Cost Test 2 Prep - Summary accounting PDF

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Cost Test 2 Prep...

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1. Which of the following costs at a manufacturing company would be treated as a product cost under variable costing?! a. Direct materials cost! b. Property taxes on the factory building! c. Sales manager’s salary! d. Sales commissions! 2. A cost that would be included in product costs under both absorption costing and variable costing is:! a. Supervisory salaries! b. Factory rent! c. Variable manufacturing costs! d. Variable selling expenses! 3. The costing method that treats all fixed costs as period costs is:! a. Absorption costing! b. Job-order costing! c. Variable costing! d. Process costing! 4. A reason why absorption costing income statements are sometimes difficult to interpret is that:! a. They omit variable expenses entirely in computing net operating income! b. They shift portions of fixed manufacturing overhead from period to period according to changing levels of inventory! c. They include all fixed manufacturing overhead on the income statement each year as a period cost! d. They ignore inventory levels in determining cost of good sold! 5. Generally speaking, net operating income under variable and absorption costing will:! a. Always be equal! b. Never be equal! c. Be equal when production and sales are equal! d. Be equal only when production exceeds sales! 6. Hidago Confectionary Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores?! a. Store manager salaries! b. Store building depreciation expense! c. The cost of corporate advertising aired during the Super Bowl! d. Cost of goods sold at each store! 7. When using data from a segmented income statement, the dollar sales for a segment to break even is equal to:! a. Traceable fixed expenses/Segment CM ratio! b. Common fixed expenses/Segment CM ratio! c. (Traceable fixed expenses + Common fixed expenses)/Segment CM ratio! d. Non-traceable fixed expenses/Segment CM ratio!

8. Mullee Corporation produces a single product and has the following cost structure:! Number of units produced each year# # Variable cost per unit:## # # # Direct materials# # # # # Direct labor# # # # # # Variable manufacturing overhead# # # Variable selling and administrative expense:## Fixed costs per year:! Fixed manufacturing overhead# # # Fixed selling and administrative expenses# #

# # # # # #

# # # # #

# #

# #

# # #

# ! #

#

# # # #

7,000 units! $51! 12! 2! 5!

$441,000! $112,000!

The absorption costing unit product cost is: ! a. $149 per unit! b. $65 per unit! c. $63 per unit! d. $128 per unit! 9. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:! Units in beginning inventory# # # # Units produced# # # # # Units sold# # # # # # Units in ending inventory# # # # Variable costs per unit:! Direct materials# # # # # Direct labor# # # # # # Variable manufacturing overhead# # # Variable selling and administrative expenses# Fixed costs:! Fixed manufacturing overhead# # # Fixed selling and administrative expense# #

# # # #

# # # #

# # # #

0! 8,900! 8,500! 400!

# # # #

# # # #

# # # #

$26! $25! $4! $4!

# #

# #

# #

$249,200! $17,000!

What is the variable costing unit product cost for the month? a. $59 per unit! b. $83 per unit! c. $87 per unit! d. $55 per unit!

10. Kneeland Corporation has two divisions: Grocery Division and Convenience Division. The following report is for the most recent operating period:! Total Company Sales

Grocery Division

Convenience Division

$427,000

$321,000

$106,000

Variable expenses

119,380

70,620

48,760

Contribution margin

307,620

250,380

57,240

Traceable fixed expenses

239,000

194,000

45,000

Segment margin

68,620

56,380

12,240

Common fixed expense

48,970

35,310

11,660

$21,650

$21,070

$580

Net operating income

The common fixed expenses have been allocated to the divisions on the basis of sales.! Required:! a. What is the Grocery Division’s break-even in sales dollars? b. What is the Convenience Division’s break-even in sales dollars? c. What is the company’s overall break-even in sales dollars?!

d. What would be the company’s overall net income be if the company operated at its two division’s break-even points?!

11. Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the costs of inspecting the finished products at Guerra?! a. Machine-hours! b. Direct-labor hours! c. Inspection time! d. Number of inspections! 12. An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:! a. Under activity-based costing, some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products! b. Under activity-based costing, the sum of all product costs does not equal the total costs of the company!

c. Activity-based costing has not been approved by the United Nation’s International Accounting Board! d. Activity-based costing results in less accurate costs than more traditional costing methods based on direct-labor hours or machine-hours! 13. Millner Corporation has provided the following data from its activity-based costing accounting system:! Activity Cost Pool

Total Cost

Total Activity

Designing Products

$1,372,448 7,798 product design hours

Setting Up Batches

33,300 740 batch set-ups

Assembling Products

126,160 6,640 assembly hours

The activity rate for the “designing products” activity cost pool is closest to:! a. $101 per product design hour! b. $1,372,448 per product design hour! c. $176 per product design hour! d. $57 per product design hour! 14. Dobles Corporation has provided the following data from its activity-based costing system:! Activity Cost Pool# Assembly# # Processing orders# Inspection# #

# # # #

# # # #

Total Cost# $228,060# $34,068# $125,560#

# # # #

Total Activity! 18,000 machine-hours! 1,200 orders! 1,720 inspection hours!

The company makes 420 units of product D28K a year, requiring a total of 460 machine-hours, 80 orders, and 10 inspection-hours per year. The product’s direct materials cost is $48.96 per unit and its direct labor cost is $25.36 per unit.! According to the activity-based costing system, the average cost of product D28K is closest to:! a. $95.34 per unit! b. $93.60 per unit! c. $74.32 per unit! d. $89.93 per unit!

15 - 18. Delauder Enterprises makes a variety of products that it sells to other businesses. The company’s activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below:! Activity Cost Pool

Activity Measure

Activity Rate

Supporting assembly

Direct labor-hours (DLHs)

$3.45 Per DLH

Processing batches

Number of batches

$193.30 Per batch

Processing orders

Number of orders

Serving customers

Number of customers

$83.05 Per order $1608.00 Per customer

The cost of serving customers, $1608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the company’s products. The details of last year’s purchases of this product are listed below:! Number of units purchased# # Number of batches# # # Number of orders# # # Direct labor-hour requirement# Selling price# # # # Direct materials cost# # # Direct labor cost# # #

# # # # # # #

1,500 units! 5 batches! 2 orders! 0.25 DLHs per unit! $18.55 per unit! $8.35 per unit! $3.95 per unit!

15. According to the ABC system, the total cost of the activity “Supporting assembly” for this customer this past year was closest to:! a. $5,175.00! b. $0.86! c. $1,293.75! d. $375.00! 16. According to the ABC system, the total cost of the activity “Processing batches” for this customer this past year was closest to:! a. $1049.55! b. $83.05! c. $193.30! d. $966.50! 17. According to the ABC system, the total overhead cost for this customer this past year was closest to:! a. $4034.35! b. $22,484.35! c. $2426.35! d. $18450.00!

18. According to the ABC system, the customer margin for this customer this past year was closest to:! a. $9375.00! b. $5340.65! c. $23,790.65! d. $15,300.00! 19. In a flexible budget, what will happen to the fixed costs as the activity increases?! a. The fixed cost per unit will decrease.! b. The fixed cost per unit will remain unchanged.! c. The fixed cost per unit will increase.! d. Fixed costs are not included in a flexible budget.! 20. Ekholm Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes.! Fixed Element per Month

Variable Element per Container Refurbished

Revenue Employee salaries and wages

$4400 $44900

Refurbishing materials Other expenses

$1000 $700

$30800

When the company prepared its planning budget at the beginning of December, it assumed that 30 containers would have been refurbished. However, 35 containers were actually refurbished during December.! The activity variance for “Employee salaries and wages” for December would have been closest to:! a. $5,000 U! b. $5,000 F! c. $4,000 U! d. $4,000 F! 21. Bellue Inc. manufactures a single product. Variable costing net operating income was $96,300 last year and its inventory decreased by 2,600 units. Fixed manufacturing overhead cost was $1 per unit for both units in beginning and ending inventory. What was the absorption costing net operating income last year?! a. $2600! b. $93700! c. $96300! d. $98900!

22. Carlino Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for April.! Fixed Element per Month Revenue Employee salaries and wages

$43000

Servicing materials Other expenses

Variable Element per Well Serviced

Actual Total for April

$4800

$126900

$1100

$73600

$500

$13600

$31600

$31300

When the company prepared its planning its budget at the beginning of April, it assumed that 24 wells would have been serviced. However, 26 wells were actually serviced during April.! Required:! Complete the performance report below showing the company’s activity and revenue and spending variances for April. Indicate in each case whether the variance is favorable (F) or unfavorable (U).! Actual results Wells serviced Revenue

Revenue and Spending Variance

Planning Budget 24 $115,200

Expenses: Salaries and wages

69,400

Servicing materials

12,000

Other expenses

31,300

Total expenses Net operating income

113,000 2,200...