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1. Question : (TCO 1) Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for
Student Answer:  taxing authorities.
 internal users of accounting information.
 external users of accounting information.
 the Securities and Exchange Commission (SEC).

 

 2. Question : TCO 1) Which of the following statements regarding fixed costs is true?
Student Answer:  When production increases, fixed cost per unit increases.
 When production decreases, total fixed costs decrease.
 When production increases, fixed cost per unit decreases.
 When production decreases, total fixed costs increase.

 

 3. Question : (TCO 1) You own a car and are trying to decide whether or not to trade it in and buy a new car. Which of the following costs is an opportunity cost in this situation?
Student Answer:  the trip to Cancun that you will not be able to take if you buy the car
 the cost of the car you are trading in
 the cost of your books for this term
 the cost of your car insurance last year

 

 4. Question : (TCO 1) Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation, $800; and other fixed costs, $600. Each steak dinner sells for $14.00 each. How much is the budgeted variable cost per unit?
Student Answer:  $5.80
 $7.74
 $6.68
 $3.25

 

 5. Question : (TCO 1) Which of the following is an example of a manufacturing overhead cost?
Student Answer:  security at the manufacturing plant
 fabric used to produce shirts
 cost of shipping product to customers
 the salary of the president of the company

 

 6. Question : (TCO 1) Which of the following is a period cost?
Student Answer:  rent on a factory building
 depreciation on production equipment
 raw materials cost
 commissions paid on each unit sold

 

 7. Question : (TCO 1) If the balance in the Finished Goods Inventory account increased by $30,000 during the period and the cost of goods manufactured was $220,000, how much is cost of goods sold?
Student Answer:  $110,000
 $190,000
 $220,000
 $250,000

 

 8. Question : (TCO 2) BCS Company applies manufacturing overhead based on direct labor cost. Information concerning manufacturing overhead and labor for August follows:

Estimated Actual
Overhead cost $174,000 $171,000
Direct labor hours 5,800 5,900
Direct labor cost $87,000 $89,975

How much is the predetermined overhead rate?

Student Answer:  2.00
 1.90
 30.00
 1.93

 

 9. Question : (TCO 2) During 2011, Madison Company applied overhead using a job-order costing system at a rate of $12 per direct labor hours. Estimated direct labor hours for the year were 150,000, and estimated overhead for the year was $1,800,000. Actual direct labor hours for 2011 were 140,000 and actual overhead was $1,670,000.

What is the amount of under or over applied overhead for the year?

Student Answer:  $10,000 underapplied
 $10,000 overapplied
 $130,000 underapplied
 $130,000 overapplied

 

 10. Question : (TCO 3) Companies in which of the following industries wouldnot be likely to use process costing?
Student Answer:  cereals
 paints
 cosmetics
 auto body shop

 

 11. Question : (TCO 3) The Blending Department began the period with 45,000 units. During the period the department received another 30,000 units from the prior department and completed 60,000 units during the period. The remaining units were 75% complete. How much are equivalent units in The Blending Department’s work in process inventory at the end of the period?
Student Answer:  30,000
 22,500
 15,000
 11,250

 

 12. Question : (TCO 3) During March, the varnishing department incurred costs of $90,250 for direct labor. The beginning inventory was 3,500 units and 10,000 units were transferred to the varnishing department from the sanding department during June. The direct labor cost in the beginning inventory was $27,270. The ending inventory consisted of 2,000 units, which were 25% complete with respect to direct labor. What is the cost per equivalent unit for direct labor?
Student Answer:  $8.71
 $7.84
 $11.19
 $9.79

 

 13. Question : (TCO 4) Clearance Depot has total monthly costs of $8,000 when 2,500 units are produced and $12,400 when 5,000 units are produced. What is the estimated total monthly fixed cost?
Student Answer:  $4,400
 $6,580
 $3,600
 $8,800

 

1. Question : (TCO 4) The margin of safety is the difference between
Student Answer:  total revenue and total fixed costs.
 expected level of sales and the break-even point.
 budgeted fixed costs and actual fixed costs.
 selling price and variable cost per unit.

