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MGMT 303 Final Exam Review
MGMT 303 Final Exam Review
Terms in this set (139)
For Franklin, Inc., sales is $1,500,000, fixed expenses are $450,000, and the contribution margin ratio is 36%. What is net income?
For Pierce Company, sales is $500,000, variable expenses are $330,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is
For Franklin, Inc., sales is $1,500,000, fixed expenses are $450,000, and the contribution margin ratio is 36%. What are the total variable expenses?
Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will be the total contribution margin at the break-even point?
(fixed cost + target net income) divided by contribution margin per unit.
The required sales in units to achieve a target net income is
as variable or fixed and computes contribution margin.
The CVP income statement classifies costs
may increase net income, even though there is a decline in total units sold.
A shift from low-margin sales to high-margin sales
Contribution margin is the amount of revenue remaining after deducting
is computed by dividing total contribution margin by net income.
The degree of operating leverage
partly a variable cost and partly a fixed cost
In a CVP income statement, cost of goods sold is generally
the behavior of costs is curvilinear throughout the relevant range
Cost-volume-profit analysis includes all of the following assumptions except
margin of safety
The amount by which actual or expected sales exceeds break-even sales is referred to as
The CVP income statement shows contribution margin instead of gross profit
Which is a true statement?
respond to changes in the level of business activity
Cost behavior analysis is a study of how a firm's costs
a variable element and a fixed element
A mixed cost contains
Cost behavior analysis applies to
variable costs as a percentage of sales decrease
The contribution margin ratio increases when
The high-low method is often employed in analyzing
Changes in activity have a(n) _________ effect on fixed costs per unit.
Sales - Variable costs - Fixed costs = Net income
The equation which reflects a CVP income statement is
fixed costs and a decrease in variable costs
The increased use of automation and less use of the work force in companies has caused a trend towards an increase in
contribution margin equals total fixed costs
At the break-even point,
contribution margin equals total fixed costs
The break-even point is where
Face cream must not be processed further because costs increase more than revenue.
New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or produced further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.
Sell now, the company will be better off by $16,000.
A company has a process that results in 24,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $160,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?
$10,000, $3,000, and $14,000
Moreland Clean Company spent $8,000 to produce Product 89, which can be sold as is for $10,000, or processed further incurring additional costs of $3,000 and then be sold for $14,000. Which amounts are relevant to the decision about Product 89?
A segment has the following data: sales 700k, variable expenses 300k, fixed expenses 550k. What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?
Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent:
Direct materials $8,400
Direct labor $11,250
Variable overhead $12,600
Fixed overhead $16,200
An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit.
If Clemente accepts the offer, by how much will net income increase (decrease)?
If Clemente accepts the offer, by how much will net income increase (decrease)?
Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?
How much sales are required to earn a target net income of $160,000 if total fixed costs are $200,000 and the contribution margin ratio is 40%?
Vintage Wines has fixed costs of $15,000 per year. Its warehouse sells wine with variable costs of 80% of its unit selling price. How much in sales does Vintage need to break even per year?
Portman Company's activity for the first three months of 2013 are as follows:
Jan 2100Mhrs 3600 Electrical Cost
Feb 2600Mhrs 4350 Electrical Cost
Mar 2900Mhrs 4800 Electrical Cost
Using the high-low method, how much is the cost per machine hour?
Bruno & Court is a nonprofit organization that captures stray deer bewildered within residential communities. Fixed costs are $15,000. The variable cost of capturing each deer is $10 each. Bruno & Court is funded by a local philanthropy in the amount of $48,000 for 2013. How many deer can Bruno & Court capture during 2013?
The following monthly data are available for Seasons Company which produces only one product. Selling price per unit, $42; Unit variable expenses $14; Total fixed expenses $84,000; Actual sale for the month of June, 5,000 units. How much is the margin of safety for the company for June?
added to the make total cost.
In a make-or-buy decision, opportunity costs are
The point in the production process when joint products are readily identifiable is the
Incremental analysis is synonymous with
Net income will increase if the special sales price per unit exceeds the unit variable costs
A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur?
Incremental variable costs, incremental fixed costs, and opportunity costs.
In a make-or-buy decision, which costs can be considered relevant?
Joint costs and sunk costs
Which of the following terms are synonymous?
