Consulting the persons affected by a budget when it is prepared can provide an effective
means of motivation and cooperation.
a. True
b. False
Conversion costs are the combination of direct labor, direct material, and factory
overhead costs.
The product cost concept includes all manufacturing costs in the cost amount to which
the markup is added to determine product price.
a. True
b. False
serves as the basis for recording direct labor on a job cost sheet
Match the following phrases with the term (a-e) that it most closely describes it. Each
term will be used only once.
a. job cost sheets
b. materials requisitions
c. receiving report
d. time tickets
e. cost allocation
If a business sells four products, it is not possible to estimate the break-even point.
a. True
b. False
The controllable variance measures
a. operating results at less than normal capacity
b. the efficiency of using variable overhead resources
c. operating results at more than normal capacity
d. control over fixed overhead costs
The profit center income statement should include only revenues and expenses that are
controlled by the manager.
a. True
b. False
Jaxson Corporation has the following data related to direct labor costs for September:
actual costs are 10,200 hours at $15.75 per hour and standard costs are 10,800 hours at
$15.50 per hour.
What is the direct labor time variance?
a. $9,300 favorable
b. $9,300 unfavorable
c. $9,450 favorable
d. $9,450 unfavorable
Aspen Technologies has the following budget data:
If factory overhead is to be applied based on direct labor hours, the predetermined
overhead rate is
a. $7.50
b. $13.20
c. $2.20
d. $16.50
If variable selling and administrative expenses totaled $124,000 for the year (80,000
units at $1.55 each) and the planned variable selling and administrative expenses totaled
$136,500 (78,000 units at $1.75 each), the effect of the quantity factor on the change in
contribution margin is:
a. $3,000 increase
b. $3,500 decrease
c. $3,000 decrease
d. $3,500 increase
The cost of production of completed and transferred goods during the period amounted
to $540,000, and the finished products shipped to customers had production costs of
$375,000. The entry to record the transfer of costs from finished goods to cost of goods
sold is
a. Finished Goods Cost of Goods Sold 540,000
540,000
b. Finished Goods Cost of Goods Sold 375,000
375,000
c. Cost of Goods Sold Finished Goods 375,000
375,000
d. Cost of Goods Sold Finished Goods 540,000
540,000
Department W had 2,400 units, one-third completed at the beginning of the period;
16,000 units were transferred to Department X from Department W during the period;
and 1,800 units were one-half completed at the end of the period. Assume the
completion ratios apply to direct materials and conversion costs.
What are the equivalent units of production used to compute unit conversion cost on the
cost of production report for Department W? Assume the company uses FIFO.
a. 16,100 units
b. 13,600 units
c. 15,000 units
d. 18,500 units
Cost behavior refers to the methods used to estimate costs for use in managerial
decision making.
a. True
b. False
If the expected sales volume for the current period is 8,000 units, the desired ending
inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units
set forth in the production budget, representing total production for the current period,
is
a. 10,600
b. 8,200
c. 66,000
d. 6,800
Planning is the process of monitoring operating results and comparing actual results
with the expected results.
a. True
b. False
Materials used by Best Bread Company in producing Division A’s product are currently
purchased from outside suppliers at a cost of $30 per unit. However, the same materials
are available from Division B. Division B has unused capacity and can produce the
materials needed by Division A at a variable cost of $20 per unit.
(a) If a transfer price of $25 per unit is established and 60,000 units of material are
transferred, with no reductions in Division B’s current sales, how much would Best
Bread Company’s total income from operations increase?
(b) Assuming transfer price of $25 per unit is established and 60,000 units of material
are transferred, with no reductions in Division B’s current sales, how much would the
income from operations of Division A increase?
(c) Assuming transfer price of $25 per unit is established and 60,000 units of material
are transferred, with no reductions in Division B’s current sales, how much would the
income from operations of Division B increase?
(d) If the negotiated price approach is used, what would be the range of acceptable
transfer prices?
Separate sales forces
Match each of the following phrases as describing (a) an advantage, (b) a
disadvantage, or (c) neither of decentralization.
a. Advantage of decentralization
b. Disadvantage of decentralization
c. Neither an advantage or disadvantage
Department F had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. Of the $12,500, $8,000 was for material
and $4,500 was for conversion costs. 14,000 units of direct materials were added during
the period at a cost of $28,700. 15,000 units were completed during the period, and
3,000 units were 75% completed at the end of the period. All materials are added at the
beginning of the process. Direct labor was $32,450 and factory overhead was $18,710
If the average cost method is used, the conversion cost per unit (to the nearest cent)
would be
a. $3.71
b. $2.84
c. $2.97
d. $3.23
The independent auditor’s report
a. describes which financial statements are covered by the audit
b. gives the auditor’s opinion regarding the fairness of the financial statements
c. summarizes what the auditor did
d. states that the financial statements were presented on time