managerials

Created by allymayj 

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Actual Manufacturing costs are assigned to each job in a job order costing system by tracing each overhead cost to a specific job.

False

If the ending work in process inventory is less than the beginning work in process inventory, then teh cost of goods manufactured will be less than the total manufacturing costs for the period.

False

Under applied overhead means that actual manufacturing overhead costs were greater than the manufacturing overhead costs applied.

False

Period Costs are not inventoriable costs.

True

The Sarbanes Oxley Act replaces generally accepted accounting principles in a manufacturing company.

False

Indirect Materials and Indirect Labor are not product costs.

False

When goods are sold, the Cost of Goods Sold account is credited and the Finished Goods Inventory account is debited for the cost of the merchandise sold.

False

Finished Goods Inventory represents the cost of completed goods available for sale to customers.

True

One of the elements of Just In Time is dependable suppliers who are willing to deliver on short notice exact quantities of the raw materials according to precise specifications.

True

ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity.

True

When overhead is properly assigned in ABC, it will usually decrease the unit cost of high volume products.

False

Use of activity based costing will result in the development of one plant-wide activity based overhead rate.

False

Equivalent units of production measure the work done in a period, expressed in fully complete units.

True

Unit material and conversion costs much be calculated before the equivalent units can be determined.

False

The flow of costs in a process costing system requires that materials be added in one department, labor added in another department and manufacturing overhead in the third dept.

False

Current trends in manufacturing include less overhead and more direct labor.

False

A comapny's break-even point can be increased by increasing the contribution margin ratio.

False

Sales mix is a measure of the percentage increase in sales from period to period.

False

The difference between absorption costing and variable costing is the treament of fixed manufacturing overhead.

True

Contribution Margin is the amount remaining after deducting variable costs from net sales.

True

The break even point is where total sales equal total fixed costs

False

The margin of safety tells a company how far its sales can drop before it will be operating at a loss.

True

A target net income is calculated by subtracting the margin of safety from gross profit.

False

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

True

In time and material pricing, the material charges based on the cost of direct materials used and a material loading charge for related overhead costs.

False

The major disadvantage of the cost-plus pricing model is that it does not consider the demand of the product.

True

Sales Volume does not affect the per unit costs in cost plus pricing.

False

A special one-time order should be accepted if the unit sales price is greater than the unit variable costs regardless of capacity issues.

False

A company should process further as long as the incremental costs of further production are less than the incremental revenue of the further production in a single product case.

True

The first step is the management decision-making process is- determine and evaluate possible courses of action.

False

In a decision to retain or replace old equipment, the book value of the old equipment is not relevant in incremental analysis

True

Flexible budgeting relies on teh assumption that unit variable costs will remain constant within the relevant range of activity.

False

A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.

False

Controllable margin is subtracted from controllable fixed costs to calculate net income for a profit center.

False

The production budget must be completed before the direct materials budget because the number of units to be produced must be known in order to determine how much material to buy.

True

The predetermined overhead rate is determined from teh production budget.

False

A merchandiser prepares a merchandise purchases budget rather than a production budget

True

Long-range planning generally presents less detailed information than an annual budget.

True

An overly optimistic sales budget may result in insufficient inventories.

False

The net present value method can only be used in capital budgeting decisions if the expected cash flows from a project are an equal amount each year.

False

The future value of a single amount is the value at a future date of a given amount invested now assuming compound interest.

True

The present value of 10,000 to be received in 5 years will be smaller if the discount rate is increased

True

The profitability index allows comparison of the relative desirability of projects that require differing initial investments.

True

A manufacturing company would include set up and downtime in their direct materials quantity standard.

False (Direct Labor)

The primary difference between standards adn budgets is that a budget is a unit amount whereas a standard is a total amount.

False (its the opposite)

In developing a standard cost for direct materials, a price factor adn a quantity factor must be considered.

False (Both are important)

The limitation of teh cash payback technique is that it ignores the profitability of the project and the time value of money.

