A plant has two departments, Machining and Assembly. This year's budget for the plant contained the following information.
Machining
Assembly
Manufacturing overhead
$4,000,000
$2,000,000
Direct labor hours
100,000
200,000
Machine hours
410,000
40,000
If t
20 Per Hr
A specialty instrument manufacturer is in the process of establishing a cost system. The company produces machines that are unique and distinctive. These machines are produced when purchase requests are received from customers. Although some common parts
Job Order Costing
Normal costing systems are said to offer a user several distinct benefits when compared with actual costing systems. Which one of the following is not a benefit associated with normal costing systems?
Improved accuracy of job and product costing.
Fact Pattern:
Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these product
Groos profit
Assuming two overhead accounts are used, what is the entry to close them and to charge underapplied overhead to cost of goods sold?
Factory o/h applied
COGS
Factory o/h Control
Which one of the following alternatives correctly classifies the business application to the appropriate costing system?
Job Costing: Print shop
Process costing: Beverage manu.
A joint process is a manufacturing operation yielding two or more identifiable products from the resources employed in the process. The two characteristics that identify a product generated from this type of process as a joint product are that it
is identifiable as an individual product only upon reaching the split-off point, and it has relatively significant sales value when compared with the other products.
A company has discovered that the cost of processing customer invoices is strictly variable within the relevant range. Which one of the following statements concerning the cost of processing customer invoices is incorrect?
The cost per unit for processing customer invoices will decline as the volume of customer invoices increases
A company has the following budget formula for annual electricity expense in its shop:
Expense = $7,200 + (Units produced � $0.60)
If management expects to produce 20,000 units during February, for the purpose of performance evaluation, what amount of exp
12600
Fixed manufacturing overhead costs totaled $150,000 and variable selling costs totaled $75,000. How should these costs be classified under variable costing?
$225,000 period costs; $0 product costs.
A firm uses a process-costing system and inspects its goods at the end of manufacturing. The inspection as of June 30 revealed the following information for the month of June:
Good units completed
16,000
Normal spoilage (units)
300
Abnormal spoilage (unit
Units Transffered: 16000
Cost:154850
A manufacturer uses a weighted-average process costing system and has the following costs and activity during October:
Materials
$40,000
Conversion cost
32,500
Total beginning work-in-process inventory
$72,500
Materials
$ 700,000
Conversion cost
617,500
T
Production Completed: 1155000
WIP:235000
A capital-intensive manufacturer of large construction equipment has a manufacturing process that relies heavily on specialized machinery. This machinery is run by a relatively small number of highly skilled laborers. In determining its predetermined over
Machein Hrs
Which one of the following best describes direct labor?
both product cost and prime cost
A manufacturer produces unique tapestries and bedding for hotel chains and uses a job order costing system. During the current month, the manufacturer purchased $50,000 of direct materials and incurred $22,000 in direct labor. Overhead is applied on the b
79700
Fact Pattern:
Goggle-Eyed Old Snapping Turtle, a sporting goods manufacturer, buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department where a seala
7600
A company uses a job costing system and applies overhead to products on the basis of direct labor cost. Job No. 75, the only job in process on January 1, had the following costs assigned as of that date: direct materials, $40,000; direct labor, $80,000; a
24000 underapplied
The allocation of costs to particular cost objects allows a firm to analyze all of the following except
Why the sales of a particular product have increased.
During the production of its single product, a company discovers that an unusual overnight power failure ruined an entire day's in-process production. How should the cost of these spoiled units be charged?
written off as a loss
A manufacturing process normally produces defective units equal to 1% of production. Defective units are subsequently reworked and sold. The cost of reworking these defective units should be charged to
factory overhead contro;
A firm uses a weighted-average process-costing system. Material B is added at two different points in the production of shirms, 40% is added when the units are 20% completed, and the remaining 60% of Material B is added when the units are 80% completed. A
8800
A company is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output:
Unit Levels
10,000
12,000
15,000
Cost A
$25,000
$29,000
Semivariable, fixed, and variable.
Fact Pattern:
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May.
