Conceptual true or false questions:

1. Historically, overhead costs have declined as a percent of total manufacturing costs.F

2. GAAP requires period costs to be allocated to products.F

3. Cost of goods manufactured is the sum of manufacturing costs added to production and beginning work-in-process inventory, less ending work-in-process inventory. T

4. Compared to job costing, a properly designed activity-based system more accurately traces costs to products. T

5. Activities cause cost drivers to consume resources.F

6. The conference method can be a useful method for forecasting costs outside the relevant range.T

7. Cost-volume profit analysis and break-even analysis are based on the assumption that inventories are constant. T

Conceptual multiple choice questions:

8. Which of the following is not an ethical standard of managerial accounting?

Competence

Confidentiality

Fairness

Integrity

Credibility

9. Which of the following statements regarding Work-in-Process is not correct?

Work-in-Process is partially completed inventory.

Work-in-Process consists of direct labor, direct material, and manufacturing overhead.

Work-in-Process Inventory is debited (left-hand-side of T-account) to record direct material used and direct labor incurred.

Work-in-Process Inventory appears on the year-end balance sheet.

Work-in-Process Inventory is credited to account for actual overhead costs.

10. Why do companies use normal costing?

to measure variable and fixed costs separately

to smooth out seasonal variations in overhead costs

to support pricing and decision making before actual costs are incurred

All of the above

B and C but not A.

11. What is the most accurate method for accounting for under- or over-applied manufacturing overhead at year-end?

charging it to Work-in-Process Inventory.

charging it to Cost of Goods Sold.

charging it to a special loss account.

prorating it among Raw Materials Inventory, Finished-Goods Inventory, and Cost of Goods Sold.

carrying the over or under-applied balance forward to the next year by applying it to the accrued overhead account.

12. The following tasks are associated with an activity-based costing system:

1Calculation of cost application rates

2Identification of cost drivers

3Assignment of cost to products

4Identification of cost pools

Which of the following choices correctly expresses the proper order of the preceding tasks in creating an activity-based costing system?

1, 2, 3, 4.

2, 4, 1, 3.

3, 4, 2, 1.

4, 2, 1, 3.

4, 2, 3, 1.

13. The percent of total activity cost that activity-based costing charges to a product is the:

overhead ratio

consumption ratio

activity rate

overhead rate

predetermined rate

14. How is ABC similar to a job-cost system with a single plant-wide rate?

Both approaches assume that unit-level costs are variable and non-unit-level costs are fixed.

Both approaches first accumulate overhead costs and then assign costs to cost objects.

Both approaches recognize the distinction between batch-, product-, and facility- level costs.

Both approaches develop rates using actual overhead costs and the actual number of cost drivers.

15. Compared to job costing, ABC tends to

Reduce cross-subsidization

Simplify the accounting system

Reduce costing accuracy

Provide information that is less relevant for cost management

Use more unit-level cost drivers and less non-unit level drivers

16. For mixed costs (that have fixed and variable costs), what happens to average cost per unit and total cost when production levels decline within the relevant range?

Average

Cost Per Unit Total Cost

Increase Decrease

Increase Increase

Decrease Decrease

Decrease Increase

No change Decrease

17. A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably true?

The company is studying a variable cost, and total volume has increased.

The company is studying a variable cost, and total volume has decreased.

The company is studying a fixed cost, and total volume has increased.

The company is studying a fixed cost, and total volume has decreased.

The company is studying a fixed cost, and total volume has remained constant.

18. Which of the follow statements about a high R² measure in a regression is not true?

It indicates a good fit of the regression line through the data points

It shows that a large amount of the change in the cost object (y) is explained by changes in the cost driver (x).

It means that there is a causal relation between the cost driver (x) and the cost object (y).

It means that, if the assumptions of the regression model are met, one can be relatively confident when using the regression information to predict future costs.

It indicates that there is a correlation between the cost driver (x) and the cost object (y).

19. Which of the following statements is true?

Compared to the income statement you learned about in Mgmt 200, the contribution margin income statement simplifies costs by categorizing them as either fixed or variable.

Both the income statement used in Mgmt 200 and the contribution margin income statement separately report product versus period costs.

Cost of goods sold reported on the income statement used in Mgmt 200 is limited to only variable costs.

Creating a contribution margin income statement is not necessary to do break-even analysis.

The Mgmt 200 income statement is used primarily for internal reporting purposes, while the contribution margin income statement is used primarily for external reporting purposes.

Computational multiple choice problems:

20. The accounting records of Hill Corporation revealed the following selected costs: Sales commissions, $40,000; factory supervision, $94,000; and administrative expenses, $185,000. Hill's period costs total:

$40,000.

$94,000.

$185,000.

$225,000.

$319,000.

