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Question 1 Stroman Inc. manufactures wooden floors by milling rough lumber and then applying various finishes to the wood. Which of the following are the best adjectives to describe the cost of rough lumber to Stroman? The quantity of flooring produced is the driver. a. Fixed & Product b. Fixed & Period c. Variable & Product d. Variable & Period Question 2 Stroman from the prior problem computed straight-line depreciation on its wood milling equipment to be $400,000 in 2015. How should Stroman account for the $400,000 for financial reporting purposes? a. $400,000 is an expense in 2015. b. $400,000 is initially capitalized and subsequently expensed as the flooring produced in 2015 is sold. c. $400,000 is capitalized in 2015 and then amortized over the next 10 years. Question 3 Internal reports prepared by the managerial accountants in an organization typically a. Must follow very specific and detailed rules. b. Are intended to be general purpose rather than customized to the information needs of particular users. c. Both a & b d. Neither a nor b Question 4 The relevant range is most important for distinguishing a. product vs period costs b. variable vs fixed costs c. direct vs indirect cost d. none of the above Question 5 The Staley Co. pays a shipping company $600 to transport its finished goods to its customer's warehouse. Which of the following best describes this $600 cost? In answering the question, number of units produced is the cost driver. a. Variable period cost b. Fixed period cost c. Variable product cost d. Fixed product cost Question 6 Which adjective in front of the word "cost" is most prominent when applying the principles of responsibility accounting? a. Variable b. Product c. Controllable d. Sunk e. All of the above Question 7 The first step in the budgeting process at most for-profit entities is to a. Establish standard costs b. Compute the predetermined overhead application rate c. Predict net cash flows for the next period d. Predict sales levels for the next period More questions on the following pages....... Question 8 Which of the following factors would produce an unfavorable static budget variance for raw materials but would not affect the flexible budget variance for raw materials? a. The price paid per unit for raw materials exceeded the standard price per unit of input that should have been paid. b. The usage of raw materials exceeded the standard amount that should have been used for the number of units actually produced. c. The usage of raw materials exceeded the amount in the beginning-of-year budget because the company produced more output than expected. d. All of these factors affect both static and flexible budget variances Question 9 The Alaina Co. manufactures clay pots. It expects to produce 600 pots during March 2016. Each pot requires 2 pounds of clay. Alaina wants to have 95 pounds in clay at the end of March, and the company plans to buy 1,225 pounds of clay in March. Based on this information, how many pounds of clay does Alaina have in inventory at the beginning of March? a. 85 pounds b. 120 pounds c. 135 pounds d. 70 pounds e. 0 pounds f. None of the above Question 10 The Sessions Co. wants to use past data to classify the behavior of compensation costs in the production department. The data below (in thousands) reveal the compensation costs for workers and the number of units produced. Compute the slope of the cost function using the high-low method. Year Costs Units produced 2015 $200 50 2014 $258 62 2013 $194 53 2012 $320 80 2011 $296 72 2010 $309 78 Question 10 continued on next page..... a. $4/unit b. $4.66/unit "ish" c. $4.2/unit d. None of the above Question 11 In a firm using standard costing, using a larger than expected percentage of the most skilled workers (and a smaller than expected percentage of the junior workers who are less skilled) would more likely lead to which pattern of direct labor variances? a. Favorable price variance, Favorable efficiency variance b. Favorable price variance, Unfavorable efficiency variance c. Unfavorable price variance, Favorable efficiency variance d. Unfavorable price variance, Unfavorable efficiency variance Question 12 The following information relates to the next two questions: Dozier Co. manufactures brass plaques. The company uses standard costing and calculates flexible budget variances like we saw in class. Dozier set these standards for 2015: each plaque should require 2 pounds of brass and 6 hours of direct labor. The standard price for the brass is $45/lb and for labor is $20/hour. In 2015, Dozier actually produced 1,000 plaques. Dozier spent $90,250 to buy 1,980 pounds of brass (all of which were used in production this period). Dozier used 6,150 direct labor hours at a cost of $121,770. Calculate Dozier Co.'s direct materials quantity variance for 2015. a. $250 unfavorable b. $900 