Exam 1 Fall14 2 - Answers and works PDF

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exam 1 Fall14

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1. If the level of activity increases within the relevant range: A. variable cost per unit and total fixed costs also increase. B. fixed cost per unit and total variable cost also increase. C. total cost will increase and fixed cost per unit will decrease. D. variable cost per unit and total cost also increase.

2. Data for Cost A and Cost B appear below:

Which of the above best describes the behavior of Costs A and B? A. Cost A is fixed, Cost B is variable. B. Cost A is variable, Cost B is fixed. C. Both Cost A and Cost B are variable. D. Both Cost A and Cost B are fixed.

3. At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs. If volume increases to 9,000 units and both 8,000 units and 9,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of: A. $22,500 B. $32,000 C. $34,500 D. $20,000

4. Cardiv Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

The best estimate of the total cost to manufacture 4,300 units is closest to: A. $877,200 B. $909,400 C. $901,925 D. $926,650

The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March.

The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company's stores.

5. What is the total amount of the costs listed above that are direct costs of the Cosmetics Department? A. $83,000 B. $94,000 C. $90,000 D. $127,000

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

6. Bee Company's net operating income for the second quarter using the contribution approach is: A. $156,200 B. $685,000 C. $431,200 D. $265,000

7. Bee Company's contribution margin for the second quarter is: A. $463,200 B. $540,000 C. $851,200 D. $431,200

8. In order to reduce its overall quality costs, a company should focus most of its efforts on: A. prevention costs. B. appraisal costs. C. internal failure costs. D. external failure costs.

9. Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to: A. understate the predetermined overhead rate. B. overstate the predetermined overhead rate. C. have no effect on the predetermined overhead rate. D. cannot be determined from the information given.

10. Paulson Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for next year:

Paulson estimated that 40,000 direct labor-hours and 20,000 machine-hours would be worked during the year. The predetermined overhead rate per machine-hour will be: A. $1.60 B. $2.10 C. $1.00 D. $1.05

11. The Work in Process inventory account of a manufacturing Corporation shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the Corporation is using a predetermined overhead rate, as a percentage of direct labor costs, of: A. 50% B. 200% C. 300% D. 20%

12. Bradbeer Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,500 hours. At the end of the year, actual direct labor-hours for the year were 16,000 hours, the actual manufacturing overhead for the year was $233,000, and manufacturing overhead for the year was underapplied by $15,400. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: A. $249,375 B. $217,600 C. $228,000 D. $238,000

13. Job 593 was recently completed. The following data have been recorded on its job cost sheet:

The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 593 would be: A. $6,705 B. $3,219 C. $5,249 D. $4,255

14. Garth Corporation sells a single product. If the selling price per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, then:

A. Option A B. Option B C. Option C D. Option D

15. Spartan Systems reported total sales of $300,000, at a price of $20 and per unit variable expenses of $12, for the sales of their single product.

What is the amount of contribution margin if sales volume increases by 30%? A. $19,500 B. $15,000 C. $156,000 D. $120,000

16. Solen Corporation's break-even-point in sales is $900,000, and its variable expenses are 75% of sales. If the company lost $32,000 last year, sales must have amounted to: A. $868,000 B. $804,000 C. $772,000 D. $628,000

17. Data concerning Wythe Corporation's single product appear below:

Fixed expenses are $106,000 per month. The company is currently selling 2,000 units per month. The marketing manager would like to cut the selling price by $15 and increase the advertising budget by $5,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 800 units. What should be the overall effect on the company's monthly net operating income of this change? A. increase of $31,000 B. decrease of $31,000 C. increase of $103,000 D. increase of $1,000

18. Chibu Corporation is a single product firm with the following cost formula for all of its costs for next year, where X is the number of units sold and Y is total cost: Y = $225,000 + $30X Chibu sells its product for $120 per unit. What would Chibu's total sales dollars have to be next year in order to generate $270,000 of net operating income? A. $618,750 B. $660,000 C. $1,080,000 D. $1,980,000

19. Alpha Corporation reported the following data for its most recent year: sales, $500,000; variable expenses, $300,000; and fixed expenses, $150,000. The company's degree of operating leverage is: A. 10 B. 2 C. 4 D. 2.5

20. The Agate Corporation manufactures and sells two types of bookcases, standard and deluxe. Agate expects the following operating results next year for each type of bookcase:

Agate expects to have a total of $57,600 in fixed expenses next year. What is Agate's breakeven point next year in sales dollars? A. $72,000 B. $144,000 C. $96,000 D. $240,000

21. Common fixed expenses should be allocated to business segments when performing breakeven calculations and making decisions. True False

22. Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing?