Consider the opportunity cost of lost sales in the incremental analysis.
Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?
Costs that will differ between alternatives and influence the outcome of a decision are
The book value of the old equipment
Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?
both incremental revenue and incremental cost.
The focus of a sell or process further decision is
is process further if incremental revenue from such processing exceeds the incremental processing costs.
The decision rule on whether to sell or process further
Costs incurred before the split-off point are
costs incurred before the split-off point.
All of the following are relevant to the sell or process further decision except:
analysis of manufacturing variances.
Incremental analysis would not be appropriate for
materials are received.
Cost of raw materials is debited to Raw Materials Inventory when the
the cost of goods sold.
The job cost sheet does not show
measure, record, and report product costs.
A major purpose of cost accounting is to
the production process is continuous.
Process costing is used when
The construction of a new campus building.
Which of the following would be accounted for using a job order cost system?
by means of a predetermined overhead rate.
Manufacturing overhead is applied to each job
It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job.
Which one of the following best describes a job cost sheet?
a job cost sheet.
The principal accounting record used in assigning costs to jobs is
accumulating and assigning.
The two major steps in the flow of costs are
Ogleby Inc.'s accounting records reflect the following inventories:
During 2013, Ogleby purchased $840,000 of raw materials, incurred direct labor costs of $150,000, and incurred manufacturing overhead totaling $192,000.
How much would Ogleby Manufacturing report as cost of goods manufactured for 2013?
some units worked on in the department are not fully complete.
It is necessary to calculate equivalent units of production in a department because
A process cost system would be used for all of the following products except
units started into production
Total units to be accounted for less units in beginning work in process equals
Units accounted for.
In a production cost report, which one of the following sections is not shown under Costs?
A primary driver of overhead costs in continuous manufacturing operations is:
flow of costs.
Differences between a job order cost system and a process cost system include all of the following except the
generally used less frequently in process costing than job order costing.
Materials requisitions are:
A process cost accounting system is most appropriate when
similar products are mass-produced
the units to be accounted for will equal the units transferred out and the units in process at the end of the period.
If there are no units in process at the beginning of the period, then
Madison Industries has equivalent units of 8,000 for materials and for conversion costs. otal manufacturing costs are $160,000. Total materials costs are $120,000. How much is the conversion cost per unit?
Charley Company's Assembly Department has materials cost at $3 per unit and conversion cost at $6 per unit. There are 20,000 units in ending work in process, all of which are 70% complete as to conversion costs and 100% complete as to materials. How much are total costs to be assigned to inventory?
$1,520,000 applied and $20,000 underapplied
Kimble Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period:
Estimated annual overhead cost- $1,600,000
Actual annual overhead cost- $1,540,000
Estimated machine hours - 400,000
Actual machine hours - 380,000
has been overapplied
The Manufacturing Overhead account shows debits of $30,000, $24,000, and $28,000 and one credit for $86,000. Based on this information, manufacturing overhead
Emley Company incurred direct materials costs of $600,000 during the year. Manufacturing overhead applied was $560,000 and is applied based on direct labor costs. The predetermined overhead rate is 70%. How much are Emley Company's total manufacturing costs for the year?
Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $1,025,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $1,050,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?
Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $84,600 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing?
multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.
To assign overhead costs to each product, the company
multiple activity-based overhead rates.
Use of activity-based costing will result in the development of
Overhead costs constitute a significant portion of total costs.
Which of the following factors would suggest a switch to activity-based costing?
Which of the following is a non-value-added activity?
should be minimized or eliminated.
more cost pools are used.
Each of the following is a limitation of activity-based costing except that
Which would be an appropriate cost driver for the machining activity cost pool?
allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
Managerial accounting information is generally prepared for
Because of automation, which component of product cost is declining?
A manager's salary for work that is done in the corporate head office
Which one of the following is an example of a period cost?
Which of the following are period costs?
setting goals and objectives for an entity.
Planning is a function that involves
Internal reports must be communicated
Beginning WIP + direct materials used + direct labor + manufacturing overhead - ending WIP.
Cost of goods manufactured is calculated as follows:
Which one of the following is not a cost element in manufacturing a product?
Dolce Co. estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.
Expenses are paid in the month incurred. If the company has budgeted to sell 80,000 widgets in October, how much is the total budgeted selling and administrative expenses for October?