 

 2. Question : (TCO 4) Allen Company sells homework machines for $100 each. Variable costs per unit are $75 and total fixed costs are $62,000. Allen is considering the purchase of new equipment that would increase fixed costs to $84,000, but decrease the variable costs per unit to $60. At that level Allen Company expects to sell 3,000 units next year. What is Allen’s break-even point in units if it purchases the new equipment?
Student Answer:  2,480 units
 36,000 units
 2,100 units
 3,650 units

 

 3. Question : (TCO 4) Paula Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is Paula’s margin of safety?
Student Answer:  $468,140
 $124,025
 $700,975
 $405,000

 

 4. Question : (TCO 5) In variable costing, when does fixed manufacturing overhead become an expense?
Student Answer:  Never
 In the period when the product is sold
 In the period when the expense is incurred
 In the period when other expenses are at the lowest level

 

 5. Question : (TCO 5) Variable costing income is a function of:
Student Answer:  Units sold only.
 Units produced only
 Both units sold and units produced.
 Neither units sold nor units. produced

 

 6. Question : (TCO 5) Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are:

Direct Material per unit $20
Direct Labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year $148,500

In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is cost of goods sold using full costing?

Student Answer:  1,359,000
 $1,260,000
 $2,038,500
 $1,408,500

 

 

 7. Question : (TCO 6) Costs may be allocated to
Student Answer:  products.
 services.
 departments.
 any of the above.

 

 8. Question : (TCO 5) An allocation base
Student Answer:  is the minimum amount to be allocated to a cost object.
 coordinates the manufacturing overhead costs as they are incurred.
 will always be less than the variable costs for a product.
 relates the cost pool to the cost objectives.

 

 9. Question : (TCO 6) The building maintenance department for Jones Manufacturing Company budgets annual costs of $4,200,000 based on the expected operating level for the coming year. The costs are allocated to two production departments. The following data relate to the potential allocation bases:
 

Production Dept. 1 Production Dept. 2
Square footage 15,000 45,000
Direct labor hours 25,000 50,000

If Jones assigns costs to departments based on square footage, how much total costs will be allocated to Production Department 1?

Student Answer:  $1,400,000
 $1,050,000
 $1,575,000
 $2,100,000

 

 10. Question : (TCO 7) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision?
Student Answer:  The selling price of the completed units.
 The costs incurred to process the units to this point.
 The selling price of the partially completed units.
 The costs that will be incurred to finish the units.

 

 11. Question : (TCO 7) BigByte Company has 12 obsolete computers that are carried in inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300. Alternatively, the computers could be sold “as is” for $9,000. What is the net advantage or disadvantage of reworking the computers?
Student Answer:  $6,300 advantage
 $1,200 disadvantage
 $5,400 disadvantage
 $3,000 advantage

 

 12. Question : (TCO 7) Olde Store has 12,000 cans of crab meat just a week past the expiration date. Each can cost $0.31. The cans could be sold as is for $0.20 each, or relabeled and sold as gourmet cat food. The cost of relabeling the cans would be $0.04 per can and the cans would then sell for $0.29 per can. What should be done with the cans and why?
Student Answer:  The cans should be thrown away since there will be a loss with the other alternatives.
 The cans should be relabeled into cat food since the sales price increases $0.09 per can and the cost is only $0.04 per can.
 The cans should be put on clearance since there is no reason to put more money into something that is already selling below cost.
 It doesn’t matter what you do since all alternatives result in a loss.
 1. Question : (TCO 3) Describe a process costing system, including the types of companies that commonly use this system.  How can process costing information be used in incremental analysis?

 

 2. Question : (TCO 7) Each year, ACE Engines surveys 7,600 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to RBG Associates, who have offered to conduct the survey and summarize results for $50,000. Robert Ace, the president of ACE Engines, believes that RBG will do a higher-quality job than his company has been doing, but is unwilling to spend more than $12,000 above current costs. The head of bookkeeping for ACE has prepared the following summary of costs related to the survey in the prior year.

Mailing $27,000
Printing (done by Lester Print Shop) 9,000
Salary of Pat Fisher, part-time employee who stuffedenvelopes and summarized data when surveys were returned (130 x $16) 2,080
Share of depreciation of computer and software used to track survey responses and summarize results 1,200
Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company       600
Total $39,880

Prepare an incremental analysis in good form to determine the impact on profit of going outside versus conducting the survey as in the past. Will ACE accept the RBG offer? Why or why not?

 3. Question : (TCO 4) The following monthly data are available for RedEx, which produces only one product that it sells for $84 each. Its unit variable costs are $28 and its total fixed expenses are $64,960. Sales during April totaled 1,600 units.

(a) How much is the breakeven point in sales dollars for RedEx?
(b) How many units must RedEx sell in order to earn a profit of $24,640?
(c) A new employee suggests that RedEx sponsor a company softball team as a form of advertising. The cost to sponsor the team is $1,792. How many more units must be sold to cover this cost?