Manley Co. manufactures office furniture. During the most productive month of the
year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the
company made 1,800 desks at a cost of $49,500. Using the high-low method of cost
estimation, total fixed costs are
a. $61,875
b. $33,875
c. $24,750
d. cannot be determined from the data given
If Kaden Company’s fixed costs are $46,800, the unit selling price is $42, and the unit
variable costs are $24. What is the break-even sale (units)?
a. 2,400
b. 1,950
c. 1,114
d. 2,600
If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales,
the contribution margin ratio is 60%.
a. True
b. False
Product costs
a. appear only on the balance sheet
b. appear only on the income statement
c. are expensed as costs are incurred for direct labor, direct material, and factory
overhead
d. appear on both the income statement and balance sheet
The following data relate to direct materials costs for February:
Materials cost per yard: standard, $2.00; actual, $2.10
Standard yards per unit: standard, 4.5 yards; actual, 4.75 yards
Units of production: 9,500
Calculate the direct materials quantity variance.
a. $4,512.50 unfavorable
b. $4,512.50 favorable
c. $4,750.00 unfavorable
d. $4,750.00 favorable
For a period during which the quantity of product manufactured equals the quantity
sold, income from operations reported under absorption costing will equal the income
from operations reported under variable costing.
a. True
b. False
The minimum acceptable divisional income from operations is set by top management
by establishing a minimum rate of return considered acceptable for invested assets.
a. True
b. False
The variance from standard for factory overhead cost resulting from operating at a level
above or below 100% of normal capacity is termed volume variance.
a. True
b. False
Department G had 3,600 units 25% completed at the beginning of the period, 11,000
units were completed during the period; 3,000 units were 20% completed at the end of
the period, and the following manufacturing costs debited to the departmental work in
process account during the period:
All direct materials are placed in process at the beginning of production and the first-in,
first-out method of inventory costing is used. What is the total cost of 3,600 units of
beginning inventory which were completed during the period (round unit cost
calculations to four decimal places)?
a. $62,206
b. $16,163
c. $40,000
d. $19,275
It is easier to quantify costs of controlling quality than the costs of failing to control
quality.
a. True
b. False
The DuPont formula uses financial information to measure the performance of a
business.
a. True
b. False
rate earned on total assets
Match each ratio that follows to its use (items a’“h). Items may be used more than
once.
a. assess the profitability of the assets
b. assess the effectiveness in the use of assets
c. indicate the ability to meet currently maturing obligations
d. indicate the margin of safety to creditors
e. indicate instant debt-paying ability
f. assess the profitability of the investment by common stockholders
g. indicate future earnings prospects
h. indicate the extent to which earnings are being distributed to common stockholders
Responsibility accounting reports that are given to lower level managers are usually
very detailed, in turn, higher level managers will be given a summary report.
a. True
b. False
Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are
$600,000, and fixed costs are $130,000. How much will operating income change if
sales increase by $40,000?
a. $8,000 increase
b. $8,000 decrease
c. $30,000 decrease
d. $30,000 increase
The Brass Works is in the process of determining manufacturing overhead. Journalize
events (a) – (d) to Factory Overhead, Administrative Expenses, Selling expenses, or
allocated between the three as appropriate. All items were paid in cash at the time of
acquisition. Next calculate the overhead application rate and apply overhead to Work in
Process.
(a) Brass Works purchases an insurance policy for $4,000. It is computed that 80% of
the value of the policy protects production, the balance protects the administrative
offices. Brass Works charges insurance initially to expense.
(b) The electric bill is received showing an amount due of $1,200. This meter is utilized
only by production as the office spaces have their own meter.
(c) Payroll reports that the sales manager’s salary for the period is $3,500 and that
production
Supervisor’s wages for the period are $5,500.
(d) The stockroom reports that $2,575 in materials were purchased for the production
Maintenance Department.
(e) If the driver for the application of overhead is drop-forge strokes and there are
expected to be 1,000 strokes in this period, what is the rate per stroke? Do not round
your answer.
(f) Assuming that there are 1,150 drop-forge strokes in this period, apply factory
overhead to Work in Process. Round your answers to nearest dollar.
Round overhead rate to four decimal places and total cost to nearest dollar.