True (advantage is its very easy)

Marion Manufacturing has established a predertmined overhead rate of 80% of DL costs. During May, the company incurred $210,000 of Labor costs. $30,000 of this amount is indirect labor. Actual overhead incurred in $200,000. The amount of overhead debited to WIP should be:

144,000

If the entry to assign factory labor showed only a debit to WIP Inventory, then all labor costs were

Direct Labor

<p>Beginning WIP Inventory Jan 1, 2008= 150,000<br>DM used=90,000<br>Actual Overhead=180,000<br>Applied Overhead=135,000<br>COG Manufactured=165,000<br>Total Manufacturing Costs=450,000The direct labor cost was:</p>

225,000

Beginning WIP Inventory Jan 1, 2008= 150,000<br>DM used=90,000<br>Actual Overhead=180,000<br>Applied Overhead=135,000<br>COG Manufactured=165,000<br>Total Manufacturing Costs=450,000<br><br>The ending WIP inventory as of Dec. 31, 2008:

435,000

Beginning WIP Inventory Jan 1, 2008= 150,000<br>DM used=90,000<br>Actual Overhead=180,000<br>Applied Overhead=135,000<br>COG Manufactured=165,000<br>Total Manufacturing Costs=450,000<br><br>At the end of the YEAR, MOH:

both a and b

At the end of the month, a company must total up the costs shown on the job cost sheets in process. What amount should this equal?</p>

<p>The total of the WIP Inventory account</p>

What broad functions do the management of an organization perform?

Planning, directing and controlling

The two basic types of cost accounting systems are:

job order and process cost systems

Manufacturing expenses that can not be classified as direct materials or direct labor are:

MOH

Tara Corporation is analyzing its account balances at the end of the year. MOH has a DEBIT balance of $4,000. What impact will this have on the financial statement.

It will reduce income by $4000

A materials requisition slip showed that DM requested were $53,000 adn indirect materials requested were $9000. The Journal entry to record the transfer of materials from the storeroom is:

WIP Inventory D=53,000, MOH=9000, RM Inventory C=62,000

An activity that has a direct cause-effect relationship with the resources consumed in Activity Based Accounting is a(n):

Cost Driver

Which of the following is a limitation of ABC?

All of the above are limitations

Activity Based Costing:

allocates overhead to multiple cost pools, then assigns the activity cost pools to products and services by means of cost drivers

One of the astro company's activity cost pools is machine setups, with an estimated overhead of 180,000. Astro produces sparklers (400 setups) and lighters (600 setups). How much of the machine set up cost pool should be assigned to sparklers?

72,000

It is necessary to calculate the equivalent units of production because:

some units worked on in a department are not fully complete

Byers company had materials of 120,000 and conversion costs of 60,000 added to the manufacturing process during the month. There are 60,000 equivalent units for materials and 30,000 equivalent units for conversion costs. What is the total manufacturing cost per unit for the units transferred out of WIP?

4

In a process cost system,

a WIP account is maintained for each process

A department adds raw materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were 1,000 units in the beginning WIP inventory, which was 100% complete as to materials and 25% complete as to conversion costs. 14,000 units were started into production in January. There were 5,000 units that were 100% complete as to materials and 50% complete as to conversion costs in teh ending WIP inventory at the end of January. What were the equivalent units of production for conversion costs for the month of January?

12,500 EU

Saks co. has variable costs which are 80% of its unit selling price and fixed costs of $60,000. What is the break even point?

300,000

A fixed cost is a cost which:

remains constant in total with changes in the level of activity

Which of the following is true?

All of the above are true

Ross Company incurred a decrease in its level of activity. What are the effects of this decrease on unit costs for variable and fixed costs?

increase in unit fixed cost and a constant per unit variable cost

A company can sell all the units can produce of either product A or product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to produce. Product B has a unit contribution margin of $30 and takes four machine hours to produce. If there are 1,000 machine hours available to manufacture a product, net income will be:

higher if product A is produced

cost structure:

refers to the relative proportion of fixed versus variable costs that a company incurs

Lagerfield Company reported the following results from the sale of 5,000 hammers in May: Sales $200,000; Variable Costs $120,000; Fixed Costs $60,000. Assume that Lagerfield increases the selling price by 20% on June 1st. How many hammers would have ot be sold in June to maintain the same level of net income?

3,333

Max Company's break even point is 4000 units, its contribution margin per unit is $5 and its selling price per unit is $15. If the company sells 4,100 units, its net income will be:

$500

Which statement describes a variable cost

all of the above

At the high level of activity in November, 80,000 machine hours were used and power costs were $50,500. In April, a month of low activity, 50,000 machine hours were used and power costs were $41,500. Using the high low method, what are the total costs in 13,000 machine hours are used.

