Question 1.1. An example of a period cost is
rubyCpaMbaQuestion 1.1. An example of a period cost is
insurance on factory machines.
a controller’s salary.
property taxes on factory building.
wages of factory maintenance employees.
Question 2.2. Which product would use job-order costing?
Ink pens
Custom boot maker
Soda pop
Horse saddles
Question 3.3. In a process costing system, which would be TRUE?
There is no need to use time tickets to assign costs to processes.
There is no need to track materials to processes.
A process costing system is more expensive to maintain because it has more work-in-process accounts.
All of the above
Question 4.4. A company keeps 60 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 30 days of inventory on hand, and the competitor's carrying costs average $2,000 per day. The non-value-added costs for the company are
$300,000.
$150,000.
$60,000.
$0.
Question 5.5. Non-value-added activities
are unnecessary inputs.
are valued outputs to internal users.
are valued outputs to external users.
help meet the organization's needs, not the product needs.
Question 6.6. The break-even point is
the volume of activity where all fixed costs are recovered.
where fixed costs equal total variable costs.
where total revenues equal total costs.
where total costs equal total contribution margin.
Question 7.7. The income statement for Thomas Manufacturing Company for 2011 is as follows.
Sales (10,000 units) $120,000
Variable expenses $72,000
Contribution margin $48,000
Fixed expenses $36,000
Operating income $12,000
Which is the contribution margin per unit?
$7.20
$1.20
$4.80
$120,000
Question 8.8. Which cost category would most likely use machine hours as its activity driver?
Personnel
Maintenance
Purchasing
Payroll
Question 9.9. Yo Department Store incurred $8,000 of indirect advertising costs for its operations. The following data have been collected for 2013 for its three departments.
Shoes Cosmetics Crafts
Sales $120,000 $100,000 $100,000
Direct advertising costs $9,000 $7,000 $4,000
Newspaper ad space 60% 20% 20%
How much of the indirect advertising costs will be allocated to the Shoes Department if newspaper ad space is the activity driver?
$8,000
$4,800
$5,400
$3,200
Question 10.10. A budget that is developed around one particular level of activity is
a static budget.
a continuous budget.
an incremental budget.
None of the above
Question 11.11. Amy Company produces and sells bikes. It expects to sell 15,000 bikes in March 2014 and had 1,200 bikes in finished goods inventory at the end of February 2014. Amy Company would like to complete operations in March with at least 1,500 completed bikes in inventory. The bikes sell for $100 each. How many bikes would be produced in March?
15,300 bikes
15,000 bikes
14,700 bikes
13,800 bikes
Question 12.12. When monthly production volume is constant and sales volume is more than production, net income determined with variable costing procedures will
always be greater than net income determined using absorption costing.
always be less than net income determined using absorption costing.
be equal to net income determined using absorption costing.
be equal to contribution margin per unit times units sold
Question 13.13. Which factor would cause an UNFAVORABLE material quantity variance?
Using poorly maintained machinery
Using higher quality materials
Using more highly skilled workers
Receiving discounts for purchasing larger-than-normal quantities
Question 14.14. Which equation measures a price variance?
AQ x (AP - SP).
SP x (AQ - SQ).
SQ x (AP - SP).
(AQ - SQ) x (AP - SP).
Essays
1. George Corporation has an estimated monthly sales of 3,200 units for $70 per unit. Variable costs include manufacturing costs of $36 and distribution costs of $14. Fixed costs are $40,000 per month.
Required:
Determine each of the following values.
a. Unit contribution margin
b. Monthly break-even unit sales volume
c. Create a contribution margin-based income statement.
2. Darling Manufacturing Inc. manufactures two products, A and B, from a joint process. A single production costs $5,000 and results in 200 units of A and 800 units of B. To be ready for sale, both products must be processed further, incurring seperable costs of $3 per unit for A and $4 per unit for B. The market price for Product A is $15 and for Product B is $10.
Required: Allocate joint production costs to each product using the physical units method.
3. Santa Inc. manufactures toys based on the following information.
Standard costs
Materials (4 ounces at $4) $16
Direct labor (1 hour per unit) $7
Variable overhead (based on direct labor hours) $3.50
Fixed overhead budget$16,000
Actual results and costs
Materials purchased
Units10,000
Cost$38,500
Materials used in production
Finished product units2,200
Raw material (ounces)9,500
Direct labor hours2,200
Direct labor cost$18,000
Variable overhead costs$8,400
Fixed overhead costs$16,200
Required:
Compute the following variances (show calculations).
a. Materials usage variance
b. Labor rate variance
c. Fixed overhead budget variance
4. Toshi Company incurred the following costs in manufacturing desk calculators.
Direct materials $14
Indirect materials (variable) 4
Direct labor 8
Indirect labor (variable) 6
Other variable factory overhead 10
Fixed factory overhead 28
Variable selling expenses 20
Fixed selling expenses 14
During the period, the company produced and sold 1,000 units.
a. What is the inventory cost per unit using absorption costing?
b. What is the inventory cost per unit using variable costing?
5. Musical Instruments Company manufactures two products (trumpets and trombones). Overhead costs ($175,000) have been divided into three cost pools that use the following activity drivers.
Product Number of setups Machine hours Packing orders
Trumpets 501,500150
Trombones504,500250
Cost per pool $60,000 $90,000 $25,000
Required (show all calculations)
a. What is the allocation rate for trumpets per setup using activity-based costing?
b. What is the allocation rate for trumpets per machine hours using activity-based costing?
c. What is the allocation rate for trumpets per packing order using activity-based costing?
6. The Baxter Corporation has the following budgeted and actual results.
Budgeted data Actual results
Unit sales35,000 Unit sales36,000
Unit production35,000 Unit production37,000
Fixed overhead Fixed overhead
Supervision $25,000 Supervision $23,500
Depreciation $40,000 Depreciation $40,000
Rent $20,000 Rent $20,000
Variable costs per unitVariable costs
Direct materials $25.00 Direct materials $900,000
Direct labor $26.00 Direct labor $950,000
Supplies $0.25 Supplies $9,000
Indirect labor $1.30 Indirect labor $50,000
Electricity $0.20 Electricity $7,500
Required:
Prepare a performance report for all costs, showing flexible budget variances (indicate F or U).
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