Question 1.1. An example of a period cost is

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Question 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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