COST ACCOUNTING REVIEWER-finals, Exams of Cost Accounting

Download COST ACCOUNTING REVIEWER-finals and more Exams Cost Accounting in PDF only on Docsity! FINALS 1 — PROCESS COSTING, MASTER BUDGET, CVP ANALYSIS, PRICING AND PROFITABILITY Question 1 1/1pts If the estimate of the stage of completion of work in process is too high, the figure representing equivalent production would be understated and, therefore, the unit cost for the month would be too low. *OVERSTATED True Correct! Question 2 1/1pts The units gained in the production under a process cost system will causes a decrease in the preceding department's unit cost but does not necessitate an adjustment of the transferred-in unit cost. *IT NECESSITATE AN ADJUSTMENT True Correct! Question 3 1/1pts When there is no beginning inventory, the FIFO method and the average cost method will both produce the same cost of goods manufactured amount because equivalent production and unit costs will be the same. Correct! False Question 4 0/1pts A major difference between FIFO and average costing is its treatment to the ending inventory from current production. You Answered True Correct Answer Question 10 1/1pts For sales revenue, if budgeted amount exceeds actual amount, the variance is favorable. *UNFAVORABLE True Correct! Question 11 1/1pts The basic idea behind responsibility accounting is that each manager's performance should be judged by how well he or she manages those items directly under his or her control. Correct! False Question 12 1/1pts Fixed costs should never be included in the flexible budget. *IT SHOULD BE INCLUDED True Correct! Question 13 0/1pts Ending inventories occur because an organization is unable to sell all that it had planned to sell during a period. FALSE You Answered True Correct Answer Question 14 1/1pts Operating budgets generally have long time horizons and may extend many years into the future. True Correct! Question 15 1/1pts The purpose of a flexible budget is to reduce the total time in preparing the annual budget. True Correct! Question 16 1/1pts Budget are essentially planning devices, rather than control devices. *PLANNING AND CONTROL DEVICE True Correct! True Correct! Question 22 1/1pts At break-even point, fixed cost is equal to contribution margin. Correct! False Question 23 1/1pts Product costs under the absorption costing method consist of direct materials, direct labor, and both variable and fixed manufacturing overhead. Correct! False Question 24 1/1pts Fixed manufacturing overhead costs are treated the same way under both the variable costing and absorption costing methods. True Correct! Question 25 1/1pts If the company has a high operating leverage, the profit will be very sensitive to changes in sales. Correct! False Question 26 1/1pts If production exceeds sales for the period, variable costing net operating income will typically be greater than absorption costing net operating income. * THE ABSORPTION WILL BE GREATER THEAN VARIABLE True Correct! Question 27 0/1pts The costs assigned to units in inventory are typically lower under absorption costing than under variable costing. You Answered True Correct Answer Question 32 1/1pts Each of the following is a method by which to allocate joint costs except: Relative weight, volume, or linear measure. Relative sales value. Correct! Chemical or engineering analysis Question 33 1/1pts Normal losses that occur in the manufacturing process are properly classified as: Correct! Extraordinary items. Period costs. Deferred charges. Question 34 0/1pts In process costing system, the materials can be added in last department only You Answered first and last department only first department only Correct Answer Question 35 1/1pts Material is added at the beginning of a process in a process costing system. The beginning work in process inventory for this process this period was 30 percent complete as to conversion costs. Using the first- in, first-out method of costing, the total equivalent units for material for this process during this period are equal to the: Beginning inventory this period for this process. Units started this period in this process plus 70 percent of the beginning inventory. Correct! Units started this period in this process plus the beginning inventory. Question 36 1/1pts Dover Enterprises has two products, Chalk V and Alabaster X, that come from a joint process, blending. Alabaster X undergoes additional curing after the split-off before it can be sold. The entry to account for the movement of products from the blending department is: Debit - Work in Process - Curing'ste! Credit - Work in Process - Blending Debit - Finished Goodsiste: Credit - Work in Process - Blending Debit - Work in Process - Curing! Credit - Factory Overhead