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
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
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.
Beginning work in process 5,000
Units started in September 51,000
Ending work in process 4,000
23. The number of equivalent units produced with respect to direct materials costs is:
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?
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)?
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:
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?
31. The Cake Factory has the following information for the month of March. Prepare a schedule of cost of goods manufactured. (6 points)
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 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
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:
For Year Ended August 31, 20–
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
Contribution margin $ 45,000
Fixed manufacturing costs $ 12,000
Fixed selling and administrative
expenses 10,800 22,800
Income from operations $ 22,200
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.