Show work for ALL PROBLEMS.....................1. When management compares the budget to actual results, which of the following is being fulfilled? A. Directing B. Controlling C. Decision-making D. Planning B 2. Which of the following is an example of overhead in a factory? A. Wages of machine operators B. Wages of factory maintenance personnel C. Wages of administrators in the corporate office A D. Salaries of salespersons

3. Property taxes on a manufacturing plant are an element of a Product Cost Period Cost a. Yes No b. Yes Yes c. No Yes d. No No A 4. You are trying to decide whether or not to sell back your accounting textbook at the end of the class. The cost you paid for the book is relevant to your decision. a True b. False

5. Comfy Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs from the past year include:

Depreciation on sales office $ 11,000 Depreciation on factory equipment $ 16,000 Factory supervisor salary $ 52,500 Sales commissions $ 23,000 Lubricants used in factory equipment $ 3,000 Insurance costs for factory $ 21,000 Wages paid to factory maintenance workers $ 115,000 Fabric used to upholster furniture $ 7,000 Freight-in (on raw materials) $ 2,500 Costs of delivery to customers $ 9,000 Wages paid to assembly-line workers $ 132,500 Lumber used to build product $ 72,000 Utilities in factory $ 44,500 Utilities in sales office $ 26,500

What are the prime costs and manufacturing overhead costs, respectively, for Comfy Furniture Company totaled: A. $ 79,000; $324,000 D B. $ 332,000; $122,000 C. $ 211,500; $228,000 D. $ 214,000; $252,000

6. Managerial accounting information A. pertains to the entity as a whole and is highly objective. B. is prepared only once a year. C. pertains to subunits (segments) of the entity and may be very detailed. D. is prepared according to generally accepted accounting principles.

7. Where would period costs be found on the financial statements? A. Under current assets on the balance sheet B. Under current liabilities on the balance sheet C. As operating expenses on the income statement for a previous period A D. As operating expenses on the income statement in the period incurred 8. Direct labor for a company was $132,000; manufacturing overhead was $275,000; and direct materials were $253,000. Conversion costs would total: A. $385,000. B. $660,000. C. $407,000. D. $528,000.

9. A company is deciding whether to purchase production equipment which can produce units more quickly than the current equipment. Which of the following costs would be relevant to its decision? A. The cost of the new equipment B. The salary of the factory manager C. The cost of raw materials D. The original purchase price of the current machinery 10. Renting a car and paying $15 per day plus $.03 per mile driven is an example of what type of cost? A. step cost B. fixed cost C. mixed cost D. variable cost

11. Select the answer that best represents which industry would use (1) process costing and (2) job costing, respectively. A. (1) Aircraft, (2) pharmaceuticals B. (1) Chemicals, (2) Commercial building construction C. (1) Construction, (2) Chemicals D D. (1) Printing, (2) Food and Beverage

12. Hallow Company produces ping pong balls using a three-step sequential process that includes molding, coloring, and finishing. When the balls are completely finished, out of which account should their cost be transferred? A. Finished goods inventory B. WIP inventory--finishing C. WIP inventory--coloring D. WIP inventory--molding

13. Which of the following cost items should be classified as a prevention cost on a cost of quality report? A. Warranty expenses on defective products. B. Technical support provided to suppliers C. Supervision of quality inspections D. Net cost of spoiled units

14. When the products are shipped to customers, the cost of manufacturing those products becomes Cost of Goods Sold (COGS) shown on the companys balance sheet. a True b. False

15. Research and development would most likely be classified as which type of activity? Machine set-up would most likely be classified as which type of activity? A. facility-level activity; unit-level activity B. batch-level activity; product-level activity C. product-level activity; batch-level activity D. facility-level activity; batch-level activity

16. The following information was gathered for the Buckley Corporation for the most recent year. Manufacturing overhead is allocated using direct labor hours. Estimated direct labor hours 54,000 Actual direct labor hours 57,000 Estimated manufacturing overhead costs $729,000 Actual manufacturing overhead costs $685,000

What is the amount of overallocated or underallocated overhead for the year? A. $44,000 overallocated B. $44,000 underallocated C. $84,500 overallocated C D. $84,500 underallocated 17. XYZ Company uses job costing. Actual manufacturing overhead for the period is $19,600 while allocated manufacturing overhead is $18,700. What entry will close the manufacturing overhead balance? A. Debit manufacturing overhead and credit work in process for $900. B. Debit manufacturing overhead and credit cost of goods sold for $900. C. Debit cost of goods sold and credit finished goods inventory for $900. D. Debit costs of goods sold and credit manufacturing overhead for $900. B 18. Which of the following entries would be made to record $10,000 of labor70% of which is direct, and 30% which is indirectto jobs? A.

