ACCT505 Question 1.1. (TCO A) Wages paid to an assembly line worker in a factory are a ; Larop Corporation, The Indiana Company, A Cement Manufacturer, The Dean Company

Question 1.1.  (TCO A)  Wages paid to an assembly line worker in a factory are a 

        Prime Cost YES.....Conversion Cost NO.

        Prime Cost YES.....Conversion Cost YES.

        Prime Cost NO....Conversion Cost NO.

        Prime Cost NO.....Conversion Cost YES.

Question 2. 2. (TCO A)  A cost incurred in the past that is not relevant to any current decision is classified as a(n) 

        period cost. 

        incremental cost. 

        opportunity cost. 

        None of the above

Question 3. 3. (TCO A) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): 

        period cost.

        direct material cost.

        indirect manufacturing cost.

        direct labor cost.

        None of the above

Question 4. 4. (TCO A)  When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? 

        Fixed costs per unit increase and variable costs per unit increase.

        Fixed costs per unit decrease and variable costs per unit do not change.

        Fixed costs per unit do not change and variable costs per unit do not change.

        Fixed costs per unit do not change and variable costs per unit increase.

Question 5. 5. (TCO F) Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company included in direct labor cost a portion of indirect labor. The effect of this misclassification will be to 

        understate the predetermined overhead rate.

        overstate the predetermined overhead rate.

        have no effect on the predetermined overhead rate.

        This cannot be determined from the information given.

Question 6. 6. (TCO F)  A job-order cost system is employed in those situations where 

        many different products, jobs, or batches of production are being produced each period.

        manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.

        the product moves from department to department before being completed.

        the unit cost of production is computed by dividing the total production costs by the number of units produced.

Question 7. 7. (TCO F) The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method 

        can be used under any cost-flow assumption.

        does not require the use of predetermined overhead rates.

        keeps costs in the beginning inventory separate from current period costs.

        does not consider the degree of completion of units in the beginning work-in-process inventory when computing equivalent units of production.

Question 8. 8. (TCO B) The contribution margin ratio always increases when the 

        break-even point increases.

        break-even point decreases.

        variable expenses as a percentage of net sales decrease.

        variable expenses as a percentage of net sales increase.

Question 9. 9. (TCO B)  To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following? 

        Variable expense per unit

        Variable expense per unit/Selling price per unit

        Fixed expense per unit

        (Selling price per unit - Variable expense per unit) /Selling price per unit.

Question 10. 10. (TCO E) In an income statement prepared using the variable costing method, fixed manufacturing overhead would

        not be used.

        be used in the computation of the contribution margin.

        be used in the computation of net operating income but not in the computation of the contribution margin.

        be treated the same as variable manufacturing overhead.

1.  (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just-completed year: 

 Sales................................................................................. $910 

 Purchases of raw materials................................................ $225 

 Direct labor....................................................................... $245 

 Manufacturing overhead.................................................... $265 

 Administrative expenses.................................................... $150 

 Selling expenses................................................................ $140 

 Raw materials inventory, beginning..................................... $15 

 Raw materials inventory, ending......................................... $45 

 Work-in-process inventory, beginning................................. $20 

 Work-in-process inventory, ending..................................... $55 

 Finished goods inventory, beginning................................... $100 

 Finished goods inventory, ending....................................... $135 

Required: Prepare a Schedule of Cost of Goods Manufactured 

2. (TCO F) The Indiana Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below. 

                                                                             Percentage completed

                                                 Units              Materials            Conversion

Work in process, June 1              70,000               65%                  45%

Work in process, Jun 30              60,000               75%                  65%

The department started 290,000 units into production during the month and transferred 300,000 completed units to the next department.

Required: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.  

3. (TCO B) A cement manufacturer has supplied the following data: 

Tons of cement produced and sold                                  220,000

Sales revenue                                                               $924,000

Variable manufacturing expense                                    $297,000

Fixed manufacturing expense                                         $280,000

Variable selling and admin expense                                $165,000

Fixed selling and admin expense                                    $82,000

Net operating income                                                    $100,000

Required:

a. Calculate the company's unit contribution margin.

b. Calculate the company's contribution margin ratio.

c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be? 

4. (TCO E) The Dean Company produces and sells a single product. The following data refer to the year just completed: 

Selling price $450          

Units in beginning Inventory0

Units produced25,000

Units sold22,000

Variable costs per unit:

Direct materials $         200 

Direct labor $           50 

Variable manufacturing overhead $           30 

Variable selling and admin $           15 

Fixed Costs:

Fixed manufacturing overhead $   275,000 

Fixed selling and admin $   230,000 

Assume that direct labor is a variable cost.

Required:

a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

b. Prepare an income statement for the year using absorption costing.

c. Prepare an income statement for the year using variable costing.