1. Fact Pattern:

Total production costs of prior periods for a company are listed as follows. Assume that the same cost behavior patterns can be extended linearly over the range of 3,000 to 35,000 units and that the cost driver for each cost is the number of units produced.Production in Units per Month

3,000

9,000

16,000

35,000

Cost X

$23,700

$52,680

$86,490

$178,260

Cost Y

47,280

141,840

252,160

551,600

Question

What is the average cost per unit at a production level of 8,000 units for cost X?

A. 5.85

B. 7.90

C. 5.98

D. 4.83

2.Fact Pattern:

The budget data for the Bidwell Company appear below.Sales (100,000 units)

$1,000,000

Costs:

Fixed

Variable

Direct materials

$0

$300,000

Direct labor

0

200,000

Manufacturing overhead

100,000

150,000

Selling and administrative costs

110,000

50,000

Total costs

$210,000

$700,000

910,000

Budgeted operating income

$90,000

Question

If fixed costs increased $31,500 with no other cost or revenue factors changing, the breakeven sales in units is

A. 94,150

B. 69,000

C. 80,500

D. 34,500

3.Consider the following situation for a company for the prior year.

1. The company produced 1,000 units and sold 900 units, both as budgeted.
2. There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.
3. Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.
4. Budgeted per unit revenues and costs were as follows:

Per Unit

Sales price

$100

Direct materials

30

Direct labor

20

Variable manufacturing costs

10

Fixed manufacturing costs

5

Variable selling costs

12

Fixed selling costs ($3,600 total)

4

Fixed administrative costs ($1,800 total)

2

Assuming that the company uses variable costing, the operating income for the prior year was

A. 13,600

B. 14,200

C. 15,300

D. 14,800

4.Fact Pattern:

Northcoast Manufacturing Company, a small manufacturer of parts used in appliances, has just completed its first year of operations. The company's controller, Vic Trainor, has been reviewing the actual results for the year and is concerned about the application of factory overhead. Trainor is using the following information to assess its manufacturing operations.

Northcoast's equipment consists of several machines with a combined cost of $2,200,000 and no residual value. Each machine has an output of five units of product per hour and a useful life of 20,000 hours.

Selected actual data of Northcoast's operations for the year just ended is presented in the opposite column.

Products manufactured

650,000 units

Machine use

130,000 hours

Direct labor usage

35,000 hours

Labor rate

$15 per hour

Total overhead

$1,130,000

Cost of goods sold

$1,720,960

Finished goods inventory (at year end)

$430,240

Work-in-process inventory (at year end)

$0

Total overhead is applied to direct labor cost using a predetermined plant-wide rate.

The budgeted activity for the year included 20 employees, each working 1,800 productive hours per year to produce 540,000 units of product. The machines are highly automated, and each employee can operate two to four machines simultaneously. Normal activity is for each employee to operate three machines. Machine operators are paid $15 per hour.

Budgeted overhead costs for the past year for various levels of activity are shown in the table below.

Northcoast Manufacturing Company

Budgeted Annual Costs for Total Overhead

Units of Product

360,000

540,000

720,000

Labor hours

30,000

36,000

42,000

Machine hours

72,000

108,000

144,000

Total overhead costs

Plant supervision

$70,000

$70,000

$70,000

Plant rent

40,000

40,000

40,000

Equipment depreciation

288,000

432,000

576,000

Maintenance

42,000

51,000

60,000

Utilities

144,600

216,600

288,600

Indirect material

90,000

135,000

180,000

Other costs

11,200

16,600

22,000

Total

$685,800

$961,200

$1,236,600

Question

How much is Northcoast's overhead over/underapplied?

A. 195,500 underapplied

B. 168,800 overapplied

C. 168,800 underapplied

D. 195,500 overapplied

5.Fact Pattern:

Starlight Theater stages a number of summer musicals at its theater in northern Ohio. Preliminary planning has just begun for the upcoming season, and Starlight has developed the following estimated data:Production

Number of Performances

Average Attendance perPerformance

Ticket Price

Variable Costs1

Fixed Costs2

Mr. Wonderful

12

3,500

$18

$3

$165,000

That's Life

20

3,000

15

1

249,000

All That Jazz

12

4,000

20

0

316,000

1

Represent payments to production companies and are based on tickets sold.

2

Costs directly associated with the entire run of each production for costumes, sets, and artist fees.

Starlight will also incur $565,000 of common fixed operating charges (administrative overhead, facility costs, and advertising) for the entire season and is subject to a 30% income tax rate.

Question

If Starlight's management desires "Mr. Wonderful" to produce an after-tax contribution of $210,000 toward the firm's overall operating income for the year, total attendance for the production would have to be

A. 31,000

B. 25,833

C. 25,000

D. 20,800

6. Fact Pattern:

A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for 4 months of the current year are presented in the table below. Advertising is considered to be a discretionary cost. Salespersons are paid monthly salaries plus commissions. The sales force was increased from 20 to 21 individuals during the month of May.March

April

May

June

Activity measures:

Sales orders

2,000

1,800

2,400

2,300

Units sold

55,000

60,000

70,000

65,000

Dollar sales

$1,150,000

$1,200,000

$1,330,000

$1,275,000

Marketing costs:

Advertising

$190,000

$200,000

$190,000

$190,000

Sales salaries

20,000

20,000

21,000

21,000

Commissions

23,000

24,000

26,600

25,500

Shipping costs

93,000

100,000

114,000

107,000

Total costs

$326,000

$344,000

$351,600

$343,500

Question

Which of the followingmostappropriately describes the classification and behavior of shipping costs?

A. Mixed cost 58,000 per month plus $23.33 per sales order

B. Mixed cost 16,000 per month plus 1.40 per unit sold

C. Variable cost 1.66 per unit

D. Mixed cost 30,000 per month plus 35.00 per sales order

7.A manufacturer allocates overhead to jobs in process using direct labor costs, direct materials costs, and machine hours. The overhead application rates for the current year are

100% of direct labor

20% of direct materials

$117 per machine hour

A particular production run incurred the following costs:Direct labor, $8,000

Direct materials, $2,000

A total of 140 machine hours were required for the production run.

What is the total cost charged to the production run?

A. 18,400

B. 34,780

C. 18,000

D. None of the answers are true

8.A tax firm has three divisions - Compliance, Tax Planning, and Financial Consulting. Based on the divisional data presented below, which one of the allocation bases for common company expenses would likely have theleastnegative behavioral impact on the Financial Consulting Division manager?

Tax

Financial

Compliance

Planning

Consulting

Revenues

$4,500,000

$6,000,000

$4,500,000

Variable expenses

1,500,000

3,750,000

2,250,000

No.of employees

68

76

56

A. contribution margin

B. Revenues

C. Equal sharing

D. Number of employees