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1) Managerial accounting information is generally prepared for a. stockholders. b. creditors. c. managers. d. regulatory agencies. 2) The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is a. manufacturing overhead. b. indirect materials. c. indirect labor. d. direct labor. 3)

Manufacturing costs include a. direct materials and direct labor only. b. direct materials and manufacturing overhead only. c. direct labor and manufacturing overhead only. d. direct materials, direct labor, and manufacturing overhead. 4)

Which one of the following is not a direct material? a. A tire used for a lawn mower b. Plastic used in the covered case for a home PC c. Steel used in the manufacturing of steel-radial tires d. Lubricant for a ball-bearing joint for a large crane

5)

A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n) a. period cost. b. indirect material. c. direct material. d. miscellaneous expense.

6) Kushman Combines has £20,000 of ending finished goods inventory as of December 31, 2020. If beginning finished goods inventory was £10,000 and cost of goods sold was £50,000, how much would Kushman report for cost of goods manufactured? a. £70,000 b. £10,000 c. £60,000 d. £40,000 7) Dolan Company's accounting records reflect the following inventories: Dec. 31, 2020 Dec. 31, 2019 Raw materials inventory €310,000 €260,000 Work in process inventory 300,000 160,000 Finished goods inventory 190,000 150,000 During 2020, €800,000 of raw materials were purchased, direct labor costs amounted to €670,000, and manufacturing overhead incurred was €640,000. The total raw materials available for use during 2020 for Dolan Company is a. €1,110,000. b. €660,000. c. €750,000. d. €1,060,000.

8) Dolan Company's accounting records reflect the following inventories: Dec. 31, 2020 Dec. 31, 2019 Raw materials inventory €310,000 €260,000 Work in process inventory 300,000 160,000 Finished goods inventory 190,000 150,000 During 2020, €800,000 of raw materials were purchased, direct labor costs amounted to €670,000, and manufacturing overhead incurred was €640,000. Dolan Company's total manufacturing costs incurred in 2020 amounted to a. €2,060,000. b. €2,020,000. c. €1,920,000. d. €2,110,000. 9) Dolan Company's accounting records reflect the following inventories: Dec. 31, 2020 Dec. 31, 2019 Raw materials inventory €310,000 €260,000 Work in process inventory 300,000 160,000 Finished goods inventory 190,000 150,000 During 2020, €800,000 of raw materials were purchased, direct labor costs amounted to €670,000, and manufacturing overhead incurred was €640,000. Assume Dolan Company's cost of goods manufactured for 2020 amounted to €1,890,000. Its cost of goods sold for the year is a. €2,000,000. b. €1,750,000. c. €1,850,000. d. €1,930,000. 10) Benson Group’s accounting records reflect the following inventories: Dec. 31, 2019 Dec. 31, 2020 Raw materials inventory € 80,000 € 64,000 Work in process inventory 104,000 116,000 Finished goods inventory 100,000 92,000 During 2020, Benson purchased €1,450,000 of raw materials, incurred direct labor costs of €250,000, and incurred manufacturing overhead totaling €160,000. How much raw materials were transferred to production during 2020 for Benson? a. €1,386,000 b. €1,466,000 c. €1,450,000 d. €1,434,000 11) Benson Group’s accounting records reflect the following inventories: Dec. 31, 2019 Dec. 31, 2020 Raw materials inventory € 80,000 € 64,000 Work in process inventory 104,000 116,000 Finished goods inventory 100,000 92,000 During 2020, Benson purchased €1,450,000 of raw materials, incurred direct labor costs of €250,000, and incurred manufacturing overhead totaling €160,000. How much is total manufacturing costs incurred during 2020 for Benson? a. €1,864,000 b. €1,876,000

c. €1,860,000 d. €1,872,000 12) Benson Group’s accounting records reflect the following inventories: Dec. 31, 2019 Dec. 31, 2020 Raw materials inventory € 80,000 € 64,000 Work in process inventory 104,000 116,000 Finished goods inventory 100,000 92,000 During 2020, Benson purchased €1,450,000 of raw materials, incurred direct labor costs of €250,000, and incurred manufacturing overhead totaling €160,000. Assume Benson’s cost of goods manufactured for 2020 amounted to €1,660,000. How much would it report as cost of goods sold for the year? a. €1,668,000 b. €1,568,000 c. €1,760,000 d. €1,652,000 13) Assuming that the direct materials used are €1,700,000, compute the total manufacturing costs using the following information. Raw materials inventory, January 1 Raw materials inventory, December 31 Work in process, January 1 Work in process, December 31 Finished goods, January 1 Finished goods, December 31 Raw materials purchases Direct labor Factory utilities Indirect labor Factory depreciation Operating expenses a. b. c. d.

€

20,000 40,000 18,000 12,000 40,000 32,000 1,700,000 760,000 150,000 50,000 400,000 420,000

€3,060,000. €3,066,000. €2,860,000. €3,480,000.

