1. An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy.
 
True
 
False

2. Ladanza Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $135.00 per unit.

  Sales volume (units)   11,000    12,120  
  Cost of sales $935,000    $1,030,200  
  Selling and administrative costs $627,000    $644,920  

The best estimate of the total contribution margin when 11,410 units are sold is:
 
$244,250
 
$501,970
 
$167,570
 
$387,940

3.The following costs were incurred in September:

  Direct materials $42,700  
  Direct labor $29,400  
  Manufacturing overhead $27,300  
  Selling expenses $23,600  
  Administrative expenses $33,700  

Conversion costs during the month totaled:
 
$156,700
 
$72,100
 
$70,000
 
$56,700

4. The wages of factory maintenance personnel would usually be considered to be:

  
 
Option B
 
Option D
 
Option C
 
Option A

5.
South Company sells a single product for $30 per unit. If variable expenses are 60% of sales and fixed expenses total $13,600, the break-even point in sales dollars will be: (Do not round intermediate calculations.)
 
$13,600
 
$22,667
 
$34,000
 
$20,400

6.Variable cost:
 
increases on a per unit basis as the number of units produced increases.
 
remains constant on a per unit basis as the number of units produced increases.
 
decreases on a per unit basis as the number of units produced increases.
 
remains the same in total as production increases.

7.
The contribution margin ratio is 20% for Grain Company and the break-even point in sales is $254,500. To obtain a target net operating income of $69,000, sales would have to be: (Do not round intermediate calculations.)
 
$323,500
 
$287,300
 
$333,000
 
$599,500

8. At the break-even point: Sales − Variable expenses = Fixed expenses.
 
True
 
False

9. Within the relevant range, variable cost per unit will:
 
increase as the level of activity increases.
 
remain constant.
 
decrease as the level of activity increases.
 
none of these.

10.
The contribution margin ratio of Thronson Corporation’s only product is 69%. The company’s monthly fixed expense is $455,400 and the company’s monthly target profit is $41,400.

  
Required:
Determine the dollar sales to attain the company’s target profit. (Omit the “$” sign in your response.)
   
  Target profit $   

11.Washtenaw Corporation uses a job-order costing system. The following data are for last year:

Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What predetermined overhead rate was used last year?
 
$3.36 per direct labor-hour
 
$3.25 per direct labor-hour
 
$3.55 per direct labor-hour
 
$3.08 per direct labor-hour

12. Wert Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company’s estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company’s direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:
 
overapplied by $60,000
 
overapplied by $40,000
 
underapplied by $60,000
 
underapplied by $44,000

13. A company has provided the following data:

If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors remain the same, net operating income will:
 
decrease by $3,125.
 
decrease by $15,000.
 
increase by $20,625.
 
decrease by $31,875.

14.Slonaker Inc. has provided the following data concerning its maintenance costs:

  Machine-Hours Maintenance
Cost
  April 5,820           $30,400       
  May 5,803           $30,310       
  June 5,785           $30,258       
  July 5,782           $30,254       
  August 5,738           $30,099       
  September 5,816           $30,381       
  October 5,851           $30,430       
  November 5,822           $30,399       
  December 5,806           $30,339       
________________________________________

Management believes that maintenance cost is a mixed cost that depends on machine-hours.
 
Required:
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.(Round your “Variable cost” to 2 decimal places. Omit the “$” sign in your response.)

  
  Variable cost per machine-hour $   

  Fixed cost per month $   

________________________________________

15. Jurper Corporation used $150,000 of direct materials during April. At the end of April, Jurper’s direct materials inventory was $25,000 more than it was at the beginning of the month. Direct materials purchases during the April amounted to:
 
$150,000
 
$175,000
 
$0
 
$125,000

16. Butteco Corporation has provided the following cost data for last year when 100,000 units were produced and sold:

All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. There are no beginning or ending inventories. If the selling price is $10 per unit, the net operating income from producing and selling 110,000 units would be:
 
$385,000
 
$560,000
 
$405,000
 
$450,000

17.
Mark Corporation produces two models of calculators. The Business model sells for $56, and the Math model sells for $35. The variable expenses are given below:

  Business
Model Math
Model
  Variable production costs per unit $12    $12  
  Variable selling and administrative expenses per unit $10    $  6  

The fixed expenses are $76,300 per month. The expected monthly sales of each model are: Business, 1,000 units; Math, 400 units.
 
The break-even point in unit sales for the expected sales mix is closest to: (Do not round intermediate calculations.)
 
1,870 Business Model and 748 Math Model
 
1,870 of each product
 
748 of each product
 
748 Business Model and 1,870 Math Model

18.Christiansen Corporation uses an activity-based costing system with the following three activity cost pools:

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:

The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Order Processing activity cost pool is closest to:
 
$676 per order
 
$780 per order
 
$312 per order
 
$560 per order

19. Underapplied or overapplied manufacturing overhead represents the difference between actual overhead costs and applied overhead costs.
 
True
 
False
20. An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:
 
some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.
 
some non-manufacturing costs are assigned to products.
 
first-stage allocations may be based on subjective interview data.
 
all of the above are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles.