Units
Beginning work-in-process inventory, May 1
16,000
Star
4.50
An entity estimates its total materials handling costs at two production levels as follows:
Cost
Gallons
$160,000
80,000
$132,000
60,000
What is the estimated total cost for handling 75,000 gallons?
15300
A cosmetics manufacturer has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost. Monthly direct labor cost for makeup is $27,500. In an attempt to distribute quality c
$525.50 higher than the cost using the traditional system.
The most important criterion in accurate cost allocations is
Using homogeneous cost pools.
Which of the following statements about activity-based costing (ABC) is false?
Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
The term "prime costs" refers to
The sum of raw material costs and direct labor costs.
A corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $5 per hour are expected to total $50,000. If factory overhead is to be applied per direct labor hour, how much ove
140
A review of the year-end accounting records of a company discloses the following information:
Raw materials
$ 80,000
Work-in-process
128,000
Finished goods
272,000
Cost of goods sold
1,120,000
The company's underapplied overhead equals $133,000. On the ba
1218000
A company has found that its total electricity cost has both a fixed component and a variable component within the relevant range. The variable component seems to vary directly with the number of units produced. Which one of the following statements conce
The total electricity cost per unit of production will increase as production volume increases
Fact Pattern:
Believing that its traditional cost system may be providing misleading information, Farragut Manufacturing is considering an activity-based costing (ABC) approach. It now employs a traditional cost system and has been applying its manufactur
6.30
Fact Pattern:
A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:
Beginning work-in-process
(70% complete)
10,000 units
Goo
112500
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. Salesperso
Clssification: Mixed Cost
Behavior: 16000
Fact Pattern: Atmel, Inc. manufactures and sells two products. Data with regard to these products are given below.
Product A
Product B
Units produced and sold
30,000
12,000
Machine hours required per unit
2
3
Receiving orders per product line
50
150
Produ
3.75
Fact Pattern:
Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown's production quantity schedule for Nov
5000
An assembly plant accumulates its variable and fixed manufacturing overhead costs in a single cost pool, which is then applied to work in process using a single application base. The assembly plant management wants to estimate the magnitude of the total m
The variable cost per unit and the total fixed costs remain constant
Costs are allocated to cost objects in many ways and for many reasons. Which one of the following is a purpose of cost allocation?
measuring incoem and assets for external reporting
An entity provides the following summary of its total budgeted production costs at three production levels:
Volume in Units
1,000
1,500
2,000
Cost A
$1,420
$2,130
$2,840
Cost B
1,550
2,200
2,900
Cost C
1,000
1,000
1,000
Cost D
1,630
2,445
3,260
The cost b
Variable, semivariable, fixed, and variable.
The allocation of general overhead costs to operating departments can be least justified in determining
Costs for making management's decisions.
Multiple or departmental overhead rates are considered preferable to a single or plantwide overhead rate when
Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.
A manufacturing company has two departments, Machining and Assembly, at its Shanghai plant. This year's budget for the plant contained the following information.
Machining
Assembly
Manufacturing overhead
$4,000,000
$2,000,000
Direct labor hours
100,000
20
Machining: 100
Assembly: 10
Generally, individual departmental rates rather than a plantwide rate for applying manufacturing overhead are used if
The manufactured products differ in the resources consumed from the individual departments in the plant.
Production costs for July are
Direct materials
$120,000
Direct labor
108,000
Factory overhead
6,000
What is the amount of costs traceable to specific products?
228000
Conversion cost pricing
Could be used when the customer furnishes the material used in manufacturing a product.
A standard-cost system may be used in
yes, yes, yes
A primary reason for a company to change from traditional costing to activity-based costing (ABC) is that ABC
Reduces product undercosting or overcosting.
A company uses a normal costing system and a predetermined overhead rate to allocate its overhead costs. The manufacturing process requires the use of machining equipment, which is a primary driver of overhead. The actual factory overhead amount is $450 f
98 underapplied
Fact Pattern:
Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May:
2.30
A conglomerate outsources the cleaning of its theaters. The cleaning vendor's charges are based upon the total hours needed to clean the facilities, and more cleaning time is needed as more people attend the theater. The conglomerate has accumulated the f
13000
A company sells products on account and experiences the following collection schedule:
In the month of sale
10%
In the month after sale
60%
In the second month after sale
30%
At December 31, the company reports accounts receivable of $211,500. Of that amo
174,500
A corporation anticipates the following sales during the last 6 months of the year:
July
$460,000
August
500,000
September
525,000
October
500,000
November
480,000
December
450,000
20% of the corporation's sales are for cash. The balance is subject to the
294000
Fact Pattern: Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below.