Dr Cr Work in Process Inventory

7,000

Manufacturing Overhead

3,000

Wages Payable

10,000

B.

Dr Cr Wages Payable

10,000

WIP Inventory

7,000

Manufacturing Overhead

3,000 C.

Dr Cr Work in Process Inventory

10,000

Wages Payable

10,000

D.

Dr Cr Manufacturing Overhead

10,000

Manufacturing Wages

10,000

19. Companies often refine their cost allocation systems to minimize the amount of __________ caused by the simpler cost allocation systems. A. cost distortion B. payroll expenses C. income taxes D. general and administrative expenses

20. Bond Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $20 per machine hour, while the Sanding Department uses a departmental overhead rate of $15 per direct labor hour. Job 542 used the following direct labor hours and machine hours in the two departments:

Actual results Assembly Department Sanding Department Direct labor hours used 4 3 Machine hours used 9 5 The cost for direct labor is $25 per direct labor hour and the cost of the direct materials used by Job 542 is $1,200.

What was the total cost of Job 542 if Bond Industries used the departmental overhead rates to allocate manufacturing overhead? A. $ 1,375 B. $ 1,425 C. $ 1,500 D. $ 1,600

21. If the selling price per unit is $10.00, the variable expense per unit is $5.75, and the breakeven sales in dollars are $465,200, what are total fixed expenses? A. $343,843 B. $10,946 C. $197,710 D. $46,520

22. The movement of parts from one area of the factory to another is considered a value-added activity whereas the storage of raw materials is considered a non-value activity. A. True B. False

23. Total costs for Watson & Company at 100,000 units are $350,000, while total fixed costs are $150,000. The total variable costs at a level of 200,000 units would be: A. $700,000 B. $175,000 C. $400,000 D. $300,000

24. The cost of product liability claims (warranties) is an example of a(n): A. appraisal cost B. external failure cost C. internal failure cost D. prevention cost

25. A manager should always reject a special order if: A. there is available excess capacity B. the special order price is less than the variable costs of the order. C. the special order price is less than the regular sales price. D. the special order will require variable non-manufacturing expenses.

26. Clear Sky Sailmakers manufactures sails for sailboats. The company has the capacity to produce 15,000 sails per year, but is currently producing and selling 10,000 sails per year. The following information relates to current production:

If a special sales order is accepted for 3,000 sails at a price of $215, fixed costs remain unchanged, and no variable marketing and administrative costs will be incurred for this order, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) A. Increase by $50,000 B. Increase by $1,125,000 C. Increase by $150,000 D. Decrease by $50,000

27. Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of $5,000 units, are as follows:

Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do? A. Make the part and save $5 per unit B. Make the part and save $2 per unit C. Buy from Erickson and save $1 per unit D. Make the part and save $7 per unit

28. Which of the following statements is TRUE if total fixed costs decrease while the sale price per unit and variable costs per unit remain constant? A. contribution margin increases B. contribution margin decreases C. breakeven point in units decreases D. breakeven point in units increases

29. On a CVP graph, total fixed costs are shown as a vertical line. A. True B. False

30. The contribution margin ratio explains the percentage of each sales dollar that contributes towards: A. variable costs B. sales revenue C. fixed costs and generating a profit D. period expenses

31. Which of the following is a method of managing purchasing, production, and sales, by which the firm attempts to produce each item only as needed for the next step in the production process? a. Flexible manufacturing practices b. Just-in-time inventory c. Theory of constraints d. Total quality management

32. Use the following information below to answer the question:

Month Miles Total Cost January 80,000 $ 96,000 February 50,000 80,000 March 70,000 94,000 April 90,000 130,000

In applying the high-low method, what is the fixed cost? a. $17,500 b. $36,000 c. $14,000 d. $50,000

33. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: Unit Variable Cost Unit Fixed Cost a. Increases Decreases b. Remains constant Remains constant c. Decreases Remains constant d. Remains constant Decreases

34. ABC Company has three products that use common facilities. The relevant data concerning these three products follows:

Product A B C Total Sales $10,000 $30,000 $40,000 $80,000 Variable costs 5,000 20,000 25,000 50,000 Contribution Margin 5,000 10,000 15,000 30,000 Fixed cost 5,000 15,000 30,000 50,000 Operating loss 0 -$ 5,000 -$15,000 -$20,000

Fixed costs are allocated common costs. If product line C is dropped, what will be the impact on operating profits? a. Operating loss will decrease to ($15,000). b. Operating loss will decrease to ($5,000). c. Operating loss will increase to ($35,000). d. There would be no change in operating profits.