21.
The following information pertains to Clove Co.:

  Budgeted sales $1,080,000 
  Breakeven sales $  620,000 
  Budgeted contribution margin $  520,000 

Clove’s margin of safety is:
 
$460,000
 
$720,000
 
$660,000
 
$560,000

22.
The following information relates to Clyde Corporation which produced and sold 57,000 units last month.

  Sales $1,368,000 
  Manufacturing costs: 
  Fixed $210,000 
  Variable $205,100 
  Selling and administrative: 
  Fixed $300,000 
  Variable $  45,700 

There were no beginning or ending inventories. Production and sales next month are expected to be 47,000 units. The company’s unit contribution margin next month should be: (Round your intermediate calculations and final answer to 2 decimal places)
 
$19.60
 
$23.56
 
$3.80
 
$9.38

23. In a contribution format income statement, sales minus cost of goods sold equals the gross margin.
 
True
 
False

24. In activity-based costing, some manufacturing costs may be excluded from product costs.
 
True
 
False
25. Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports.
 
True
 
False

26.
Umanzor Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Processing, $51,500; Supervising, $35,800; and Other, $26,600. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

   MHs (Processing) Batches (supervising)
  Product S5 15,300             1,060            
  Product F5 1,180             820            
  Total 16,480             1,880            

The activity rate for the Processing activity cost pool under activity-based costing is closest to:
 
$2.81 per MH
 
$3.13 per MH
 
$7.56 per MH
 
$3.43 per MH

27.
McCaskey Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Total Activity
  Fabrication 10,000    machine-hours
  Order processing 125    orders
  Other N/A

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.

The company has provided the following data concerning its costs:

  Wages and salaries $435,000 
  Depreciation 134,000 
  Occupancy 182,000 
  Total $751,000 

The distribution of resource consumption across activity cost pools is given below:

  Activity Cost Pools 
  Fabrication Order
Processing Other Total
  Wages and salaries 10%     80%     10%     100%   
  Depreciation 25%     25%     50%     100%   
  Occupancy 5%     75%     20%     100%   

The activity rate for the Fabrication activity cost pool is closest to:
 
$2.56 per machine-hour
 
$0.96 per machine-hour
 
$18.78 per machine-hour
 
$8.61 per machine-hour
28. Desrevisseau Inc., a manufacturing company, has provided the following data for the month of August. The balance in the Work in Process inventory account was $10,000 at the beginning of the month and $22,000 at the end of the month. During the month, the company incurred direct materials cost of $63,000 and direct labor cost of $39,000. The actual manufacturing overhead cost incurred was $40,000. The manufacturing overhead cost applied to Work in Process was $43,000. The cost of goods manufactured for August was:
 
$142,000
 
$130,000
 
$133,000
 
$145,000

29. In a job-order costing system, direct labor cost is ordinarily debited to:
 
Finished Goods.
 
Manufacturing Overhead.
 
Work in Process.
 
Cost of Goods Sold.

30. The break-even point in unit sales is found by dividing total fixed expenses by:
 
the sales price per unit.
 
the contribution margin per unit.
 
the variable expenses per unit.
 
the contribution margin ratio.

31. Supply costs at Lattea Corporation’s chain of gyms are listed below:

  Client-Visits Supply Cost
  March 11,653      $28,567    
  April 11,449      $28,401    
  May 11,981      $28,825    
  June 12,600      $28,904    
  July 11,713      $28,628    
  August 11,199       $28,227    
  September 11,993      $28,826    
  October 11,684      $28,584    
  November 11,832      $28,709    

Management believes that supply cost is a mixed cost that depends on client-visits. Using the high-low method to estimate the variable and fixed components of this cost, those estimates would be closest to:(Round your Variable cost per unit to 2 decimal places.)
 
$1.06 per client-visit; $15,798 per month
 
$0.52 per client-visit; $22,351 per month
 
$0.48 per client-visit; $22,856 per month
 
$2.17 per client-visit; $28,629 per month

32. In May, Hervey Inc. incurred $60,000 of direct labor costs and $3,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:
 
debit to Work in Process of $63,000
 
credit to Manufacturing Overhead of $3,000
 
credit to Work in Process of $63,000
 
debit to Manufacturing Overhead of $3,000

33.
At the beginning of the year, manufacturing overhead for the year was estimated to be $266,400. At the end of the year, actual direct labor-hours for the year were 22,500 hours, the actual manufacturing overhead for the year was $264,300, and manufacturing overhead for the year was overapplied by $5,700. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: (Round your intermediate calculations to 2 decimal places.)
 
21,800 direct labor-hours
 
22,200 direct labor-hours
 
20,700 direct labor-hours
 
22,500 direct labor-hours

34.
Nikkel Corporation, a merchandising company, reported the following results for July:

  Sales $464,000  
  Cost of goods sold (all variable) $173,500  
  Total variable selling expense $  24,600  
  Total fixed selling expense $  23,000  
  Total variable administrative expense $  8,900  
  Total fixed administrative expense $  38,200  

The contribution margin for July is:
 
$257,000
 
$195,800
 
$402,800
 
$290,500

35.
[The following information applies to the questions displayed below.]
 
Bakker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $77,250 and 2,500 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $79,000 and actual direct labor-hours were 2,400.
 
 
 
 
The predetermined overhead rate for the year was:
 
$29.66
 
$30.90
 
$32.92
 
$31.60