Question 41 1/1pts When preparing the flexible budget for factory overhead, variable costs may include all but the following: repair costs electricity to run the machines shop supplies Correct! Question 42 1/1pts All are considered when preparing the production budget, except: Correct! Budgeted beginning inventory of Finished Goods Budgeted sales in units Budgeted ending inventory of Finished Goods Question 43 1/1pts Quinn Company’s master budget called for 30,000 units of production. Budgeted direct material costs at this level were $450,000 or $15 per unit. Quinn actually produced 32,000 units and incurred direct material costs of $496,000. Quinn uses flexible budgeting to evaluate variances and determined that there was a $16,000 unfavorable direct materials variance. All of the following reasons could have contributed to the flexible budget variance except: Quinn did a poor job of controlling the quantity of the direct materials used in the production process. Correct! None of the given answer is correct. Quinn did a poor job of controlling the purchase cost of the raw materials. Question 44 1/1pts The level of production that provides complete utilization of all facilities and personnel, but allows for some idle capacity due to operating interruptions such as machinery breakdowns, idle time and other inescapable inefficiencies is: normal capacity. budgeted capacity. theoretical capacity. Correct! Question 45 1/1pts Flexible budgeting is a reporting system wherein the: Budget standards may be adjusted at will. Correct! Reporting dates vary according to the levels of activity reported upon. Statements included in the budget report vary from period to period. Question 46 1/1pts At the break-even-point, fixed cost is always more than the contribution margin Gross profit per unit for each additional unit. Selling price per unit for each additional unit Correct! Variable cost per unit for each additional unit Question 51 1/1pts A technique that uses the degrees of cost variability to measure the effect of changes in volume on resulting profits is: Correct! Segment profitability analysis. Standard costing. Variance analysis. Question 52 1/1pts Break-even sales volume in units is determined by: Subtracting the fixed cost from the contribution margin. Dividing the fixed cost by the contribution margin ratio Correct! Dividing the fixed cost by the unit selling price. Question 53 1/1pts Which of the following would cause the break-even point to change? Sales volume increased. Total variable costs increased as a function of higher production. Total production decreased. Correct! Question 54 1/1pts The elements of CVP Analysis include the following, except. Correct! Unit variable cost volume or number of units Total fixed costs Question 55 1/1pts Which of the following does not appear on an income statement prepared using Absorption costing? Operating expense Cost of goods sold Correct! Gross margin/profit. Question 56 1/1pts A manager can increase income under absorption costing by Correct! PROBLEMS Question 1 2/2 pts Kehler Corporation wished to market a new product for $2.00 a unit. Fixed costs to manufacture this product are $100,000. The contribution margin is 40 percent. Compute the margin of safety ratio should the corporation realized a net income of $140,000 from this product. 40% 71.43% 140% Correct! SOLUTION: MARGIN OF SAFETY= SALES-[ FIXED / CM RATIO] / SALES SALES IS UNKNOWN OPE INCOME $140,000 FIXED COST $100,000 CM 240,000 / 40% CM RATIO = 600,000 SALES MOS= 600,000- [100,000 / 40%] / 600,000 = 58.33% Question 2 2/2 pts The Blue Saints Band is holding a concert in Toronto. Fixed costs relating to staging a concert are $350,000. Variable costs per patron are $10.00. The selling price for a tickets $30.00. The Blue Saints Band has sold 23,000 tickets so far. How many tickets does the Blue Saints Band need to sell to earn a net operating income of $75,000? 14,000 17,500 Correct! 20,000 SOLUTION: TARGET INCOME= [75,000 + 350,000] / [30- 10] = 21,250 Question 3 2/2 pts Ayo Corporation has fixed cost of $300,000, a contribution margin of 40%, and a margin of safety of $250,000. What is Ayo's sales revenue? Correct! $550,000 $750,000 $500,000 SOLUTION: MOS= SALES- BEP 250,000= SALES — [ 300,000 / 40%] SALES= 250,000 + 750,000 SALES= $1,000,000 Calculate the selling price per unit. $13.75 Correct Answer You Answered $12.50 $14.00 SOLUTION: MATERIALS DIRECT LABOR FACTORY OVERHEAD ADMIN EXPENSE NET INCOME TOTAL SELLING PRICE 10% OF SALES SELLING PRICE [12.50/ 90%] PER UNIT $5.00 2.30 1.00 1.20 3.00 12.50 PERCENTAGE 90% [ 12.50-[12.50 X 10%]] 10% Question 6 2/2 pts Queen, Ltd. desires to earn an after-tax income of $150,000. It has a fixed cost of $1,000,000, a unit sales price of $500, and a variable cost of $200. The company is in the 30% tax bracket. How many dollars of sales revenue must be earned to achieve the after-tax profit of $150,000? $1,916,667 Correct! $2,032,810 $1,991,667 SOLUTION BEFORE TAX= $150,000 / [ 1- 30%] = 214,286 CM RATIO = [500-200]/ 500= 0.6 TARGET REVENUE= [214,286 + 1,000,000] /0.6= $2,023, 810 Question 7 2/2 pts Consider the income statement for Pickbury Farm: Sales $500,000 Variable costs 350,000 Contribution margin 150,000 Fixed costs 80,000 Net income $ 70,000 Compute the degree of operating leverage. 