The following information has been gathered by the controller of Acme Industries.
Required:
Using standard costing, prepare the following journal entries.
a. Purchase of direct materials on account
b. Transfer of direct materials into production
c. Recording of payroll
d. Payment for variable overhead
e. Application of variable overhead to work in process
f. Recording of variable overhead variances
g. Application of fixed overhead to work in process
h. Payment of fixed overhead
i. Recording of fixed overhead variances
Which of the following would be considered a unit-level activity?
a. Ordering direct materials
b. Direct labor
c. Preparing the annual budget
d. Performing quality tests
Staci Pearce is preparing a direct labor budget. Her sales budget shows total sales units
of 15,000 and sales dollars of $45,000. The direct materials purchases budget shows
materials to be purchased of 25,000 units and budgeted purchases cost of $18,750. The
production budget indicates a total of 25,000 units to be produced. Standard direct labor
hours per unit is .50 and the standard average wage rate is $10. What is budgeted direct
labor cost?
a. $125,000
b. $143,750
c. $188,750
d. None of these answer choices are correct.
Direct materials are sometimes referred to as
a. Overhead
b. Raw materials
c. Period costs
d. None of these answer choices are correct.
Indicate which of the following costs are classified as mixed, step, or variable costs.
During the current year, Maddox Industries sold a delivery truck with a book value of
$5,000 for $15,000, declared and paid cash dividends of $8,000 and borrowed $50,000
from First National Bank. Maddox’s net cash flows provided by financing activities is
a. $0
b. $27,000
c. $42,000
d. $50,000
Bivouac Camping Supply sells marine-grade hatches. The hatches sell for $20 each.
The cost of each hatch is $12. The only other costs are fixed costs of $15,000. During
the current period, Bivouac sold 2,400 units.
Required:
a. What is the contribution margin per unit?
b. What is the contribution margin ratio?
c. What is the breakeven point in units? In dollars?
d. What is the margin of safety in units? In dollars?
In preparing cash flows provided by operating activities using the indirect method,
which of the following items is added to net income?
a. Non-cash expenses such as depreciation
b. Gains on investing and financing transactions
c. Increases in current asset balances
d. Decreases in current liability balances
The degree of operating leverage is calculated as
a. Net operating income divided by contribution margin.
b. Contribution margin divided by sales.
c. Net operating income divided by sales.
d. Contribution margin divided by net operating income.
Holly Industries manufactures artificial holiday wreaths. Its most popular wreath
requires 3 yards of artificial pine boughs and 15 sprigs of holly berries. In August, the
company purchased 4,000 yards of artificial pine bough, and 20,000 sprigs of holly
berries. Holly paid $2.65 per yard for the artificial pine bough, and purchased 4 boxes
of 5,000 sprigs of holly berries for $7,000 per box. The standard price for artificial pine
bough is $2.60 per yard, and the standard price per sprig of holly berry is $1.45. During
August, Holly produced 1,250 wreaths and used 3,625 yards of artificial pine bough
and 19,000 sprigs of holly berries. What is Holly’s direct materials price variance for
sprigs of holly berries for August?
a. $1,000 unfavorable
b. $ 1,000 favorable
c. $ 362.50 favorable
d. $ 362.50 unfavorable
The formula for the customer profit margin is
a. Customer net profit divided by customer revenue
b. Customer revenue divided by customer cost of goods sold
c. Customer revenue less cost of goods sold less allocated selling expenses
d. Customer profit margin less allocated selling and administrative expenses
International Imports is a merchandising Firm. Last year they reported sales of
$674,500 and cost of goods sold of $404,700. The company’s total variable selling and
administrative expense was $60,705, and fixed selling and administrative expense was
$53,960. The total contribution margin for the firm is:
a.$209,095
b.$613,795
c.$559,835
d.$215,840
Vista Industries manufactures 75,000 digital cameras each year. Vista has been
producing the lenses internally. However, late last year the company received an offer
to produce the 150,000 lenses the company uses each year for a total contract price of
$380,000. When Vista manufactures the lenses internally, direct materials cost $1.05 per
lens, direct labor is $.65 per lens, and variable overhead is $.30 per lens. Vista ‘s total
overhead is $110,000. If the lens were purchased, $28,000 of fixed overhead could be
avoided. What is the total relevant cost to produce the lenses internally?
a. $410,000
b. $328,000
c. $382,000
d. $380,000
Mirada Manufacturing produces stained glass lamp shades. The standard cost card for a
lamp shade is as follows:
Ron Shop, operations manager, became upset when he reviewed the unfavorable
variances for April. He asked Heidi Cotton, controller, for more information. She
provided the following overhead budgets, along with the actual results for April. The
company purchased and used 115,000 pounds of glass during the month. Glass
purchases during the month were made at $4.35 per pound. The direct labor payroll ran
$744,150, with an actual hourly rate of $36.30 per direct labor hour. The annual budgets
were based on the production of 1,000,000 shades, using 250,000 direct labor hours.
Though the budget for April was based on 80,000 shades, the company actually
produced 82,000 shades during the month.
Variable Overhead Budget
Fixed Overhead Budget
Required
a. Calculate the direct materials price and quantity variances for April.
b. Calculate the direct labor rate and efficiency variances for April.
c. Calculate the variable overhead spending and efficiency variances for April.
d. Calculate the fixed overhead spending variance for April.
e. Provide an explanation for each variance you calculated.
f. Which of these variances should Ron be held responsible for? Why?
An example of a committed fixed cost is
a.Advertising.
b.Lease on warehouse space.
c.Sales commissions.
d.All of these answer choices are correct.
Which of the following is not a characteristic of managerial accounting reports?
a.Managerial accounting reports are designed to provide the ultimate decision maker
with the appropriate information.
b.Managerial accounting reports come in a variety of formats.
c.Managerial accounting reports are not distributed to the general public.
d.All of these answer choices are correct.
Which of the following is not a characteristic of a rolling budget?
a. A method of budgeting always includes 12 months of data.
b. As one month ends, it is removed from the budget and the entire budget rolls forward
one month.
c. At the beginning of the budget period, management breaks down only the first
quarter into months.
d. All of these answer choices are characteristics of a rolling budget.