21. Kent Products uses a predetermined overhead application rate of $18 per direct labor hour. A review of the company's accounting records revealed budgeted manufacturing overhead for the period of $621,000, applied manufacturing overhead of $590,400, and over-applied overhead of $11,900.

What is the amount of budgeted labor hours?

661.11

32,800

34,500

38,300

40,100

22. Brickman Corporation, which began operations on January 1 of the current year, reported the following information:

Estimated manufacturing overhead	$ 600,000
Actual manufacturing overhead	639,000
Estimated direct labor cost	480,000
Actual direct labor cost	500,000
Total debits in the Work-in-Process account	1,880,000
Total credits in the Finished-Goods account	920,000

Brickman applies manufacturing overhead to jobs on the basis of direct labor cost and adds a 60% markup to the cost of completed production when finished goods are sold. On December 31, job no. 18 was the only job that remained in production. That job had direct-material and direct-labor charges of $16,500 and $36,000, respectively.

What is the ending balance for Work-in-Process inventory?

$16,500

$52,500

$82,250

$97,500

$691,500

23. Montgomery, Inc., which uses a job-costing system, is a labor-intensive firm, with many skilled craftspeople on the payroll. Job no. 789 was the only job in process on January 1, having costs of $22,500 as of that date. Direct materials used and direct labor incurred during January was:

Job No.	Direct Materials		Direct Labor
789	$ 2,000	$ 6,000
790	9,000	10,000
791	14,000	8,000

Manufacturing overhead is applied at 150% of direct labor dollars. Job no. 791 was the only job in production as of January 31.

What is the Cost of Goods Manufactured in January?

$27,000

$73,500

$97,000

$105,500

$107,000

24. Fletcher, Inc., disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when manufacturing overhead was underapplied by $15,000. If sales revenue totaled $1,400,000, determine Fletcher's adjusted cost of goods sold and gross margin.

	Adjusted Cost of Goods Sold	Gross Margin
a.	$575,000	$810,000
b.	$575,000	$825,000
c.	$590,000	$810,000
d.	$605,000	$795,000
e.	$605,000	$810,000

Please use the following information to answer questions 25 and 26:

Century, Inc., currently uses normal job costing, applying $400,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the overhead cost pools and respective driver volumes is as follows.

Product	Pool No. 1 (Driver: DLH)		Pool No. 2 (Driver: SU)	Pool No. 3 (Driver: PC)
X	600		30	1,500
Y	1,400		50	1,000
Cost	$80,000		$140,000	$180,000

25. The overhead cost allocated to product X by using normal job costing would be:

$120,000.

$184,500.

$215,500.

$280,000.

some other amount.

26. The overhead cost allocated to product Y by using activity-based costing would be:

$120,000.

$184,500.

$215,500.

$280,000.

some other amount.

Please use the following information to answer questions 27 and 28:

Lennox Industries manufactures two products: A and B. A review of the company's accounting records revealed the following per-unit costs and production volumes:

	A		B
Production volume (units)	2,500		5,000
Direct material	$ 40		$ 60
Direct labor:
2 hours at $12	24
3 hours at $12			36

Manufacturing overhead is currently computed by spreading overhead of $1,860,000 over 20,000 direct labor hours. Management is considering a shift to activity-based costing in an effort to improve the firm's accounting procedures. The following data are available:

					Cost Driver Volume
Cost Pool		Cost		Cost Driver	A	B	Total
Setups		$ 240,000		Number of setups	100	20	120
General factory		1,500,000		Direct labor hours	5,000	15,000	20,000
Machine processing		120,000		Machine hours	2,200	800	3,000
Total		$1,860,000

Lennox determines selling prices by adding 40% to a product's total cost.

27. What is the per-unit selling price of product B by using Lennox's current costing procedures?

$650

$525

$375

$279

$245

28. What is the total overhead cost of product B if the company switches to activity-based costing?

$1,197,000

$1,105,000

$1,101,500

$980,000

$975,500

29. The following information is available for the first three months of the year:

Production Supplies

Month Volume Cost

January 1,400 $ 4,000

February 3,200 $14,200

March 1,200 $ 5,400

Using the high-low method, what is the estimate of total supplies cost for April, when production is expected to be 5,000 units?

$22,000.

$22,120.

$22,320.

$28,280.

30. Quick tune charges $50 for a tune-up. Variable costs for each tune-up is $30 and total fixed costs is $500,000. The tax rate is 40%. How many tune-ups are necessary to earn $300,000 after tax?

40,000

50,000

60,000

70,000

80,000

31. Toms Repair Shop expects variable costs of $12,000, fixed costs of $8,000 and a pretax operating loss of $2,000. The annual sales volume required for Toms to have a before tax income of $12,000 is:

$20,000

$35,000

$40,000

$60,000

I do know answers but i dont know how to solve