30,400

Sutton Company produces flash drives for computers, which it sells for $20 each. Each flash drive has $6 of VC. FC are $4,088. If variable costs decrease by 10%, what happens to the breakeven number of units for the company?

It decreases by 12 units

Saks Company has variable costs which are 60% of its unit selling price and FC of $200,000. How much will Saks report as sales when its targeted net income is $20,000?

550,000

Fixed costs are $400,000 for a company. The CM per unit is $80 adn sales for the current year are $1,000,000. What is the breakeven point?

5,000 units

Wheel's Repair Shop has the following data available for 2010:<br>Repair Technicians wages: $270,000<br>Fringe Benefits: 60,000<br>Overhead: 45,000<br>Total: 375,000<br><br>The desired profit margin is $30 per labor hour. The material loading charge is 60% of the cost of the parts used. It is estimated that 5,000 labor hours will be worked in 2010. In February 2010, Wheel's Repair Shop repairs a bicycle that takes 3 hours to repair and uses parts of $180. The bill for this repair would be:

$603

Why does the unit selling price decrease when expected volume is higher than the original budgeted volume?

FC and desired ROI have to be spread over more units

The management of the Catering Company ould like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for $80. The food division sells the product to customers for 180 per unit. The food division's VC is $100 per unit and its fixed cost per units is $20. The food division is currently at FULL CAPACITY. What is the minimum transfer price the Food Division should accept?

$180

The overall objective in teh determination of a transfer price is to

maximize the return to the whole company

<p>Which of the following is a true regarding relevant costs in incremental analysis?</p>

All costs are relevant if they change between alternatives

A previously incurred cost which will not change in the future is a(n)

sunk cost

Adler Division has the following sales and cost data:<br>Sales: $220,000<br>Variable Expenses: 120,000<br>Fixed Expenses: 120,000<br><br>If this division is eliminated, 40% of the FC will be allocated to the company's other divisions. What will be the EFFECT ON NET INCOME if the Adler Division is eliminated?

28,000 Decrease

A company is considering eliminating a product line. All of the fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued,

NI will decrease by the amount of the CM of the product line being discontinued

Which of the following is a disadvantage of buying rather than making a component of a company's product?

all of the above are disadvantages

It costs Fortune Company $35 of variable and $8 of FC to produce one scale, which normally sells for $75. A foreign wholesaler offers to purchase 2000 scales for $50 each. Fortune would incur special shipping costs of $4 per scale if the order is accepted. Fortune has excess capacity to produce the 2000 scales. If the special order is accepted, what will be the effect on net income?

22,000 increase

NF Toy Company is unsure of whether to sell its product assembled or un-assembled. The unit cost of the unassembled product is $30 and NF Toy would sell it for $65. The COST TO ASSEMBLE the product is estimated at $21 per unit and the company believes the market would support a price of $85 on the assembled unit. What decision should NF Toy make?

Sell before assembly, the company will be better off by $1 per unit

Hi Tech Company is deciding whether or not to replace a machine that they purchased at the beginning of 2009 with a new machine. If the old machine is replaced now, at the beginning of 2010, it can be sold for $20,000. Both machines use Straight Line depreciation.<br>The information on the two machines is the following<br>Original Cost: Old (200,000) New (300,000)<br>Estimated salvage value: Old (0) New (0)<br>Estimated Useful Life: Old (6 years) New (5 years)<br>Annual Operating Expenses: Old (150,000) New (100,000)<br><br>Should the company replace the machine?

No, the company would spend an additional 30,000 over a 5 year period

Which one of the following is not a benefit of budgeting

it provides assurance that the company will achieve its objectives

Which one of the following is not needed in preparing a production budget?

Budgeted RM

which of the following will decrease a company's return on investment?

Increase Average Operating Assets

When a company uses 100,000 DL hours, the flexible budget for indirect materials is $35,000. The actual cost for indirect materials was $32,000 when the company used 90,000 hours. The flexibile budget report should show the following difference for indirect materials.

500 Unfavorable

What is the primary difference between a static budget and a flexible budget?