Sales
$1,500,000
Cost of sales:
Direct materials
$250,000
Direct labor
729027
In an organization that plans by using comprehensive budgeting, the master budget is
A compilation of all the separate operational and financial budget schedules of the organization.
A firm manufactures only one product and is preparing its budget for next year based on the following information:
Selling price per unit
$ 100
Variable costs per unit
75
Fixed costs
250,000
Effective tax rate
35%
If the firm wants to achieve a net income
90,000
A continuous (rolling) budget
Is a plan that is revised monthly or quarterly, dropping one period and adding another.
A company produces one product and budgeted 220,000 units for the month of August with the following budgeted manufacturing costs:
Total Costs
Cost Per Unit
Variable costs
$1,408,000
$ 6.40
Batch set-up cost
880,000
4.00
Fixed costs
1,210,000
5.50
Total
$
3,930,000
A company's breakeven point in sales dollars may be affected by equal percentage increases in both selling price and variable cost per unit (assume all other factors are constant within the relevant range). The equal percentage changes in selling price an
remained unchanged
Fact Pattern:
Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of proje
14.375
Fact Pattern: Streeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quart
78,000
The change in period-to-period operating income when using variable costing can be explained by the change in the
Unit sales level multiplied by a constant unit contribution margin.
Fact Pattern: M&P Tool has three service departments that support the production area. Outlined below is the estimated overhead by department for the upcoming year:
Estimated
Number of
Service Departments
Overhead
Employees
Receiving
$25,000
2
Repair
35,0
0
A budgeting approach that requires a manager to justify the entire budget for each budget period is known as
zero based budgeting
In the quest to develop a more achievable budget for the coming year, the chief executive officer has elected to develop the company's budget by using a decentralized bottom-up budget approach. A production manager's involvement in the budget process this
Require development of a production budget after receiving the division's projected sales forecast.
Fact Pattern:
Kim is thinking of organizing a fundraiser to support a local charity. She has planned to rent a banquet hall and provide the guests with food, entertainment, and various party favors. She has decided to charge $500 a person. After researchi
480
An enterprise sells three chemicals: petrol, septine, and tridol. Petrol is the company's most profitable product; tridol is the least profitable. Which one of the following events will definitely decrease the firm's overall breakeven point for the upcomi
An increase in anticipated sales of petrol relative to sales of septine and tridol.
The two most appropriate factors for budgeting manufacturing overhead expenses would be
Management judgment and production volume.
Which one of the combinations listed correctly depicts the chronological order of preparation for the following budgets?
Cost of goods sold budget
Production budget
Purchases budget
Administrative budget
II, III, I, IV.
When allocating costs from one department to another, a dual-rate cost-allocation method may be used. The dual-rate cost-allocation method is most useful when
Costs are separated into variable-cost and fixed-cost subpools.
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
5.98
The board of directors is concerned that the budget committee has fallen into the practice of applying a flat 3% growth to the prior year performance, placing too much emphasis on the past and not focusing on the future opportunities and related activitie
zero based budget
Fact Pattern:
Historically, Pine Hill Wood Products has had no significant bad debt experience with its customers. Cash sales have accounted for 10% of total sales, and payments for credit sales have been received as follows:
40% of credit sales in the mo
Be unchanged
Fact Pattern:
Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a
2340
A firm is considering discontinuing a certain product line if it does not have a margin of safety higher than 15%. The breakeven sales are $76,800, and the margin of safety is $13,200. Based on this information, the controller has recommended that the fir
No, because the margin of safety ratio of 14.7% is not better than 15%.
Which one of the following budgeting methodologies would be most appropriate for a firm facing a significant level of uncertainty in unit sales volumes for next year?
flexible budget
All of the following would appear on a projected schedule of cost of goods manufactured except for
Beginning finished goods inventory.
