Normally, standard costs should be revised when labor rates change to incorporate new
union contracts.
a. True
b. False
Department J had no work in process at the beginning of the period; 18,000 units were
completed during the period; and 2,000 units were 30% completed at the end of the
period. The following manufacturing costs were debited to the departmental work in
process account during the period (Assume the company uses FIFO and rounds cost per
unit to two decimal places):
Assuming that all direct materials are placed in process at the beginning of production,
what is the total cost of the 18,000 units completed during the period?
a. $90,000
b. $193,140
c. $16,438
d. $283,140
work centers for processing in a just-in-time system
Match each phrase that follows with the term (a-e) it describes.
a. cost of production report
b. equivalent units of production
c. manufacturing cells
d. yield
e. just-in-time processing
A company has a margin of safety of 25%, a contribution margin ratio of 30%, and
sales of $1,000,000.
(a) What is the break-even point in sales dollars?
(b) What is the operating income?
(c) If neither the relationship between variable costs and sales nor the amount of fixed
costs is expected to change in the next year, how much additional operating income can
be earned by increasing sales by $110,000?
Panamint Systems Corporation is estimating activity costs associated with producing
disk drives, tapes drives, and wire drives. The indirect labor can be traced to four
separate activity pools. The budgeted activity cost and activity base data by product are
provided below.
Determine the activity-based cost for each wire drive unit.
a. $204.13
b. $173.51
c. $744.06
d. $394.12
Goods that are partially completed by a manufacturer are
a. merchandise inventory
b. work in process inventory
c. finished goods inventory
d. materials inventory
Sanders Inc. has applied $567,988 of overhead to jobs in the cost ledger. Actual
overhead at the end of the year is $575,000. The adjustment for over or under applied
overhead is
a. $7,012 over applied, increase Cost of Goods Sold
b. $7,012 under applied, increase Cost of Goods Sold
c. $7,012 over applied, decrease Cost of Goods Sold
d. $7,012 under applied, decrease Cost of Goods Sold
Which of the following expenses incurred by a department store is an indirect expense?
a. insurance on merchandise inventory
b. sales salaries
c. depreciation on store equipment
d. salary of vice president of finance
BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The
project has an estimated life of 4 years and no salvage value. The estimated net income
and net cash flow from the project are as follows:
The company’s minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636,
respectively.
Determine: (a) the average rate of return on investment, including the effect of
depreciation on the investment, and (b) the net present value.
Standard costs serve as a device for measuring efficiency.
a. True
b. False
Differential revenue is the amount of increase or decrease in revenue expected from a
particular course of action as compared with an alternative.
a. True
b. False
If factory overhead applied exceeds the actual costs, the factory overhead account will
have a credit balance.
a. True
b. False
typically used by companies whose products are indistinguishable from each other
Match the following phrases with the term (a-g) that it most closely describes.
a. job order cost system
b. process cost system
c. activity-based costing
d. under applied overhead
e. over applied overhead
f. finished goods ledger
g. materials ledger
Which of the following is not considered a complicating factor in capital investment
decisions?
a. income tax
b. lease versus purchasing options
c. equal proposal lives
d. qualitative factors
Which of the following is not an example of a cost that varies in total as the number of
units produced changes?
a. electricity per KWH to operate factory equipment
b. direct materials cost
c. insurance premiums on factory building
d. wages of assembly worker