1.875 1.14 3.33 Correct! 2.14 SOLUTION degree of operating leverage = 150,000/ 70,000= 2.14 = (Almonds unit contribution x Almonds sold) + (Cashews unit contribution x Cashews sold) + (Walnuts unit contribution x Walnuts sold) / Almonds sold + Cashews sold + Walnuts sold [($8 — $4) x 1,429] + [($10 — $5) x 2,857] + [($6 — $4) x 5,714] 1,429 + 2,857 + 5,714 Question 10 2/2 pts The following production data come from the records of Olympic Enterprises for the year ended December 31, 2019. Direct materials $ 480,000 Direct labor 270,000 Variable factory overhead 60,000 Variable selling expense 20,000 Fixed factory overhead 36,800 Fixed selling expense 35,000 During the year, 40,000 units were manufactured but only 35,000 units were sold for $25 each. Compute the product cost per unit using variable costing. $21.17 $20.75 $22.55 Correct! SOLUTION PRODUCT COST VARIABLE COSTING Direct materials S$ 480,000 Direct labor 270,000 Variable factory overhead 60,000 TOTAL VARIABLE COST _ 810,000 / 40,000 units = §20.25 Question 11 0/2 pts The following production data come from the records of Olympic Enterprises for the year ended December 31, 2019. Direct materials $ 480,000 Direct labor 260,000 Variable factory overhead 44,000 Fixed factory overhead 36,800 During the year, 40,000 units were manufactured but only 35,000 units were sold. How much is the inventoriable cost of the remaining unsold units using absorption costing. $686,000 Correct Answer $102,600 You Answered $102,500 $718,200 SOLUTION Direct materials $ 480,000 Direct labor 260,000 Variable factory overhead 44,000 Fixed factory overhead 36,800 TOTAL COSTS 820,800 / 40,000 units = 20.52 ENDING INVENTORY UNITS = 40,000- 35,000 = 5,000 UNITS ENDING INVENTORY COST= 5,000 X 20.52 = $102,600 Abdol Company, which has only one product, has provided the Selling price $86 Units in beginning inventory 0 Units produced 6,600 Units sold 6,500 Units in ending inventory 100 Variable costs per unit: Direct materials $22 Direct labor $12 Variable manufacturing overhead Variable selling and administrative: Fixed Costs: Fixed manufacturing overhead $231,000 Fixed selling and administrative {$32,500 SOLUTION ABDOL OPERATING INCOME SALES [6,500 X $86] COGS: Direct materials [6,500 X $22] 143,000 Direct labor [6,500 X $12] 78,000 Variable manufacturing 26,000 overhead|6,500 X $4] ’ Fixed manufacturing overhead [6,500X [$231,000 / 6,600] 227,500 Variable selling and administrative [$6 X 6,500] Fixed selling and administrative following data concerning its most recent month of operations: The total gross margin for the month is: $91,800 $273,000 Correct! $13,000 559,000 474,500 39,000 $32,500 OPERATING INCOME $13,000 Question 14 0/2 pts Mobile, Inc., manufactured 700 units of Product A, a new product, during the year. Product A's variable and fixed manufacturing costs per unit were $8.00 and $2.00, respectively. The inventory of Product A on December 31 of the year consisted of 200 units. There was no inventory of Product A on January 1 of the year. What would be the change in the profit on December 31 if absorption costing were used instead of variable costing? Correct Answer $400 increase You Answered $400 decrease $200 increase $200 decrease SOLUTION ENDING INVENTROY ABSORPTION= 200 UNITS X [ 8+2] = 2,000 ENDING INVENTROY VARIABLE COSTING= 200 UNITS X 8 = 1,600 * ABSORPTION IS GREATER THAN VARIABLE A company had income of $50,000 using variable costing for a given period. Beginning and ending inventories for the period were 18,000 units and 13,000 units, respectively. If the fixed overhead application rate was $2 per unit, what was the net income, using absorption costing? $60,000 $45,000 Correct! $40,000 $55,000 SOLUTION net income, using absorption BEG 18,000 END 13,000 ABS _5,0000 X 2= 10,000 DECREASE NET INCOME OF VARIABLE 50,000 — 10,000 = $40,000 Direct labor Variable manufacturing overhead Variable selling and administrative: Fixed Costs: Fixed manufacturing overhead $231,000 Fixed selling and administrative $32,500 $312,000 $84,500 Correct Answer $42,000 SOLUTION SALES Variable cost of goods sold Direct materials Direct labor Variable manufacturing overhead Variable marketing expense