
nearest whole dollar.
Present value of an ordinary annuity of $1:
Present value of $1:
What does the fixed overhead cost variance measure?