A. Option A B. Option B C. Option C D. Option D

23. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the absorption costing unit product cost for the month? A. $96 per unit B. $83 per unit C. $87 per unit D. $100 per unit

24. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under variable costing? A. $15,000 B. $12,100 C. $2,900 D. $5,300

25. Yuvil Corporation produces a single product. At the end of the company's first year of operations, 1,000 units of inventory remained on hand. Its variable manufacturing overhead cost is $45 per unit and its fixed manufacturing overhead cost is $10 per unit. Yuvil's absorption costing net operating income would be higher than its variable costing net operating income by: A. $0 B. $10,000 C. $35,000 D. $45,000

exam 1 Fall14 Key

1. If the level of activity increases within the relevant range: A. variable cost per unit and total fixed costs also increase. B. fixed cost per unit and total variable cost also increase. C. total cost will increase and fixed cost per unit will decrease. D. variable cost per unit and total cost also increase.

AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Understand Difficulty: 2 Medium Garrison - Chapter 02 #49 Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs; fixed costs; and mixed costs.

2. Data for Cost A and Cost B appear below:

Which of the above best describes the behavior of Costs A and B? A. Cost A is fixed, Cost B is variable. B. Cost A is variable, Cost B is fixed. C. Both Cost A and Cost B are variable. D. Both Cost A and Cost B are fixed.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Analyze Difficulty: 2 Medium Garrison - Chapter 02 #55 Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs; fixed costs; and mixed costs.

3. At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs. If volume increases to 9,000 units and both 8,000 units and 9,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of: A. $22,500 B. $32,000 C. $34,500 D. $20,000

Total cost = Total fixed cost + Total variable cost $32,000 = $12,000 + Total variable cost Total variable cost = $32,000 - $12,000 = $20,000 Variable cost per unit = $20,000 ¸ 8,000 units = $2.50 per unit Total cost = Total fixed cost + Total variable cost = $12,000 + ($2.50 per unit ´ 9,000 units) = $12,000 + $22,500 = $34,500

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Garrison - Chapter 02 #72 Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs; fixed costs; and mixed costs.

4. Cardiv Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

The best estimate of the total cost to manufacture 4,300 units is closest to: A. $877,200 B. $909,400 C. $901,925 D. $926,650

Total manufacturing overhead at 5,000 units = 5,000 units ´ $62.10 per unit = $310,500 Total manufacturing overhead at 4,000 units = 4,000 units ´ $73.60 per unit = $294,400 Variable manufacturing overhead per unit = Change in cost ¸ Change in activity = ($310,500 - $294,400) ¸ (5,000 units - 4,000 units) = $16,100 ¸ 1,000 units = $16.10 per unit Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $310,500 - (5,000 units ´ $16.10 per unit) = $310,500 - $80,500 = $230,000 Total variable manufacturing cost = Direct materials + Direct labor + Manufacturing overhead = $85.80 per unit + $56.10 per unit + $16.10 per unit = $158.00 per unit Total manufacturing cost = Total variable manufacturing cost per unit ´ Total units manufactured + Total fixed manufacturing cost = ($158.00 per unit ´ 4,300 units) + $230,000 = $679,400 + $230,000 = $909,400

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Garrison - Chapter 02 #81 Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs; fixed costs; and mixed costs. Learning Objective: 02-05 Analyze a mixed cost using a scattergraph plot and the high-low method.

The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March.

The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company's stores.