CONTRIBUTION MARGIN Question 18 2/2 pts The total contribution margin for the month under the variable costing approach is: You Answered $86 x 6,500 559,000 $22 x 6,500 143,000 $12 x 6,500 78,000 $4x 6,500 26,000 247,000 $6 x 6,500 39,000 The following information is from Franklin Industries master budget for the current year: Number of units Sales revenue Direct materials Direct labor Variable factory overhead Fixed factory overhead Variable selling and administrative expenses Fixed selling and administrative expenses 15,000 $585,000 165,000 90,000 120,000 75,000 60,000 20,000 Compute the net income at 14,000 units level of sales §55,000 $65,000 Correct! $49,000 SOLUTION @ 15, 000 UNITS UNIT @14,000 UNITS COST= COST/ NO. OF UNITS Sales revenue $585,000 $39 $546,000 Less variable expenses: Direct materials 465,000 11 | 354,000 Direct labor 90,000 6 | 84,000 Variable factory overhead 120,000 8 112,000 Variable selling and 4 36,000 . : 60,000 administrative expenses Contribution margin 140,000 Less fixed expenses: Fixed factory overhead 75,000 75,000 Fixed selling and 20.000 - : 20,000 administrative expenses $45,000 Net Income Question 19 2/2 pts Question 22 2/2 pts Jasinski Jewelry produces a component for lapel pins. Budgeted production in April is 8,400 units. Each unit requires 1/3 ounce of gold, and 2 hours of direct labor time. It is estimated that Jasinski will have 100 ounces of gold on hand at April 1, and since management anticipates an increase in the price of gold in the coming months, the desired ending inventory at the end of April is 150 ounces. The standard cost of an ounce of gold is $300. The standard rate for direct labor is $25 per hour. Compute the direct materials budget. $2,535,000 Correct! $855,000 $825,000 $840,000 Question 23 2/2 pts Jasinski Jewelry produces a component for lapel pins. Budgeted production in April is 8,400 units. Each unit requires 1/3 ounce of gold, and 2 hours of direct labor time. It is estimated that Jasinski will have 100 ounces of gold on hand at April 1, and since management anticipates an increase in the price of gold in the coming months, the desired ending inventory at the end of April is 150 ounces. The standard cost of an ounce of gold is $300. The standard rate for direct labor is $25 per hour. Compute the direct labor budget. $210,000 $630,000 $142,500 Correct! $420,000 Question 24 The planned production for July is 120,000 cars. Sales are forecasted at 90,000 toy cars for June and 120,000 toy cars for July. Each toy car requires four wheels. Brazil's policy is to maintain a 10% of the next month's production in materials inventory at the end of the month. Brazil's budgeted materials purchase of wheels during June is 552,000 units and the ending balance for the month of May was 56,000 units. Compute the planned number of toy cars to produce for the month of June based on the given information. 100,000 Correct Answer You Answered 112,500 123,000 Question 25 2/2 pts During March, Alpine Company's Department B equivalent unit product costs computed under the average cost method were as follows: Materials $3 Correct! 40,300 units 40,000 units Question 28 2/2 pts Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from the same process, which last year cost $800,000. Budde produced 10,000 gallons of X15, which sells for $40 per gallon and 30,000 gallons of Z24, which sells for $10 per gallon. Using the physical measure method, how much of the joint cost should be allocated to X15? $400,000 $120,000 Correct! $200,000 $150,000 Question 29 0/2 pts Van Pelt Company uses the FIFO method of process costing. The production report for the Mixing department follows: In process, beginning of period 1,000 units 800 units - materials 50% complete; conversion costs 40% complete 200 units - materials 25% complete; conversion costs 15% complete . . . 5,000 Placed in process during period units . 4,800 Transferred to packing department units . 1,200 In process, end of period units 700 units - materials 75% complete; conversion costs 50% complete 500 units - materials 25% complete; conversion costs 25% complete Compute the equivalent units for materials. Correct Answer 5,000 4,850 5,275 You Answered 5,450 Question 30 2/2 pts Regina Manufacturing uses the FIFO method of process costing. The production report for the Curing Department, where the materials are added at the beginning of the period, for September was as follows: In process, beginning of the period 3,000 units Stage of completion 30 % Transferred to stockroom during period 12,000 units In process, end of the period 6,000 units Stage of completion 40 % Using the FIFO method, what are the equivalent units for the materials unit cost calculation? 6,000 Correct! 15,000 12,000 9,000