Todd Company has two production departments called Assembly and Finishing. The
maintenance department serves both production departments. Maintenance costs are
allocated based on labor hours. Budgeted fixed costs for the maintenance department
are $30,000. Budgeted variable costs for the maintenance department are $5.00 per
labor hour. Other relevant data follow:
Assembly Finishing
Capacity available 20,000 labor hours 15,000 labor hours
Capacity used 15,000 labor hours 9,000 labor hours
Actual maintenance department costs:
Fixed $36,000
Variable $100,000
The amount of variable maintenance department costs allocated to the Finishing
Department should be ________.
A) $37,500
B) $42,000
C) $45,000
D) $75,000
The ________ is mainly concerned with the company’s operating matters whereas the
________ is mainly concerned with the company’s financial matters.
A) treasurer; controller
B) controller; treasurer
C) managerial accountant; financial accountant
D) chief executive officer; chief financial officer
________ is the drive for some selected goal that creates effort and action toward that
goal.
A) Goal congruence
B) Managerial effort
C) Motivation
D) Personal rewards
Surly Company makes small boats. The company produces and sells 5,500 boats per
year at a selling price of $160 per boat. Surly Company has excess capacity and is
trying to get special orders. A new retailer wants to purchase 1,000 boats for $125 per
boat. Surly Company is going to decline the special order because it costs $130 to make
a single boat as seen below:
Direct materials $50 per unit
Direct manufacturing labor $55 per unit
Variable manufacturing overhead $10 per unit
Fixed manufacturing overhead $15 per unit
Total $130 per unit
Required:
A) Should Surly Company reject the special order from the new retailer? Why?
B) How much will Surly’s net income increase with the special offer?
Couric Company reported the following information about the production and sale of
its only product during the first month of operations:
Selling price per unit $117.00
Sales $117,000
Direct materials used $37,500
Direct labor $63,000
Variable factory overhead $25,500
Fixed factory overhead $80,000
Variable selling and administrative expenses $4,500
Fixed selling and administrative expenses $7,500
Units produced 2,000 units
Units sold 1,000 units
Production volume variance $0
Under absorption costing, what is the Cost of Goods Sold?
A) $63,000
B) $103,000
C) $126,000
D) $206,000
If a company chooses to allocate central support costs, it is important to allocate them
using ________.
A) actual or estimated usage
B) a fair approach accepted by managers
C) the indirect costs of each division
D) A and B
When managers use the decision process to make decisions, what is the output after
using the prediction method?
A) decision
B) implementation
C) predictions
D) evaluation
Financial reports prepared by financial accountants focus on ________. Financial
reports prepared by management accountants focus on ________.
A) segments of the organization such as departments and divisions; segments of the
organization such as departments and divisions
B) the organization as a whole; the organization as a whole
C) the organization as a whole; segments of the organization such as departments and
divisions
D) segments of the organization such as departments and divisions; the organization as
a whole
Schaefer Company has the following information available for the month of March:
Units Transferred- Direct Conversion
in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%
Transferred-in during March 400
Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%
Costs added in March $52,000 $13,200 $48,600
The company uses the weighted-average method for process costing. What are the
equivalent units for March for transferred-in costs?
A) 400
B) 440
C) 600
D) 640
Uptown Corporation has a joint process that produces three products: P, G and A. Each
product may be sold at split-off or processed further and then sold. Joint-processing
costs for a year amount to $20,000. Other data follows:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs after Split-Off at Completion
P $32,000 $5,000 $39,000
G 16,500 7,500 29,000
A 6,400 8,000 10,000
Processing Product P beyond the split-off point will cause profits to ________.
A) be unchanged
B) increase by $2,000
C) increase by $3,000
D) increase by $7,000
West Allis Bike Shop uses a backflush-costing system to account for bicycles. Bicycles
are scheduled for production only after orders are received and products are shipped to
customers immediately upon completion. No Finished Goods Inventory is maintained
and product costs are applied directly to Cost of Goods Sold. The standard cost for
materials is $150 per bicycle. The standard cost for conversion costs is $75 per bicycle.
During the current month, West Allis Bike Shop purchased $6,000 of direct materials
and incurred $3,000 in conversion costs to produce 40 bicycles. The journal entry to
record the purchase of materials includes a Debit to ________.
A) Materials Inventory
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Cost of Goods Sold
Benson Company is considering the replacement of a machine that is presently used in
production. The following data are available:
Old Machine New Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000 –
Disposal value now $8,000 –
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
Adding all five years together, the total relevant costs to consider if the new machine is
purchased is ________.
A) $12,000
B) $27,000
C) $47,000
D) $55,000
Cudahy Company had the following transactions:
1. The owner started the company by investing $10,000 of cash.
2. The company paid $2,000 for six months of rent. The rent was paid in advance.
3. The company acquired $3,000 in inventory for cash.
4. The company sold inventory costing $1,400 for $2,900 on account.
After all these transactions, what is the balance in the cash account?
A) $2,100
B) $3,500
C) $5,000
D) $8,000
Which stage of the product life cycle has a stable sales level?
A) product development stage
B) introduction to market stage
C) mature market stage
D) phase-out of product stage
Budgets that focus on the budgeted cost of activities required to produce and sell
products are called ________.