Garrison - Chapter 02

5. What is the total amount of the costs listed above that are direct costs of the Cosmetics Department? A. $83,000 B. $94,000 C. $90,000 D. $127,000

Direct costs of the Cosmetics Department = Cosmetics Department sales commissions + Cosmetics Department cost of sales + Cosmetics Department manager's salary = $7,000 + $83,000 + $4,000 = $94,000

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 1 Easy Garrison - Chapter 02 #99 Learning Objective: 02-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

Garrison - Chapter 02

6. Bee Company's net operating income for the second quarter using the contribution approach is: A. $156,200 B. $685,000 C. $431,200 D. $265,000

Unit sales = $960,000 ¸ $60 per unit = 16,000 units Selling expenses = Fixed selling expenses + (0.08 ´ Sales) $200,000 = Fixed selling expenses + (0.08 ´ $960,000) Fixed selling expenses = $200,000 - $76,800 = $123,200 Administrative expenses = Fixed administrative expenses + ($2 per unit ´ 16,000 units) $75,000 = Fixed administrative expenses + ($2 per unit ´ 16,000 units) Fixed administrative expenses = $75,000 - $32,000 = $43,000

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Garrison - Chapter 02 #151 Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs; fixed costs; and mixed costs. Learning Objective: 02-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

7. Bee Company's contribution margin for the second quarter is: A. $463,200 B. $540,000 C. $851,200 D. $431,200

Unit sales = $960,000 ¸ $60 per unit = 16,000 units

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Garrison - Chapter 02 #152 Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs; fixed costs; and mixed costs. Learning Objective: 02-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

8. In order to reduce its overall quality costs, a company should focus most of its efforts on: A. prevention costs. B. appraisal costs. C. internal failure costs. D. external failure costs.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making Blooms: Remember Difficulty: 1 Easy Garrison - Appendix 02B... #7 Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

9. Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to: A. understate the predetermined overhead rate. B. overstate the predetermined overhead rate. C. have no effect on the predetermined overhead rate. D. cannot be determined from the information given.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Analyze Difficulty: 3 Hard Garrison - Chapter 03 #16 Learning Objective: 03-01 Compute a predetermined overhead rate.

10. Paulson Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for next year:

Paulson estimated that 40,000 direct labor-hours and 20,000 machine-hours would be worked during the year. The predetermined overhead rate per machine-hour will be: A. $1.60 B. $2.10 C. $1.00 D. $1.05

Predetermined overhead rate = Estimated total manufacturing overhead ¸ Estimated total amount of the allocation base Predetermined overhead rate = $42,000 ¸ 20,000 machine-hours = $2.10 per machine-hour

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Garrison - Chapter 03 #32 Learning Objective: 03-01 Compute a predetermined overhead rate.

11. The Work in Process inventory account of a manufacturing Corporation shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the Corporation is using a predetermined overhead rate, as a percentage of direct labor costs, of: A. 50% B. 200% C. 300% D. 20%

($10,000 + $4,000X) + ($5,000 + $2,000X) = $18,000 $6,000X = $3,000 X = 0.50

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Garrison - Chapter 03 #35 Learning Objective: 03-01 Compute a predetermined overhead rate. Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate.

12. Bradbeer Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,500 hours. At the end of the year, actual direct labor-hours for the year were 16,000 hours, the actual manufacturing overhead for the year was $233,000, and manufacturing overhead for the year was underapplied by $15,400. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: A. $249,375 B. $217,600 C. $228,000 D. $238,000

Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead Manufacturing overhead applied Manufacturing overhead applied = Actual manufacturing overhead - Underapplied manufacturing overhead = $233,000 - $15,400 = $217,600 Overhead applied = Predetermined overhead rate ´ Amount of the allocation base incurred Predetermined overhead rate = Overhead applied ¸ Amount of the allocation base incurred Predetermined overhead rate = $217,600 ¸ 16,000 direct labor-hours = $13.60 per direct labor-hour Predetermined overhead rate = Estimated total manufacturing overhead ¸ Estimated total amount of the allocation base Estimated total manufacturing overhead = Predetermined overhead rate ´ Estimated total amount of the allocation base = $13.60 per direct labor-hour ´ 17,500 direct labor-hours = $238,000

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Garrison - Chapter 03 #37 Learning Objective: 03-01 Compute a predetermined overhead rate. Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate. Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

13. Job 593 was recently completed. The following data have been recorded on its job cost sheet:

The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 593 would be: A. $6,705 B. $3,219 C. $5,249 D. $4,255

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Difficulty: 1 Easy Garrison...