Which one of the following items should be done first when developing a comprehensive budget for a manufacturing company?
Development of a sales budget.
A corporation is considering three new product lines but can only invest in one of the three. The expected annual revenue and costs for each product line are shown below. All three product lines are assumed to operate for the same length of time.
A
B
C
Un
B only
Fact Pattern: Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30:
July 1
June 30
Direct material*
40,000
50,000
Work-in-
1,010,000
The controller of a store has asked a staff accountant to prepare detailed reports that summarize the firm's cash flows for the upcoming accounting period and cash position at the end of the period. Accordingly, the controller has requested preparation of
Listing of cash collections
Pro forma statement of cash flows
A controller developed the following direct-costing income statement for Year 1:
Per
Unit
Sales (150,000 units at $30)
$ 4,500,000
$30
Variable costs:
Direct materials
$1,050,000
$ 7
Direct labor
1,500,000
10
Mfg. overhead
300,000
2
Selling & mktg.
300,00
420000
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
80,500
A sales budget shows quarterly sales for the next year as follows:
Quarter
Units
1
10,000
2
8,000
3
12,000
4
14,000
Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted producti
8800
Fact Pattern: A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. Its margin of safety is $40,000.
What is the company's breakeven point?
360000
A master budget was prepared based on the following projections:
Sales
$2,400,000
Decrease in inventories
60,000
Decrease in accounts payable
100,000
Gross margin
40%
Estimated cash disbursements for inventories are
1,480,000
There are several methods for allocating service department costs to the production departments. The method that recognizes service provided by one service department to another but does not recognize reciprocal interdepartmental service is the
step down method
A furniture company manufactures several steel products. It has three production departments: Fabricating, Assembly, and Finishing. The service departments include Maintenance, Material Handling, and Designing. Currently, the company does not allocate ser
Request an excessive amount of service.
A home building company offers its customers the choice of 1 of 12 home designs on lots located in several developing areas. During its 15-year existence, the company created its annual budget by adjusting the prior year's actual results for changes in in
Zero-based budgeting.
Fact Pattern: Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to
407,332
Traditional budgeting methods look at historical data and current resources and then project forward. Activity-based budgeting is different in that
It looks at desired outcomes and works back from there to determine resources needed.
It uses current level
I and III only.
A firm has prepared budgets for the next 5 months: May, June, July, August, and September. As soon as May results are reported, the firm will add October to their budget plans. What type of budget system is the firm using?
Continuous budgeting.
For the month of June, a company expects to sell 12,500 cases of small cherries at $25 per case and 33,000 cases of large cherries at $32 per case. Sales personnel receive a 6% commission on each case of small cherries and an 8% commission on each case of
84,480
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
120,000
A company breaks even at an annual sales volume of 75,000 units. Actual annual sales volume was 100,000 units, and the company reported operating income of $200,000. The annual fixed costs are
600,000
A gift shop maintains a 35% gross profit percentage on sales and carries an ending inventory balance each month sufficient to support 30% of the next month's expected sales. Anticipated sales for the fourth quarter are as follows:
October
$42,000
November
40,820
the master budget
Contains the operating budget.
In developing a comprehensive budget for a manufacturing company, which one of the following items should be done first
development of a sales plan
a continous budget plan
Is a plan that is revised monthly or quarterly.
One approach for developing standard costs incorporates communication, bargaining, and interaction among product line managers; the immediate supervisors for whom the standards are being developed; and the accountants and engineers before the standards ar
team development approact
A company has sales of $500,000, variable costs of $300,000, and operating income of $150,000. If the company increased the sales price per unit by 10%, reduced fixed costs by 20%, and left variable cost per unit unchanged, what would be the new breakeven
88,000
Zero-based budgeting forces managers to
Justify all expenditures at the beginning of every budget period.
A manufacturer is considering dropping a product line. It currently produces a multi-purpose woodworking clamp in a simple manufacturing process that uses special equipment. Variable costs amount to $6.00 per unit. Fixed overhead costs, exclusive of depre
4500 units
The purpose of project budgeting is to identify, evaluate, and select beneficial projects that require
Commitments of large sums of funds, and the appropriate time frame is over the project's life cycle.
