Which of the following is not a reason a service firm would use a job order costing
system?
a. to help control costs
b. to determine client billing
c. to determine department costs within the firm
d. to determine profit
A company reports the following:
Sales $1,200,000
Average accounts receivable (net) 50,000
Determine the (a) accounts receivable turnover, and (b) number of days’ sales in
receivables. Round your answer to one decimal place.
Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B
during the past year. The unit contribution margins for Products A and B are $30 and
$60, respectively. Corn has fixed costs of $378,000. The break-even point in units is
a. 8,000 units
b. 6,300 units
c. 12,600 units
d. 10,500 units
The ratio of the market price per share of common stock on a specific date to the annual
earnings per share is referred to as the price-earnings ratio.
a. True
b. False
The number of times interest expense is earned is computed as
a. net income plus interest expense, divided by interest expense
b. income before income tax plus interest expense, divided by interest expense
c. net income divided by interest expense
d. income before income tax divided by interest expense
The budget for Department 6 of Cardinal Company for the current month ending March
31 is as follows:
During March, the costs incurred in Department 6 of Cardinal Company were materials,
$204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant
and equipment, $35,000; power and light, $21,360; insurance and property taxes,
$14,400; maintenance, $9,456.
(a) Prepare a budget performance report for the supervisor of Department 6 of Cardinal
Company for the month of March.
(b) Are there any significant variances (5% or greater) of the budgeted amounts that
should be examined by the supervisor?
costing system used by a company producing custom window treatments
Match each phrase that follows with the term (a-h) it describes.
a. direct labor and factory overhead
b. direct labor and direct materials
c. transferred in costs
d. equivalent units
e. process costing
f. job order costing
g. first-in, first-out method
h. cost of production report
The debit to factory overhead for the cost of indirect materials is obtained from the
summary of the materials requisitions.
a. True
b. False
The excess of divisional income from operations over a minimum acceptable amount of
divisional income from operations is
a. profit margin
b. residual income
c. rate of return on investment
d. gross profit
Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000
units, while sales were 12,000 units. Determine (a) whether variable costing income
from operations is less than or greater than absorption costing income from operations,
and (b) the difference in variable costing and absorption costing income from
operations.
In which of the following types of firms would it be appropriate to prepare contribution
margin reporting and analysis?
a. boat manufacturing
b. a chain of beauty salons
c. home building
d. all of the above
A clean audit opinion is the same as a qualified audit opinion.
a. True
b. False
Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The cost per unit for the production and sale of the company’s product is
a. $12.11
b. $12.88
c. $15.00
d. $13.50
The source document for the data for debiting Work in Process for direct materials is a
a. purchase order
b. purchase requisition
c. materials requisition
d. receiving report
Home construction
Match each business that follows to the type of costing system (a or b) it would
typically use.
a. Job order costing
b. Process costing
A firm produces its products by a continuous process involving three production
departments, 1 through 3. Present entries to record the following selected transactions
related to production during August:
(a) Materials purchased on account, $120,000
(b) Material requisitioned for use in Department 1, $125,700, of which $124,200
entered directly into the product
(c) Labor cost incurred in Department 1, $195,400, of which $174,000 was used
directly in the manufacture of the product
(d) Factory overhead costs for Department 1 incurred on account, $54,700
(e) Depreciation on machinery in Department 1, $29,200
(f) Expiration of prepaid insurance chargeable to Department 1, $7,000
(g) Factory overhead applied to production in Department 1, $106,300
(h) Output of Department 1 transferred to Department 2, $362,700
Multiple production department factory overhead rates are most useful when production
departments are very similar in their manufacturing processes.
a. True
b. False
Which of the following would not be an appropriate activity base for cost analysis in a
service firm?
a. lawns mowed
b. inventory produced
c. customers served
d. haircuts given
A qualitative characteristic that may impact upon capital investment analysis is market
opportunities.
a. True
b. False
For which of the following businesses would a process cost system be appropriate?
a. Boat repair service
b. Shampoo manufacturer
c. Dressmaker
d. Custom furniture manufacturer
If the standard to produce a given amount of product is 2,000 units of direct materials at
$12 and the actual was 1,600 units at $13, the direct materials quantity variance was
$5,200 favorable.
a. True
b. False
The absorption costing income statement does not distinguish between variable and
fixed costs.
a. True
b. False
plastic parts
Match the costs that follow to the type of product cost (a-c) or designate as not a
product cost (d).
a. direct labor
b. direct materials
c. factory overhead
d. not a product cost