Doe Manufacturing plans to sell 6,000 purple lawn chairs during May, 5,700 in June, and 6,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Doe produce during June?
Kam Department Store reported the following information for 2013:
All sales are on credit. Customer amounts on account are collected 50% in the month of sale and 50% in the following month.
On January 1, Witt Company has a beginning cash balance of $126,000. During the year, the company expects cash disbursements of $1,020,000 and cash receipts of $870,000. If Witt requires an ending cash balance of $120,000, Witt Company must borrow
Off-Line Co. has 9,000 units in beginning finished goods. The sales budget shows expected sales to be 36,000 units. If the production budget shows that 42,000 units are required for production, what was the desired ending finished goods?
Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct labor hours per unit is
Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's total variance is
The per-unit standarads for direct labor are 1.5 direct labor hours at $15 per hour. If in producing 2,400 units, the actual direct labor cost was $46,000 for 3,000 direct labor hours worked, the total direct labor variance is
Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct materials quantity per unit is
Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?
A company developed the following per-unit standards for its product: 2 gallons of direct materials at $8 per gallon. Last month, 3,000 gallons of direct materials were purchased for $22,800. The direct materials price variance for last month was
Material and controllable
Under management by exception, which differences between planned and actual results should be investigated?
is a series of static budgets at different levels of activity.
The flexible budget
An investment center is responsible for revenues and expenses, as well as earning a return on assets.
Which statement is true?
Another name for the static budget is
can be implemented at each level of responsibility within an organization.
Management by exception
Sales exceeding budget; costs under budget
Which of the following will not result in an unfavorable controllable margin difference?
(AH) x (AR) less (AH) x (SR).
The formula for the labor price variance is
sum of the materials price variance and the materials quantity variance.
The total materials variance is equal to the
price and quantity variances.
A total materials variance is analyzed in terms of
Cost of goods sold
Alex Co. prepared its income statement for management using a standard cost accounting system. Which of the following appears at the "standard" amount?
worker fatigue or carelessness.
An unfavorable labor quantity variance may be caused by
The labor time requirements for standards may be determined by the
is usually lower than the contribution margin.
The dollar amount of the controllable margin
Cost of goods sold would be at standard costs, and variances would be reported separately.
Parnell Company prepared its income statement for internal use. How would amounts for cost of goods sold and variances appear?
is to be included in the standard cost of direct materials.
The cost of freight-in
The form, content, and frequency of variance reports vary considerably among companies.
Which of the following is true?
There is no correlation of favorable or unfavorable for price and quantity variances.
Which one of the following statements is true?
The most rigorous of all standards is the
in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs.
The costing of inventories at standard cost for external financial statement reporting purposes is
Variances are the differences between total actual costs and total standard costs.
Which of the following statements is true?
150,000 hours and 150,000 hours.
Kathleen Corp. produced 320,000 units in 150,000 direct labor hours. Production for the period was estimated at 330,000 units and 165,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at
At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:
No, the return is less than the required rate of 9%.
Dingo Division's operating results include: controllable margin of $150,000, sales totaling $1,200,000, and average operating assets of $500,000. Dingo is considering a project with sales of $100,000, expenses of $86,000, and an investment of average operating assets of $200,000. Dingo's required rate of return is 9%. Should Dingo accept this project?
budgeted balance sheet.
The projection of financial position at the end of the budget period is found on the
Coordinating the preparation of the budget is the responsibility of the
In a production budget, total required production units are the budgeted sales units plus
desired ending finished goods units minus beginning finished goods units.
An overly optimistic sales budget may result in
The single most important output in preparing financial budgets is the
They are used in performance evaluation.
Which is true of budgets?They are used in performance evaluation.
The production budget is derived from the direct materials and direct labor budgets.
Which of the following statements is incorrect?
management's minimum required balance.
The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than
A budget is most likely to be effective if
it has top management support.
The primary benefits of budgeting include all of the following except it
requires only top management to plan ahead and formalize their future goals.
Which one of the following items would never appear on a cash budget?
usually starts with budgeting expenditures, rather than receipts.
Budgeting in not-for-profit organizations
expected cash receipts and cash disbursements from all sources.
The cash budget reflects
a budget committee.
In many companies, responsibility for coordinating the preparation of the budget is assigned to
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