A) strategic budgets
B) master budgets
C) activity-based budgets
D) rolling budgets
Conoco Company has an actual factory overhead cost of Depreciation Expense—
Equipment of $5,000. Job-order costing is used. The journal entry to record this actual
cost would include ________.
A) Debit to Factory Department Overhead Control $5,000 and Credit to Accumulated
Depreciation—Equipment $5,000
B) Debit to Depreciation Expense—Equipment $5,000 and Credit to Accumulated
Depreciation—Equipment $5,000
C) Debit Work-In-Process Inventory $5,000 and Credit to Factory Department
Overhead Control $5,000
D) Debit to Work-In-Process Inventory $5,000 and Credit to Factory Department
Overhead Applied $5,000
Golden Company manufactures a part for its production cycle. The annual costs per unit
for 10,000 units of the part are as follows:
Per Unit
Direct materials $20.00
Direct labor 15.00
Variable factory overhead 6.00
Fixed factory overhead 10.00
Total costs $51.00
The fixed factory overhead costs are unavoidable. Olson Company has offered to sell
10,000 units of the same part to Golden Company for $55 per unit. The facilities
currently used to make the part could be used to make 10,000 units per year of a new
product that has a contribution margin of $20 per unit. No additional fixed costs would
be incurred with the new product. Golden Company should ________.
A) make the part to save $40,000
B) make the part to save $140,000
C) make the new product and buy the part to save $60,000
D) make the new product and buy the part to save $140,000
Each year, goodwill on the consolidated balance sheet is ________.
A) amortized
B) depreciated
C) evaluated by management to determine if it is impaired
D) ignored
Walter Company manufactures greeting cards. Special glittery material is added at the
end of the process in the Printing Department. Conversion costs are applied uniformly
throughout the process. The weighted-average method of process costing is used. Data
for the Printing Department for the month of September follow:
Work-In-Process Inventory, September 1:
Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472
Units started in September 127,500
Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000
Direct materials added in September $427,500
Conversion costs added in September $315,000
With regard to the Work-In-Process Inventory on September 30, materials are 0 percent
complete and conversion costs are 60 percent complete. The unit cost for conversion
costs is ________.
A) $2.24
B) $2.26
C) $2.41
D) $2.73
Assume machine hours are the cost-allocation base for the budgeted rate for fixed
overhead costs. The total fixed overhead cost applied to a product is the result of
multiplying the ________ by the ________ for the product.
A) budgeted fixed overhead costs; percent of completion
B) actual fixed overhead rate; budgeted machine hours
C) budgeted fixed overhead costs; budgeted machine hours
D) budgeted fixed overhead rate; actual machine hours used
If the actual volume of production differs from the expected volume of production, the
fixed overhead costs used for budgeting and product costing are ________.
A) the same
B) different
C) indeterminate
D) changing over the accounting period
Assume Unicorn Company has the following information available:
Selling price per unit $100
Variable cost per unit $45
Fixed costs per year $420,000
Expected sales per year 20,000 units
If variable costs increase to $65 per unit, what is the expected net income for one year?
A) $280,000
B) $700,000
C) $880,000
D) $1,580,000
Current assets are expected to be converted to cash or sold or consumed within
________.
A) one year or operating cycle if longer than one month
B) one year or operating cycle if longer than one year
C) one year or operating cycle if shorter than one year
D) one fiscal year
The monthly indirect production cost is Depreciation Expense on Assembly Equipment
of $100,000. The cost allocation base is number of machine hours. The expected level
of production in a month is 10,000 machine hours. What is the amount of indirect
production cost per unit assigned to Product 1 and Product 2. Product 1 requires 10
machine hours per unit. Product 2 requires 20 machine hours per unit.
Product 1 Product 2
A) $1 $2
B) $10 $20
C) $100 $200
D) none of the above
Which of the following costs is a fixed cost?
A) cost of dairy ingredients used to produce ice cream
B) depreciation expense on factory building
C) fuel used by delivery trucks
D) labor wages of workers who mix dairy ingredients to make ice cream
Current liabilities are debts due within the ________ year or within the normal
operating cycle if ________.
A) past; longer than a year
B) next; longer than a year
C) past; shorter than a year
D) next; shorter than a year
When estimating the cost of the laundry department in a hospital, which of the
following cost drivers should be used?
A) number of patients
B) number of patients times the length of stay per patient
C) number of patients in intensive care and critical care
D) number of pounds of laundry
________ have no obvious relationship to levels of output activity, but are determined
as part of the periodic planning process.
A) Discretionary fixed costs
B) Committed fixed costs
C) Capacity costs
D) Engineered costs
Chocolate Company is considering the production of a new product. Chocolate
Company has the following data available:
Expected sales(units) over product life 15,000
Variable production costs $42 per unit
Variable selling costs $16 per unit
Annual fixed production costs $15,000
Annual fixed selling costs $5,000
Research and development costs $184,000
What is the total variable cost of the product over the product life cycle?
A) $204,000
B) $716,000
C) $870,000
D) $880,000
Which of the following statements is FALSE?
A) A cost may be defined as a sacrifice or giving up of resources for a particular
purpose.
B) Costs are frequently measured by the monetary units that must be paid for goods and
services.
C) Only manufacturing firms need some form of cost accounting.
D) A cost accounting system typically has two processes that include cost accumulation
and cost assignment.