14) Assuming €3,000,000 is the total manufacturing costs, compute the cost of goods manufactured using the following information. Raw materials inventory, January 1 Raw materials inventory, December 31 Work in process, January 1 Work in process, December 31 Finished goods, January 1 Finished goods, December 31 Raw materials purchases Direct labor Factory utilities Indirect labor Factory depreciation Operating expenses

€

20,000 40,000 18,000 12,000 40,000 32,000 1,700,000 760,000 150,000 50,000 400,000 420,000

a. b. c. d.

€3,014,000. €2,994,000. €3,006,000. €3,008,000.

15) Assuming €3,040,000 is the cost of goods manufactured, compute the cost of goods sold using the following information. Raw materials inventory, January 1 Raw materials inventory, December 31 Work in process, January 1 Work in process, December 31 Finished goods, January 1 Finished goods, December 31 Raw materials purchases Direct labor Factory utilities Indirect labor Factory depreciation Operating expenses a. b. c. d.

€

20,000 40,000 18,000 12,000 40,000 32,000 1,700,000 760,000 150,000 50,000 400,000 420,000

€3,046,000. €3,008,000. €3,032,000. €3,048,000.

16) Penner Company reported total manufacturing costs of €450,000, manufacturing overhead totaling €78,000, and direct materials totaling €96,000. How much is direct labor cost? a. Cannot be determined from the information provided. b. €624,000 c. €354,000 d. €276,000 17) Gammil Limited has beginning and ending raw materials inventories of £96,000 and £120,000, respectively. If direct materials used were £490,000, what was the cost of raw materials purchased? a. £490,000. b. £520,000. c. £466,000. d. £514,000. 18.

Costas AG has beginning and ending raw materials inventories of €64,000 and €80,000, respectively. If direct materials used were €310,000, what was the cost of raw materials purchased? a. €310,000. b. €330,000. c. €294,000. d. €326,000.

19

Wood Company has beginning work in process inventory of €138,000 and total manufacturing costs of €477,000. If cost of goods manufactured is €480,000, what is the cost of the ending work in process inventory?

a. b. c. d.

€120,000. €141,000. €150,000. €135,000.

20.

What is “balanced” in the balanced scorecard approach? a. The number of products produced b. The emphasis on financial and non-financial performance measurements c. The amount of costs allocated to products d. The number of defects found on each product

21.

Many companies now focus on reducing defects in finished products with the goal of zero defects. This is called a. Activity-based costing. b. Balanced scorecard. c. Value chain. d. Total quality management.

22) For a manufacturing company, which of the following is an example of a period cost rather than a product cost? a. Depreciation on factory equipment b. Wages of salespersons c. Wages of machine operators d. Insurance on factory equipment 23) Match the items in the two columns below by entering the appropriate code letter in the space provided. A. B. C. D. E.

Managerial accounting Financial accounting Planning Directing Controlling

F. Work in process inventory G. Direct materials H. Manufacturing overhead I. Period costs J. Value chain

_____ 1.

The cost of products that are partially complete.

_____ 2.

The function of keeping activities in accordance with plans.

_____ 3.

Primarily concerned with internal users, and reports pertain to subunits of the entity.

_____ 4.

Materials that can be physically and directly associated with manufacturing a product.

_____ 5.

The function of setting goals and objectives.

_____ 6.

Indirect costs of manufacturing a product.

_____ 7.

Primarily concerned with external users and reports pertain to the entity as a whole.

_____ 8.

Costs that are noninventoriable.

_____ 9.

All business processes associated with providing a product or service.

_____10.

The function of coordinating diverse activities to produce a smooth-running operation.

Ans: N/A, LO: 1, Bloom: K, Difficulty: Easy, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Answers to Matching 1. 2. 3. 4. 5.

F E A G C

6. 7. 8. 9. 10.

H B I J D

24) A variable cost is a cost that a. varies per unit at every level of activity. b. occurs at various times during the year. c. varies in total in proportion to changes in the level of activity. d. may or may not be incurred, depending on management's discretion.

25) Two costs at Bradshaw Company appear below for specific months of operation. Delivery costs Utilities

Month September October September October

Amount € 40,000 55,000 € 84,000 126,000

Units Produced 40,000 60,000 40,000 60,000

Which type of costs are these? a. Delivery costs and utilities are both variable. b. Delivery costs and utilities are both mixed. c. Utilities are mixed and delivery costs are variable. d. Delivery costs are mixed and utilities are variable. 26) Fixed costs normally will not include a. property taxes. b. direct labor. c. supervisory salaries. d. depreciation on buildings and equipment. 27) Which of the following costs are variable? Cost 10,000 Units 1. $100,000 2. 40,000 3. 90,000 4. 50,000 a. 1 and 2 b. 1 and 4 c. 1, 2, or 4 d. only 2

30,000 Units $300,000 80,000 90,000 150,000

28) Frazier Manufacturing Company collected the following production data for the past month: Units Produced 1,600 1,300 1,500 1,100

Total Cost £66,000 57,000 67,500 49,500

If the high-low method is used, what is the monthly total cost equation? a. Total cost = £13,200 + £33/unit b. Total cost = £16,500 + £30/unit c. Total cost = £0 + £45/unit d. Total cost = £9,900 + £36/unit

29) Gribble Company’s high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were €156,000 in May and €60,000 in November. Using the highlow method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units. a. €135,000 b. €144,000 c. €117,000 d. €120,000 30) In applying the high-low method, what is the unit variable cost? Month January February March April a. b. c. d.

