True/False

 

1.Managerial accounting information includes both historical and estimated data.

 

2. The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.

 

3.If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct materials cost.

 

4.For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.

 

5.A receiving report is prepared when purchased materials are first received by the manufacturing department.

 

6.In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are in process at June 1, 28,000 units are completed during June, and 4,000 units were 75% completed at June 30, the number of equivalent units of production for June was 33,400.

 

7.The relevant activity base for a cost depends upon which base is most closely associated with the cost and the decision-making needs of management.

 

8.If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

 

9.If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold.

 

10.Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

 

11. In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

 

12.In variable costing, the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.

 

13.In contribution margin analysis, the unit price or unit cost factor is computed as the difference between the actual unit price or unit cost and the planned unit price or unit cost, multiplied by the actual quantity sold.

 

14.The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals.

 

15.The flexible budget is, in effect, a series of static budgets for different levels of activity.

 

Multiple Choice (2 points each)

 

16.       In most business organizations, the chief management accountant is called the:

a.         chief accounting officer

b.         controller

c.         chairman of the board

d.         chief executive officer

 

17.       The following are all product costs except:

a.         Direct materials

b.         Sales and administrative expenses

c.         Direct labor

d.         Factory overhead

 

18.       All of the following are ways that managers use managerial information except

a.         to evaluate the company’s stock performance

b.         to evaluate the performance of a company’s operations

c.         to support long-term planning decisions

d.         to determine the cost of manufacturing a product

 

19.       Job order costing and process costing are

a.         pricing systems.

b.         cost accounting systems.

c.         cost flow systems.

d.         inventory tracking systems.

 

 

20.       The recording of the jobs completed would include a debit to:

a.         Factory Overhead

b.         Finished Goods

c.         Work in Process

d.         Cost of Goods Sold

 

21.       The following budget data are available for Oldest Company:

 

Estimated direct labor hours   12,000

Estimated direct dollars          $90,000

Estimated factory overhead costs       $179,000

 

If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is

a.         $2.57

b.         $.51

c.         $.067

d.         $14.92

 

22.       Which of the following entities would probably use a process costing system?

a.         A custom boat builder

b.         A custom furniture manufacturer

c.         A one of a kind jewelry creator

d.         An oil refinery.

 

The following unit data were assembled for the assembly process of the Super Co. for the month of June. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process.

 

Units

Beginning work in process      5,000

(60% complete)          

Units started in September     51,000

Ending work in process          4,000

(30% complete)          

 

23.       The number of equivalent units produced with respect to direct materials costs is:

a.         51,000

b.         50,000

c.         47,000

d.         56,000

 

Department J had no work in process at the beginning of the period, 18,000 units were completed during the period, 2,000 units were 30% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period (Assuming the company uses FIFO and rounds average cost per unit to two decimal places):

 

Direct materials (20,000 at $5)           $ 100,000

Direct labor     142,300

Factory overhead        57,200

 

24.       Assuming that all direct materials are placed in process at the beginning of production, what is the total cost of the departmental work in process inventory at the end of the period?

a.         $90,000

b.         $283,140

c.         $199,500

d.         $16,438

 

25.       Which of the following statements is correct concerning variable and fixed costs?

a.         Both costs are constant when considered on a per unit basis.

b.         Variable costs vary in total and fixed costs are constant on a per unit basis.

c.         Fixed costs are constant in total and variable costs are constant on a per unit basis.

d.         Variable costs are constant in total and fixed costs are constant on a per unit basis.

 

26.       If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point (dollars)?

a.         $1,875,000

b.         $300,000

c.         $2,500,000

d.         $1,250,000

 

27.       When a business sells more than one product at varying selling prices, the business’s break-even point can be determined as long as the number of products does not exceed:

a.         two

b.         three

c.         fifteen

d.         there is no limit

 

 

28.       If variable selling and administrative expenses totaled $120,000 for the year (80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $120,900 (78,000 units at $1.55 each), the effect of the unit cost factor on the change in variable selling and administrative expenses is:

a.         $900 decrease

b.         $3,100 decrease

c.         $4,000 decrease

d.         $3,100 increase

 

29.       A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed:

a.         flexible budgeting

b.         continuous budgeting

c.         zero-based budgeting

d.         master budgeting

 

The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January – 200,000 units; February – 180,000 units; March – 210,000 units; and April – 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.

 

30.       What would be the budgeted production for March?

a.         256,000

b.         206,000

c.         214,000

d.         298,000

 

Problems

 

31. The Cake Factory has the following information for the month of March. Prepare a schedule of cost of goods manufactured. (6 points)

 

Purchases        $85,000

Materials inventory, March 1  6,000

Materials inventory, March 31            7,000

Direct labor     25,000

Factory overhead        34,000

Work in process, March 1       17,000

Work in process, March 31     18,500

Finished goods inventory, March 1    21,000

Finished goods inventory, March 31  23,000

Sales    235,000

Sales and administrative expenses      78,000

 

32. A summary of the time tickets for August follows:

 

Description      Amount           Description      Amount

Job No. 321     $11,000           Job No. 342     $8,300

Job No. 329 8,200       Job No. 346     5,700

Job No. 336     2,000  Indirect labor 5,000

 

Present the journal entries to record (a) the labor cost incurred and (b) the application of factory overhead to production for August. The factory overhead rate is 70% of direct labor cost. (5 points)

 

 

33. The cost of direct materials transferred into the Bottling Department of the Desert Springs Water Company is $27,225. The conversion cost for the period in the Bottling Department is $7,596. The total equivalent units for direct materials and conversion are 60,500 and 63,300 respectively. Determine the direct materials and conversion cost per equivalent unit. (6 points)

 

34. Barrack Inc. manufactures laser printers within a relevant range of production of 50,000 to 70,000 printers per year. The following partially completed manufacturing cost schedule has been prepared: (15 points)

 

Number of Printers Produced

70,00090,000100,000

Total costs:     

Total variable costs     $350,000         (d)       (j)

Total fixed costs         630,000          (e)        (k)

Total costs       $980,000         (f)        (l)

Cost per unit: 

Variable cost per unit  (a)        (g)        (m)

Fixed cost per unit      (b)        (h)        (n)

Total cost per unit       (c)        (i)         (o)

 

35. On August 31, the end of the first year of operations, during which 18,000 units were manufactured and 13,500 units were sold, Finberg Inc. prepared the following income statement based on the variable costing concept:

 

Finberg Inc.

Income Statement

For Year Ended August 31, 20–

Sales    $297,000

Variable cost of goods sold:  

Variable cost of goods manufactured$279,000        

Less ending inventory 67,500           

Variable cost of goods sold    211,500

Manufacturing margin            $ 85,500

Variable selling and administrative    

expenses          40,500

Contribution margin    $ 45,000

Fixed costs:    

Fixed manufacturing costs      $ 12,000         

Fixed selling and administrative        

expenses          10,800            22,800

Income from operations          $ 22,200

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Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.