favorable c. $1,150 favorable d. $1,150 unfavorable e. None of the above More questions on next page....... Question 13 Calculate direct labor price variance for Dozier Co. in 2015. a. $1,150 unfavorable b. $1,770 unfavorable c. $3,000 unfavorable d. $1,230 favorable e. None of the above Question 14 The Carrera Co. began 2014 with $4,000 in work in process inventory and $6,200 in finished goods inventory. During 2014, the company incurred production costs of $78,000. At the end of 2014, the company had $4,600 in work in process inventory and $5,250 in finished goods inventory. What is cost of goods sold for 2014? (Show work with answer) Question 15 The Sindarius Co. makes two types of products: Basic and Fancy. The Basic is larger but the Fancy requires more skilled labor. The chart below lists the pounds of materials and labor hours needed to build the budgeted number of products of each type in the coming year. At the planned level of production for 2016, overhead costs related to materials handling are expected to be $17,160, and the overhead costs related direct laborers are expected to be $40,040. Thus total expected manufacturing overhead is $57,200 in 2016. Suppose that Sindarius combines all overhead cost into a single cost pool and applies overhead based on pounds of materials used. As of the beginning of 2016, what is the expected amount of overhead to be applied to each Fancy unit produced? a. $88/unit b. $78/unit c. $22/unit d. $5.2/unit e. $1.56/unit f. None of the above Question 16 Refer to the question above. Suppose Sindarius applies labor related overhead costs to products based on direct labor hours used and materials handling related overhead costs based on pounds of materials used. Compute the combined rate for applying overhead to each Fancy unit produced. Question 17 The Kacinas Co. uses a job-order cost system. It had no inventories at the beginning of 2015. During 2015, it started jobs at three locations, Elon, Lyons, and Sono. Information about each job is in the chart below. Kacinas applies overhead to jobs at a rate of $30 per direct labor hour. The Lyons job was completed and sold for $41,100 in 2015. The Elon job was completed in 2015 but not sold. The Sono job is still in process at the end of 2015. Kacinas incurred actual manufacturing overhead costs of $18,650 during 2015. The company follows the simple approach regarding over or under applied overhead. What is the gross margin (sales minus costs of goods sold after adjustments) reported in 2015? Question 18 Refer to the question above. PJ, the manager of Kacinas Co., is wondering what would happen to gross margin if he had his team devote an additional 15 hours of labor to the Sono job at the end of 2015. The 15 hours would not be enough to complete the job. The Sono workers would be paid their usual wages of $20 per hour for the additional work. In addition, PJ estimates that overhead costs would increase from $18,650 to $18,980 due to the additional work. The additional work did not require any additional materials. Can you tell PJ how the 2015 gross margin (after adjustments) would change due to the additional work? a. Decrease by $300 b. Increase by $450 c. Decrease by $330 d. Increase by $120 e. None of the above Question on next page......... Question 19 Department A is a part of a much larger organization. The department runs a production line that takes in raw materials and creates several types of electric motors. Other departments produce goods for sale to the public which use the motors produced by Department A. The manager of the Department A has full authority over purchasing of raw materials (how much to buy, how much to pay, and who to buy from) and also is responsible for staffing workers to run the production line (hiring, firing, wage amounts, etc.). The capacity of Department A is set by upper management. If you were developing the responsibility accounting system for this larger organization, would you make the Department A a cost center, revenue center, profit center, or investment center? Briefly explain why. What additional factors - if any - might be important to your decision? Answer 1:- Variable & Product Answer2:- $400,000 is an expense in 2015. Answer 3:- Must follow very specific and detailed rules. Answer 4:- variable vs fixed costs Answer 5:- Variable period cost Answer 6:- Controllable Answer7:- Predict net cash flows for the next period Answer 8:- The price paid per unit for raw materials exceeded the standard price per unit of input that should have been paid. Answer 9:- 70 pounds Answer 10:Answer 11:- Unfavorable price variance, Favorable efficiency variance Answer 12:- None of the above Answer 13:- $1,770 unfavorable Answer 14:- Cost of Goods Sold = Opening Stock of Finished Goods Opening Stock of WIP + Production cost - Closing stock of Finished Goods - Closing Stock of WIP. = $ 6200 + $4000 + 78000 -4600 - 5250 = $ 78,350