Miles 80,000 50,000 70,000 90,000

Total Cost HK$192,000 160,000 188,000 260,000

HK$2.88 HK$2.50 HK$3.20 Cannot be determined from the information given.

31) . In applying the high-low method, what is the fixed cost? Month January February March April a. b. c. d. 32.

Miles 80,000 50,000 70,000 90,000

Total Cost HK$192,000 160,000 188,000 260,000

HK$ 35,000 HK$ 72,000 HK$ 28,000 HK$100,000

CVP analysis does not consider a. level of activity. b. fixed cost per unit.

c. variable cost per unit. d. sales mix. 33.

Contribution margin a. is always the same as gross profit margin. b. excludes variable selling costs from its calculation. c. is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. d. equals sales revenue minus variable costs.

34.

If a company had a contribution margin of HK$1,000,000 and a contribution margin ratio of 40%, total variable costs must have been a. HK$1,500,000. b. HK$ 600,000. c. HK$2,500,000. d. HK$ 400,000.

35. Sales are HK$500,000 and variable costs are HK$330,000. What is the contribution margin ratio? a. 52% b. 34% c. 66% d. Cannot be determined because amounts are not expressed per unit. 36. Cunningham, Inc. sells MP3 players for €60 each. Variable costs are €40 per unit, and fixed costs total €120,000. What sales are needed by Cunningham to break even? a. €160,000. b. €300,000. c. €360,000. d. €480,000. 37. Gall Manufacturing sells a product for £50 per unit. The fixed costs are £840,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by £200,000 and variable costs will be 50% of the selling price. The new break-even point in units is: a. 42,000. b. 41,600. c. 41,200. d. 33,600.

38 .

Montoya Manufacturing has fixed costs of €3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of €300,000? a. €5,500,000 b. €5,000,000 c. €8,250,000 d. €7,500,000

39) A company desires to sell a sufficient quantity of products to earn a profit of HK$400,000. If the unit sales price is HK$20, unit variable cost is HK$12, and total fixed costs are HK$800,000, how many units must be sold to earn net income of HK$400,000? a. 225,000 units b. 150,000 units

c. 120,000 units d. 90,000 units 40) At the break-even point, a. sales equal total variable costs. b. contribution margin equals total variable costs. c. contribution margin equals total fixed costs. d. sales equal total fixed costs. 41) Wilton Co. reported the following results from the sale of 5,000 hammers in May: sales £200,000, variable costs £120,000, fixed costs £60,000, and net income £20,000. Assume that Wilton increases the selling price of hammers by 10% on June 1. How many hammers will have to be sold in June to maintain the same level of net income? a. 4,000 b. 4,300 c. 4,500 d. 5,000 42) For Wickham Co., sales is €3,000,000, fixed expenses are €900,000, and the contribution margin ratio is 36%. What is required sales to earn a target net income of €600,000? a. €1,666,667 b. €2,500,000 c. €4,166,667 d. €8,333,333 43) In 2019, Hagar Corp. sold 3,000 units at €500 each. Variable expenses were €350 per unit, and fixed expenses were €780,000. The same variable expenses per unit and fixed expenses are expected for 2020. If Hagar cuts selling price by 4%, what is Hagar’s break-even point in units for 2020? a. 5,200 b. 5,416 c. 5,760 d. 6,000 44) Ramirez Corporation sells two types of computer hard drives. The sales mix is 30% (QDrive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of €90 and a selling price of €150. Q-Drive Plus has variable costs per unit of €105 and a selling price of €195. The weighted-average unit contribution margin for Ramirez is a. € 69. b. € 75. c. € 81. d. €150. 45) Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs £6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The break-even point in sales is a. £ 2,464,200. b. £15,488,373. c. £16,650,000.

d. £18,000,000. 46.

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs £6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point? a. £ 5,400,000 b. £ 6,300,000 c. £10,067,442 d. £11,700,000

47.

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs £6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will be the total contribution margin at the break-even point? a. £5,730,699 b. £6,660,000 c. £6,720,000 d. £7,740,000

48) MacCloud Industries has two divisions—Standard and Premium. Each division has hundreds of different types of tennis racquets and tennis products. The following information is available: Standard Division Premium Division Total Sales €400,000 €600,000 €1,000,000 Variable costs 280,000 360,000 Contribution margin €120,000 €240,000 Total fixed costs €300,000 What is the weighted-average contribution margin ratio? a. 34% b. 35% c. 36% d. 50% 49.

The sales mix percentages for Novotna’s Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are £2,220,000. What is Novotna’s break-even pointin sales? a. £ 777,000 b. £6,000,000 c. £6,342,856 d. £6,727,272

50.

Curtis Corporation’s contribution margin is €25 per unit for Product A and €30 for Product B. Product A requires 2 machine hours and Product B requires 4 machine hours. How much is the contribution margin per unit of limited resource for each product? A B a. €12.50 €7.50

b. c. d.

€12.50 €10.00 €10.00

€8.33 €7.50 €8.33...