The foundation of a profit plan is the
sales forecast
All of the following statements concerning standard costs are correct except that
Standard costs are usually stated in total, while budgeted costs are usually stated on a per-unit basis.
Due to a change in market conditions, a company finds that it can sell as many of each of its three main products as it can produce. Which one of the following is most important in determining which of the three products to produce and market?
Contribution margin per hour of production time available.
While an operating budget is a key element in planning and control, it is not likely to
Set out long-range, strategic concepts.
Fact Pattern: Scarborough Corporation manufactures and sells two products, Thingone and Thingtwo. Scarborough's budget department gathered the following data to project sales and budget requirements:
Projected Sales
Product
Units
Price
Thingone
60,000
$ 7
$390,000
$492,000
Ineffective budget control systems are characterized by
All of the answers are correct.
The following direct labor information relates to the manufacture of televisions.
Number of workers
60
Number of product hours per week, per worker
40
Hours required to make 1 unit
3
Weekly wages per worker
$600
Employee benefits treated as direct labor c
54
Fact Pattern: Superflite expects April sales of its deluxe model airplane, the C-14, to be 402,000 units at $11 each. Each C-14 requires three purchased components shown below.
Number Needed
Purchase Cost
for Each C-14 Unit
A-9
$0.50
1
B-6
0.25
2
D-28
1.0
400,000 Units
Fact Pattern: Siberian Ski Company recently expanded its manufacturing capacity to allow it to produce up to 15,000 pairs of cross-country skis of the mountaineering model or the touring model. The sales department assures management that it can sell betw
Produce 12,000 pairs of mountaineering skis because they are more profitable.
In developing the budget for the next year, which one of the following approaches would produce the greatest amount of positive motivation and goal congruence?
Have the divisional and senior management jointly develop goals and the divisional manager develop the implementation plan.
A company budgeted $148,000 sales on account for June, $120,000 for July, $211,000 for August, $198,000 for September, and $164,000 for October. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36%
October
Mason Enterprises has prepared the following budget for the month of July:
Selling Price
Variable Cost
Unit
Per Unit
Per Unit
Sales
Product A
$10.00
$4.00
15,000
Product B
15.00
8.00
20,000
Product C
18.00
9.00
5,000
Assuming that total fixed costs will b
21,819 units
The pro forma statement of employee benefit costs, a budget schedule that is prepared as part of an organization's annual profit plan, would include costs related to
Company-paid benefits and company-paid payroll taxes.
An advantage of incremental budgeting when compared with zero-based budgeting is that incremental budgeting
Accepts the existing base as being satisfactory.
Fact Pattern: Madengrad Company manufactures a single electronic product called Precisionmix. This unit is a batch-density monitoring device attached to large industrial mixing machines used in flour, rubber, petroleum, and chemical manufacturing. Precisi
(4,200,000)
The following direct labor information relates to the manufacture of televisions.
Number of workers
60
Number of product hours per week, per worker
40
Hours required to make 1 unit
3
Weekly wages per worker
$600
Employee benefits treated as direct labor c
54
A company has developed the following sales projections for the calendar year.
May
$100,000
June
120,000
July
140,000
August
160,000
September
150,000
October
130,000
Normal cash collection experience has been that 50% of sales are collected during the mo
414,000
Fact Pattern: The data below are available for Xerbert Co.:
Xerbert Co.
Budget and Actual Income Statements
For the Year Ending December 31
(000s omitted)
Budget
Actual
Xenox
Xeon
Total
Xenox
Xeon
Total
Unit sales
150
100
250
130
130
260
Net dollar sales
65,000 U
A corporation's current year-end sales totaled $240 million, and its ending cash balance was $20 million. The corporation anticipates its sales for the upcoming year will be $260 million. On average, 10% of a year's sales will be collected during the foll
2 million
Fact Pattern: Kelly Company is a retail sporting goods store that uses accrual accounting for its records. Facts regarding Kelly's operations are as follows:
Sales are budgeted at $220,000 for December Year 1 and $200,000 for January Year 2.
Collections a
208,000
Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the
421,053