For a period during which the quantity of product manufactured exceeded the quantity
sold, income from operations reported under absorption costing will be larger than
income from operations reported under variable costing.
a. True
b. False
Answer:
If in evaluating a proposal by use of the net present value method there is an excess of
the present value of future cash inflows over the amount to be invested, the rate of
return on the proposal exceeds the rate used in the analysis.
a. True
b. False
Answer:
A make-to-order company matches its production schedules to actual customer orders.
a. True
b. False
Answer:
Period costs include direct materials and direct labor.
a. True
b. False
Answer:
Production and sales estimates for May for the Cardinal Co. are as follows:
The number of units expected to be sold in May is a. 21,000
b. 3,700
c. 22,800
d. 18,300
Answer:
For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales
manager’s salary is $80,000; advertising expenses are $65,000; shipping expenses total
1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total
selling expenses for the month of March are
a. $217,100
b. $205,000
c. $207,100
d. $142,100
Answer:
Delaney Company is considering replacing equipment which originally cost $600,000
and which has $420,000 accumulated depreciation to date. A new machine will cost
$790,000. What is the sunk cost in this situation?
a. $370,000
b. $790,000
c. $180,000
d. $190,000
Answer:
In evaluating the profit center manager, the income from operations should be
compared
a. across profit centers
b. to historical performance or budget
c. to the competitor’s net income
d. to the total company earnings per share
Answer:
Grace Co. can further process Product B to produce Product C. Product B is currently
selling for $60 per pound and costs $38 per pound to produce. Product C would sell for
$95 per pound and would require an additional cost of $13 per pound to produce. What
is the differential revenue of producing and selling Product C?
a. $35 per pound
b. $38 per pound
c. $95 per pound
d. $60 per pound
Answer:
Favorable volume variances may be harmful when
a. machine repairs cause work stoppages
b. supervisors fail to maintain an even flow of work
c. production in excess of normal capacity cannot be sold
d. all of the answers are correct
Answer:
Equivalent units should be computed separately for direct materials and conversion
costs.
a. True
b. False
Answer:
Which of the following is not a characteristic of a process cost system?
a. manufacturing costs are grouped by departments
b. the system may use several work in process accounts
c. the system measures costs for each completed job
d. the system allocates costs between completed and partially completed units within a
department
Answer:
Department A had 1,000 units in Work in Process that were 60% completed at the
beginning of the period at a cost of $7,000. During the period, 4,000 units of direct
materials were added at a cost of $8,200, and 4,500 units were completed. At the end of
the period, 500 units were 40% completed. All materials are added at the beginning of
the process. Direct labor was $28,700 and factory overhead was $4,510. The cost of the
500 units in process at the end of the period if the first-in, first-out method is used to
cost inventories was
a. $3,240
b. $5,175
c. $2,569
d. $2,607
Answer:
Adams Company is a manufacturing company that has worked on several production
jobs during the first quarter of the year. Below is a list of all the jobs for the quarter:
Jobs 356, 357, 358, and 359 were completed. Jobs 356 and 357 were sold at a profit of
$500 on each job.
What is the gross profit for Adams Company at the end of the first quarter?
a. $1,685
b. $2,685
c. $1,000
d. $685
Answer:
The level of inventory of a manufactured product has increased by 4,000 units during a
period. The following data are also available:
What would be the effect on income from operations if absorption costing is used rather
than variable costing?
a. $44,000 decrease
b. $44,000 increase
c. $64,000 increase
d. $64,000 decrease
Answer:
Employees view budgeting more positively when goals are established for them by
senior management.
a. True
b. False
Answer:
The relevant range is useful for analyzing cost behavior for management
decision-making purposes.
a. True
b. False
Answer:
Planning for capital expenditures is necessary for all of the following reasons except
a. machinery and other fixed assets wear out
b. expansion may be necessary to meet increased demand
c. amounts spent for office equipment may be immaterial
d. fixed assets may fall below minimum standards of efficiency
Answer:
Calculate the overhead rate per unit for Product A in the painting department of
Adirondack Marketing Inc.
a. $236.32 per unit
b. $325.00 per unit
c. $147.70 per unit
d. $161.00 per unit
Answer:
serves as the basis for recording materials used
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
Answer:
The difference between the current sales revenue and the sales at the break-even point is
called the
a. contribution margin
b. margin of safety
c. price factor
d. operating leverage
Answer:
The expected average rate of return for a proposed investment of $800,000 in a fixed
asset with a useful life of 4 years, straight-line depreciation, no residual value, and an
expected total net income of $360,000 for the 4 years, is
a. 45%
b. 22.5%
c. 11.3%
d. 5.5%
Answer:
the stock ledger
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
Answer:
The amount of the estimated average income for a proposed investment of $90,000 in a
fixed asset, giving effect to depreciation (straight-line method), with a useful life of 4
years, no residual value, and an expected total income yield of $25,300, is
a. $12,650
b. $25,300
c. $6,325
d. $45,000
Answer:
Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 2 for direct labor is
a. Work in Process’”Department 2 Wages Payable 65,000
65,000
b. Wages Payable Work in Process’”Department 2 65,000
65,000
c. Work in Process’”Department 2 Wages Payable 125,000
125,000
d. Work in Process’”Department 2 Wages Payable 185,000
185,000
Answer:
Laramie Technologies had the following data:
Calculate the cost of goods manufactured.
Answer:
Proposals A and B each cost $600,000 and have 5-year lives. Proposal A is expected to
provide equal annual net cash flows of $159,000, while the net cash flows for Proposal
B are as follows:
Determine the cash payback period for each proposal. Round answers to two decimal
places.
Answer:
A company reports the following:
Determine the number of times interest charges are earned. Round your answer to one
decimal place.
Answer:
The Mountain Springs Water Company has two departments, Purifying and Bottling.
The Bottling Department had 3,000 liters in beginning work in process inventory (30%
complete). During the period 71,000 liters were completed. The ending work in process
was 5,000 liters (70% completed). What are the total equivalent units for direct
materials (using the FIFO method) if materials were added at the beginning of the
process?
Answer:
Define and discuss the two main types of cost accounting systems for manufacturing
operations. What are their similarities and differences?
Answer:
The Mallory Company produces and sells Product X at a total cost of $35 per unit, of
which $28 is product cost and
$7 is selling and administrative expenses. In addition, the total cost of $35 is made up
of $24 variable cost and $11 fixed cost. The desired profit is $8 per unit. Determine the
markup percentage on product cost.
Answer: