Reference no: EM133154610

Question 1 - Ratchford Clocks manufactures alarm clocks and wall clocks and allocates overhead based on direct labor hours. The production process is set up in three departments: Assembly, Finishing, and Calibrating. The following is information regarding the direct labor used to produce one unit of the two clocks:

Per-Unit Hours	Assembly	Finishing	Calibrating
Alarm clocks	3	1	1
Wall clocks	2	3	2
Total direct labor hours	5	4	3

Factory overhead is budgeted for the year as follows:

Assembly Department $595,000

Finishing Department 200,000

Calibrating Department 140,000

Total factory overhead $935,000

Ratchford Clocks is planning to manufacture 50,000 alarm clocks and 10,000 wall clocks during the year.

a. Determine the total number of direct labor hours that will be needed by each department.

b. Determine the factory overhead rate by department using the multiple production department factory overhead rate method.

c. Determine the amount of factory overhead to be allocated to each unit of alarm clocks and wall clocks.

d. Determine the amount of total factory overhead to be allocated to the alarm clocks and wall clocks.

Question 2 - If the expected sales volume for the current period is 6,200 units, the desired ending inventory is 241 units, and the beginning inventory is 325 units, the number of units set forth in the production budget, representing total production for the current period, is

a. 6,441

b. 5,875

c. 6,200

d. 6,116

Question 3 - The manufacturing costs of Mocha Industries for three months of the year are as follows:

	Total Cost	Production
April	$84,893	1,970 Units
May	90,344	2,760
June	98,900	4,000

a. Using the high-low method, determine the variable cost per unit.

b. Using the high-low method, determine the total fixed costs.

Question 4 - Variable costs as a percentage of sales for Lemon Inc. are 60%, current sales are $673,000, and fixed costs are $193,000. How much will operating income change if sales increase by $38,500?

a. $23,100 increase

b. $23,100 decrease

c. $15,400 decrease

d. $15,400 increase

Question 5 - Which of the following is not true when determining the selling price for a product?

a. Variable costing is effective when determining short-run decisions, but absorption costing is only used for long-term pricing policies.

b. Absorption costing should be used to determine routine pricing which includes both fixed and variable costs.

c. As long as the selling price is set above the variable costs, the company will make a profit in the short run.

d. Both variable and absorption pricing plans should be considered, to include several pricing alternatives.

Question 6 - A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (17,500 units):
Direct materials	$170,400
Direct labor	238,200
Variable factory overhead	261,700
Fixed factory overhead	101,500	$771,800
Operating expenses:
Variable operating expenses	$129,000
Fixed operating expenses	40,800	169,800

If 1,800 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is

a. $68,940

b. $82,214

c. $96,850

d. $79,385

Question 7 - Activity rates are computed by dividing the cost budgeted for each activity pool by the estimated activity base for that pool.

True

False

Question 8 - If variable manufacturing costs are $18 per unit and total fixed manufacturing costs are $631,900, what is the manufacturing cost per unit if:

a. 7,100 units are manufactured and the company uses the variable costing concept?

b. 8,900 units are manufactured and the company uses the variable costing concept?

c. 7,100 units are manufactured and the company uses the absorption costing concept?

d. 8,900 units are manufactured and the company uses the absorption costing concept?

Question 9 - Variable costing is appropriate only for manufacturing firms, not for service firms.

True

False

Question 10 - Below is budgeted production and sales information for Flushing Company for the month of December.

	Product XXX	Product ZZZ
Estimated beginning inventory	29,000 units	20,000 units
Desired ending inventory	36,100 units	14,100 units
Region I, anticipated sales	310,000 units	254,000 units
Region II, anticipated sales	186,000 units	142,000 units

The unit selling price for product XXX is $7 and for product ZZZ is $14. Budgeted production for product ZZZ during the month is

a. 561,100 units

b. 390,100 units

c. 410,100 units

d. 396,000 units

Question 11 - A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (20,100 units):
Direct materials	$173,100
Direct labor	237,200
Variable factory overhead	240,300
Fixed factory overhead	92,800	$743,400
Operating expenses:
Variable operating expenses	$120,000
Fixed operating expenses	45,100	165,100

If 1,900 units remain unsold at the end of the month and sales total $1,004,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement?

a. $61,500

b. $157,000

c. $70,272

d. $165,682

Question 12 - Botosan Factory has budgeted factory overhead for the year at $13,500,000, and budgeted direct labor hours for the year are 10,000,000. If the actual direct labor hours for the month of May are 350,000, the overhead allocated for May is

a. $236,250

b. $470,630

c. $675,000

d. $472,500

Question 13 - Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to determine Bounty's variable utilities cost per machine hour. Round answer to the nearest cent.

a. $0.72

b. $1.03

c. $0.10

d. $0.68

Question 14 - Flying Cloud Co. has the following operating data for its manufacturing operations:

Unit selling price $236

Unit variable cost $108

Total fixed costs $839,000

The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the next break-even point for Flying Cloud Co. will be

a. increased by 1,068 units

b. increased by 712 units

c. decreased by 890 units

d. increased by 890 units

Question 15 - Philadelphia Company has the following information for March:

Sales $471,419

Variable cost of goods sold 216,658

Fixed manufacturing costs 76,060

Variable selling and administrative expenses 51,927

Fixed selling and administrating expenses 32,533

Determine the March:

a. Manufacturing margin

b. Contribution margin

c. Operating income for Philadelphia Company

Question 16 - A business operated at 100% of capacity during its first month, with the following results:

Sales (111 units)		$654,900
Production costs (139 units):
Direct materials	$88,653
Direct labor	22,635
Variable factory overhead	39,611
Fixed factory overhead	37,724	188,623
Operating expenses:
Variable operating expenses	$5,072
Fixed operating expenses	3,338	8,410

The amount of gross profit that would be reported on the absorption costing income statement is

a. $654,761

b. $504,273

c. $495,863

d. $499,201

Question 17 - Jase Manufacturing Co.'s static budget at 7,900 units of production includes $31,600 for direct labor and $3,160 for electric power. Total fixed costs are $39,200. At 10,500 units of production, a flexible budget would show

a. variable costs of $46,200 and $52,101 of fixed costs

b. variable costs of $46,200 and $39,200 of fixed costs

c. variable and fixed costs totaling $73,960

d. variable costs of $34,760 and $39,200

Question 18 - If sales are $319,000, variable costs are 75% of sales, and operating income is $42,600, the operating leverage is

a. 1.9

b. 0.0

c. 1.4

d. 5.6

Question 19 - Tulip Company produces two products, T and U. The indirect labor costs include the following two items:

Plant supervision $700,000

Setup labor (indirect) 300,000

Total indirect labor $1,000,000

The following activity-base usage and unit production information is available for the two products:

	Number of Setups	Direct Labor Hours	Units
Product T	200	20,000	900
Product U	200	30,000	1,100
Total	400	50,000	2,000

a. Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.

b. Determine the factory overhead allocated per unit for Products T and U, using the single plantwide factory overhead rate.

c. Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups.

d. Determine the factory overhead allocated per unit for Products T and U, using the activity-based costing method.

Question 20 - Big Wheel, Inc., collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. Sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500 in April. What are the budgeted sales on account for April?

Question 21 - Budgetary slack can be avoided if lower and mid-level managers are required to support all of their spending requirements with specific operational plans.

True

False

Question 22 - The budgeted direct materials purchases is normally computed as the sum of (1) the materials for production and (2) the desired ending inventory.

True

False

Question 23 - Tara Company's budget shows the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. The amount of cash Tara Company will expect to collect in November as a result of current and past credit sales is

a. $30,000

b. $28,400

c. $31,100

d. $19,700

Question 24 - If budgeted beginning finished goods inventory is $8,000, budgeted ending finished goods inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted cost of goods manufactured should be

a. $1,400

b. $9,600

c. $11,550

d. $11,660

Question 25 - A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (20,300 units):
Direct materials	$175,100
Direct labor	236,500
Variable factory overhead	244,700
Fixed factory overhead	91,800	$748,100
Operating expenses:
Variable operating expenses	$124,100
Fixed operating expenses	50,000	174,100

If 2,000 units remain unsold at the end of the month and sales total $1,124,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?

a. $90,857

b. $73,704

c. $64,660

d. $266,461

Question 26 - The level of inventory of a manufactured product has increased by 8,762 units during a period. The following data are also available:

	Variable	Fixed
Unit manufacturing costs of the period	$13.00	$4.00
Unit operating expenses of the period	3.00	2.00

The effect on operating income if absorption costing is used rather than variable costing would be a

a. $35,048 increase

b. $52,572 increase

c. $35,048 decrease

d. $52,572 decrease

Question 27 - Production and sales estimates for April for Crane Co. are as follows:

Estimated inventory (units), April 1 19,000

Desired inventory (units), April 30 18,000

Expected sales volume (units):

Territory A 3,000

Territory B 4,750

Territory C 4,250

Unit sales price $20

The number of units expected to be manufactured in April is

a. 9,500 units

b. 13,000 units

c. 11,000 units

d. 12,000 units

Question 28 - Steven Company has fixed costs of $319,152. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.

Product	Selling Price per Unit	Variable Cost per Unit	Contribution Margin per Unit
X	$960	$360	$600
Y	688	368	320

The sales mix for Products X and Y is 60% and 40%, respectively. Determine the break-even point in units of X and Y.

Question 29 - The manufacturing costs of Calico Industries for three months of the year are provided below:

	Total Cost	Production (units)
April	$113,100	276,600
May	91,900	165,600
June	98,100	230,400

Using the high-low method, the variable cost per unit and the total fixed costs are

a. $0.34 per unit and $30,273

b. $0.19 per unit and $60,546

c. $1.90 per unit and $6,055

d. $3.42 per unit and $6,055

Question 30 - Strait Co. manufactures office furniture. During the most productive month of the year, 3,100 desks were manufactured at a total cost of $82,500. In the month of lowest production, the company made 1,210 desks at a cost of $57,700. Using the high-low method of cost estimation, total fixed costs are

a. $41,828

b. $82,500

c. $57,700

d. $24,800

Question 31 - Production and sales estimates for June for Cardinal Co. are as follows:

Estimated inventory (units), June 1 20,000

Desired inventory (units), June 30 19,000

Expected sales volume (units):

Territory X 7,000

Territory Y 4,000

Territory Z 5,500

Unit sales price $20

The number of units expected to be manufactured in June is

a. 15,500 units

b. 12,500 units

c. 11,000 units

d. 13,500 units

Question 32 - At the beginning of the period, the Cutting Department budgeted direct labor of $136,000, direct materials of $165,000 and fixed factory overhead of $10,800 for 7,900 hours of production. The department actually completed 11,200 hours of production. The appropriate total budget for the department, assuming it uses flexible budgeting, is

a. $316,311

b. $442,046

c. $437,534

d. $311,800

Question 33 - A flexible production budget for the year ending December 31 for Cedar Jeans Company using production levels of 16,000, 18,000, and 20,000 units produced. The following additional information is necessary to complete the budget:

Variable costs:

Direct labor ($6.00 per unit)

Direct materials ($8.00 per unit)

Variable manufacturing costs ($2.50 per unit)

Fixed costs:

Supervisor's salaries $80,000

Rent 12,000

Depreciation on equipment 24,000

Question 34 - The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.

True

False

Question 35 - Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.

	Activity Cost	Activity Base
Procurement	$369,400	Number of purchase orders
Scheduling	221,600	Number of production orders
Materials handling	450,200	Number of moves
Product development	702,300	Number of engineering changes
Production	1,450,800	Machine hours

The activity rate for the scheduling activity cost pool is

a. $285.25 per production order

b. $171.12 per production order

c. $20.38 per production order

d. $68.76 per production order

Question 36 - The factory superintendent's salary would be included as part of the cost of products manufactured under the absorption costing concept.

True

False

Question 37 - Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept.

True

False

Question 38 - When production departments differ significantly in their manufacturing processes, it is recommended that the single plantwide factory overhead rate be used for allocating factory overhead.

True

False