35. Which of the following is not a step in activity based costing? a. Identify the departments that consume resources and assign costs to those departments. b. Identify the cost drivers associated with each activity. c. Compute a cost rate per cost driver unit. d. Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

36. Differences occur between resources supplied and resources used because a. management is utilizing company resources appropriately. b. managers have committed to supply a certain level of resources before actually using them. c. cross-functional teams are not as productive in certain cultures d. management has not properly categorized costs incurred according to the cost hierarchy.

37. In producing joint products, which are the relevant costs for decisions to sell or process further? a. Costs incurred up to the splitoff point b. Costs incurred after the splitoff point c. Joint costs d. Sunk costs BLUE Company needs 10,000 units of a certain part to be used in production. If BLUE buys the part from RED Company instead of making it, BLUE could not use the present facilities for another manufacturing activity. Sixty percent (60%) of the fixed overhead applied will continue regardless of what decision is made.

The following quantitative information is available regarding the situation presented: Cost to BLUE to make the part:

Direct materials $ 7 Direct labor 24 Variable overhead 12 Fixed overhead applied 15

$58 Cost to buy the part from

RED company $53

38. In deciding whether to make or buy the part, BLUE' s total relevant cost to make the part is a. $352,000. b. $490,000. c. $540,000. d. $580,000.

39. SunDevil Co. plans to sell 200,000 special Rose Bowl footballs with fixed costs of $400,000 and variable expenses at 60% of sales. To have a net income of $100,000 SunDevil management must set the sales price at a. $3.75 b. $4.17 c. $5.00 d. $6.25

40. What effect would a decrease in wage rates (applicable to direct, strictly variable, labor) have on the break-even point and the contribution margin?

Break-even Point Contribution Margin a. Increase Increase b. Increase Decrease c. Decrease Increase d. Decrease Decrease

Problems Please complete the following problems. Make certain to show all of your work. I. Calculate a Job Cost Using Activity Based Costing (ABC) (20 points) Berg Industries, a family-run small manufacturer, has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and usage of cost drivers have been estimated for the year: Activity Estimated Total Manufacturing Overhead Cost Estimated Total Usage of Cost Driver

Machine setup

$ 150,000 3,000 setups

Machining

1,000,000 5,000 machine hours

Quality control

337,500 4,500 test runs

Total $ 1,487,500

During May, Evan and Stephanie Berg machined and assembled Job 624. Evan worked a total of 10 hours on the job, while Stephanie worked 5 hours on the job. Evan is paid a $25 per hour wage rate, while Stephanie is paid $30 per hour because of her additional experience level. Direct materials for the job totaled $1,050. Additionally, the job requires 1 machine setup, 5 machine hours and 2 quality control test.

Requirements

1. Compute the cost allocation rate for each activity for the year.

Machine setup = per setup

Machining = per machine hour

Quality control = per test run

2. Compute the manufacturing overhead cost that should be assigned to Job 624.

Machine setup =

Machining =

Quality control =

total manufacturing overhead cost

3. Complete the following job cost record for Job 624.

Job Cost Record Job 624 Manufacturing Costs

Direct Materials

Direct Labor

Manufacturing Overhead ..

Total job cost

II. Compute Weighted Average Contribution Margin (20 points) Waterside Company sells two products, Yellow models and Striped models. Yellow models sell for $50 per unit with variable costs of $30 per unit. Striped models sell for $60 per unit with variable costs of $25 per unit. Total fixed costs for the company are $20,000. Waterside Company typically sells one yellow model for every three striped models.

Requirements: (a) Compute the weighted-average contribution margin per unit.

(b) Compute the number of yellow models and striped models the company must sell to break even.

(c) Assuming the data above in part (b), compute the breakeven point in terms of sales revenue for both the yellow and striped model.