The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels

Kimble Company's master budget shows that the planned activity level for the next year is expected to be 20,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:<br><br>Variable Costs:<br>Indirect Labor: 45,000<br>Factory Supplies: 4,000<br>Indirect Materials: 21,000<br><br>Fixed Costs:<br>Depreciation: 11,000<br>Supervision: 4,000<br><br>If the company operates at 35,000 machine hours, how much is the flexible budget for MOH costs

137,500

A dept. has budgeted monthly manufacturing overhead costs of $3 per DL hour plus $270,000. The flexible budget report reflects $522,000 for total budgeted manufacturing costs for the month.. What is the actual level of activity achieved for the month.

84,000 DL hours

Under management by exception, which differences between planned and actual results should be investigated?

material and controllable

Eckert Company has budgeted the following unit sales:<br><br>2010<br>May: 60,000 units<br>June: 50,000 units<br>July: 40,000 units<br><br>Of the units budgeted, 40% are sold by the southern division at an average price of $15 per unit and the remainder are sold by the Eastern Division at an average price of $12 per unit. Eckert's policy is to maintain an ending inventory equal to 25% of the next month's sales. How much is the budgeted sales revenue for JUNE?<br><br>

660,000

Pardee Company plans to sell 12,000 units in the month of August and 16,000 units in September. The company desires an ending inventory equal to 60% of the next month's budgeted unit sales. How many units should be produced in AUGUST?

14,400

Lester Production is planning to sell 250 boxes of ceramic tile, with production estimated at 200 boxes during May. Each box of tile requires 50 pounds of clay mix and a half hour of DL. Clay mix costs $10 per pound and employees of the company are paid 12.50 per hour. What is the total amount to be budgeted for DL for the month?

$1,250

The Tobler Company has budgeted production for the next year as follows:<br><br>Production in Units:<br>1st Qtr: 10,000<br>2nd Qtr: 12,000<br>3rd Qtr: 16,000<br>4th Qtr: 14,000<br><br>Sales in units<br>1st Qtr: 12,000<br>2nd Qtr: 15,000<br>3rd Qtr: 18,000<br>4th Qtr: 12,000<br><br><br>Four pounds of RM are required for each unit produced. The RM inventory at the end of each quarter should equal 10% of the next quarter's production needs. How many pounds of RM should Tobler purchase in the FIRST QUARTER.

40,800

Lowe Co. expects its sales for January, February and March to be $230,000; 220,000; and 280,000, respectively. Sales for November and December last year were $250,000 and $280,000, respectively. The company collects 50% in the month of the sale and 50% in the following month. What is the balance in AR at the end of JANUARY?<br>

115,000

If an asset costs 180,000, is expected to have a 20,000 salvage value at the end of its ten year life, and generates annual net cash flows of 30,000 each year, the cash payback period is:

6 years

A company has a cost of capital of 10% and is considering investing in a project that requires an investment of $600,000 with no salvage value. It is expected to generate cash inflows of $150,000 and net income of $50,000 for each of the next 6 years. The equipment uses straight line depreciation. The NPV of this project is:

53,289 (use table 4)

An asset costs $85,000. It is expected to generate the following net annual cash flows over the life of the project:<br><br>Yr 1: 18,000<br>yr 2: 25,000<br>yr 3: 35,000<br>yr 4: 20,000<br>The cash payback period is:

3.35 years

A company projects an increase in NI of $21,375 each year for the next five years if it invests $80,000 in new equipment. The equipment has a five year life and an estimated salvage value of 5,000. What is the annual rate of return for this investment?

50.3%

Which of the following will decrease the NPV of a project?

none of the above

Which of the following statements are true?

There is no correlation of favorable and unfavorable for price and quantity variances

In Sonic Corporation's income statement, they report gross profit at standard of $50,000 and has the following variances:<br><br>Materials Price 420 U<br>Material Quantity 600 U<br>Labor Price 420 F<br>Labor Quantity 1000 U<br>Overhead 900 U<br><br>Sonic would report the actual gross profit of:

47,500

Fleck's standard quantities for one unit of product include 3 pounds of material and 2.0 DL hours. The standard costs are $4 per pound of material and $15 per labor hour. The standard overhead rate is $12 per DL hour. The total standard cost of the product is:<br><br>

$66

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