Quiz over Ch Name

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1 Quiz over Ch. 2-6 Name 1) Which of the following does NOT affect the direct/indirect classification of a cost? A) the level of budgeted profit for the next year B) the design of the operation C) available technology to gather information about the cost D) the materiality of the cost in question 2) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is: A) material used to make the soccer balls B) plant supervisor C) shift supervisor for the soccer line D) labor to shape the leather used to make the soccer ball 3) All of the following are true EXCEPT that indirect costs: A) are not easily traced to products or services B) may be included in manufacturing overhead C) may be included in prime costs D) vary with the selection of the cost object 4) Which statement is true? A) A direct cost of one cost object can be an indirect cost of another cost object. B) All variable costs are direct costs. C) All fixed costs are direct costs. D) A direct cost of one cost object cannot be an indirect cost of another cost object. 5) Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item. Cost Cost Nonmanu- Item Tracing Allocation facturing Carpenter wages Depreciation - office building Glue for assembly Lathe department supervisor Lathe depreciation Lathe maintenance Lathe operator wages Lumber Samples for trade shows Metal brackets for drawers Factory washroom supplies 1

2 Pederson Company reported the following: Manufacturing costs $2,000,000 Units manufactured 50,000 Units sold 47,000 units sold for $75 per unit Beginning inventory 0 units 6) What is the amount of gross margin? A) $5,405,000 B) $3,525,000 C) $1,750,000 D) $1,645,000 7) The cost of inventory reported on the balance sheet may include all of the following EXCEPT: A) the cost of parts used in the manufacturing process B) customer-service costs C) depreciation of the factory equipment D) wages of the plant supervisor 8) Which of the following formulas determine cost of goods sold in a merchandising entity? A) Beginning inventory + Purchases + Ending inventory = Cost of goods sold B) Beginning inventory + Purchases - Ending inventory = Costs of goods sold C) Beginning inventory - Ending inventory - Purchases = Cost of goods sold D) Beginning inventory - Purchases + Ending inventory = Cost of goods sold Beginning finished goods, 1/1/20X5 $ 40,000 Ending finished goods, 12/31/20X5 33,000 Cost of goods sold 250,000 Sales revenue 600,000 Operating expenses 120,000 9) What is cost of goods manufactured for 20X5? A) $243,000 B) $350,000 C) $250,000 D) $257,000 Northenscold Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 10) The contribution margin per unit is: A) $6 B) $8 C) $12 D) $14 2

3 Sherry's Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of fixed costs. 11) Breakeven point in units is: A) 200 units B) 300 units C) 500 units D) None of these answers are correct. 12) The number of units that must be sold to achieve $6,000 of operating income is: A) 1,000 units B) 1,166 units C) 1,200 units D) None of these answers are correct. Assume the following cost information for Fernandez Company: Selling price $120 per unit Variable costs $80 per unit Total fixed costs $80,000 Tax rate 40% 13) What minimum volume of sales dollars is required to earn an aftertax net income of $30,000? A) $330,000 B) $465,000 C) $390,000 D) $165,000 14) What is the number of units that must be sold to earn an after-tax net income of $42,000? A) 4,625 units B) 3,750 units C) 1,875 units D) 3,050 units 15) Mount Carmel Company sells only two products, Product A and Product B. Product A Product B Total Selling price $40 $50 Variable cost per unit $24 $40 Total fixed costs $840,000 Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount Carmel faces a tax rate of 30%. Mount Carmel desires a net after-tax income of $73,500. The required number of units sold would be: A) 45,000 units of Product A and 22,500 units of Product B B) 43,500 units of Product A and 21,750 units of Product B C) 21,750 units of Product A and 43,500 units of Product B D) 22,500 units of Product A and 45,000 units of product B 16) Lobster Liquidators will make $500,000 if the fishing season weather is good, $200,000 if the weather is fair, and would actually lose $50,000 if the weather is poor during the season. If the weather service gives a 40% probability of good weather, a 25% probability of fair weather, and a 35% probability of poor weather, what is the expected monetary value for Lobster Liquidators? A) $232,500 B) $200,000 C) $500,000 D) $267,500 3

4 17) The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called A) the adjusted allocation rate approach B) the write-off of cost of goods sold approach C) the proration approach D) None of these answers are correct. Because the Abernathy Company used a budgeted indirect-cost rate for its manufacturing operations, the amount allocated ($200,000) was different from the actual amount incurred ($225,000). Ending balances in the relevant accounts are: Work-in-Process $ 10,000 Finished Goods 20,000 Cost of Goods Sold 170,000 18) What is the journal entry used to write off the difference between allocated and actual overhead directly to cost of goods sold? A) Manufacturing Overhead Control 225,000 Work-in-Process Control 55,000 Cost of Goods Sold 170,000 B) Manufacturing Overhead Control 200,000 Cost of Goods Sold 25,000 Manufacturing Overhead Allocated 225,000 C) Manufacturing Overhead Allocated 200,000 Cost of Goods Sold 25,000 Manufacturing Overhead Control 225,000 D) Manufacturing Overhead Allocated 200,000 Work-in-Process Control 30,000 Cost of Goods Sold 170,000 19) The use of a single indirect-cost rate is more likely to: A) undercost high-volume simple products B) undercost lower-priced products C) undercost low-volume complex products D) Both B and C are correct. 20) Design costs are an example of: A) unit-level costs B) facility-sustaining costs C) batch-level costs D) product-sustaining costs 21) It is usually difficult to find good cause-and-effect relationships between and a cost allocation base. A) facility-sustaining costs B) unit-level costs C) batch-level costs D) product-sustaining costs 22) Responsibility centers include all of the following EXCEPT: A) customers B) investment C) revenue D) cost 23) A maintenance manager is most likely responsible for a(n): A) profit center B) revenue center C) cost center D) investment center 4

5 24) Controllability may be difficult to pinpoint because of all the following EXCEPT: A) some costs depend on market conditions B) the current use of stretch or challenge targets C) current managers may have inherited inefficiencies of a previous manager D) few costs are under the sole influence of one manager 25) A primary consideration in assigning a cost to a responsibility center is: A) whether the cost is direct or indirect B) where in the organizational structure the cost was incurred C) who can best control the change in that cost D) whether the cost is fixed or variable 26) The Japanese use the term kaizen when referring to: A) continuous improvement B) the sales forecast C) scarce resources D) pro forma financial statements 27) Building in budgetary slack includes: A) underestimating budgeted costs B) overestimating budgeted revenues C) making budgeted targets more easily achievable D) All of these answers are correct. 28) The cash flow statement does NOT include: A) cash outflows paid toward raw material purchases B) cash inflows from the collection of receivables C) all sales revenues D) interest paid and received The following information pertains to Hepburn Company: Month Sales Purchases January $60,000 $32,000 February $80,000 $40,000 March $100,000 $56,000 Cash is collected from customers in the following manner: Month of sale 30% Month following the sale 70% 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Labor costs are 20% of sales. Other operating costs are $30,000 per month (including $8,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at the end of the month. Money can be borrowed in multiples of $1, ) How much cash will be collected from customers in March? A) $94,000 B) $100,000 C) $86,000 D) None of these answers are correct. 5

6 30) How much cash will be paid to suppliers in March? A) $88,000 B) $56,000 C) $46,400 D) None of these answers are correct. 31) Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted: Work-in-process inventory (January 1) $ 140,400 Work-in-process inventory (March 31) 171,000 Finished goods inventory (January 1) 540,000 Finished goods inventory (March 31) 510,000 Direct materials used 378,000 Indirect materials used 84,000 Direct manufacturing labor 480,000 Indirect manufacturing labor 186,000 Property taxes on manufacturing plant building 28,800 Salespersons' company vehicle costs 12,000 Depreciation of manufacturing equipment 264,000 Depreciation of office equipment 123,600 Miscellaneous plant overhead 135,000 Plant utilities 92,400 General office expenses 305,400 Marketing distribution costs 30,000 Required: a. Prepare a cost of goods manufactured schedule for the quarter. b. Prepare a cost of goods sold schedule for the quarter. 6