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3.
Question : (TCO 1) You own a car and are trying to decide whether or not to
trade it in and buy a new car. Which of the following costs is an opportunity cost in
this situation?
Student Answer:
the trip to Cancun that you will not be able to take if you
buy the car
the cost of the car you are trading in
the cost of your books for this term
the cost of your car insurance last year
4.
Question : (TCO 1) Shulas 347 Grill has budgeted the following costs for a
month in which 1,600 steak dinners will be produced and sold: materials, $4,080;
hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation, $800; and other
fixed costs, $600. Each steak dinner sells for $14.00 each. How much is the
budgeted variable cost per unit?
Student Answer:
$5.80
$7.74
$6.68
$3.25
5.
Question : (TCO 1) Which of the following is an example of a manufacturing
overhead cost?
Student Answer:
security at the manufacturing plant
fabric used to produce shirts
cost of shipping product to customers
the salary of the president of the company
6.
Question : (TCO 1) Product costs
Student Answer:
are also called manufacturing costs.
are considered an asset until the finished goods are sold.
become an expense when the goods are sold.
All of the above answers are correct.
7.
Question : (TCO 1) At December 31, 2010, WDT Inc. has a balance in the
Work in Process Inventory account of $62,000. At January 1, 2010, the balance was
$55,000. Current manufacturing costs for the year are $292,000, and cost of goods
sold is $284,000. How much is cost of goods manufactured?
Student Answer:
$292,000
$299,000
$277,000
$285,000
8.
Question : (TCO 2) BCS Company applies manufacturing overhead based on
direct labor hours. Information concerning manufacturing overhead and labor for
August follows:
Estimated Actual
Overhead cost
$174,000
$171,000
Direct labor hours 5,800 5,900
Direct labor cost
$87,000
$89,975
How much overhead should be applied in total during August?
Student Answer:
179,950
171,100
168,200
177,000
9.
Question : (TCO 2) Citrus Company incurred manufacturing overhead costs
of $300,000. Total overhead applied to jobs was $306,000. What was the amount of
overapplied or underapplied overhead?
Student Answer:
$7,000 overapplied
$6,000 overapplied
$6,000 underapplied
$13,000 underapplied
10. Question : (TCO 3) Companies in which of the following industries wouldnot
be likely to use process costing?
Student Answer:
cereals
paints
cosmetics
auto body shop
11. Question : (TCO 3) The Blending Department began the period with 20,000
units. During the period the department received another 80,000 units from the
prior department and at the end of the period 30,000 units remained, which were
40% complete. How much are equivalent units in The Blending Departments work
in process inventory at the end of the period?
Student Answer:
12,000
28,000
40,000
52,000
12. Question : (TCO 3) Ranger Glass Company manufactures glass for French
doors. At the start of May, 2,000 units were in-process. During May, 11,000 units
were completed and 3,000 units were in process at the end of May. These in-process
units were 90% complete with respect to material and 50% complete with respect
to conversion costs. Other information is as follows:
Work in process, May 1:
Direct material
$36,000
Conversion costs $45,000
Costs incurred during May:
Direct material
$186,000
Conversion costs $255,000
Calculate the cost per equivalent unit for conversion costs.
Student Answer:
$4.09
$21.43
$20.40
$24.00
13. Question : (TCO 4) Clearance Depot has total monthly costs of $8,000 when
2,500 units are produced and $12,400 when 5,000 units are produced. What is the
estimated total monthly fixed cost?
Student Answer:
$4,400
$6,580
$3,600
$8,800
(TCO 4) Which of the following will have no effect on the break-even point in units?
Student Answer:
The selling price increases
The variable cost per unit increases
The sales volume increases
Total fixed costs increase
2.
Question : (TCO 4) Circle K Furniture has a contribution margin ratio of 16%.
If fixed costs are $176,800, how many dollars of revenue must the company
generate in order to reach the break-even point?
Student Answer:
$1,105,000
$282,880
$1,060,800
$208,476
3.
Question : (TCO 4) Randy Company produces a single product that is sold
for $85 per unit. If variable costs per unit are $26 and fixed costs total $47,500, how
many units must Randy sell in order to earn a profit of $100,000?
Student Answer:
1,735
618
890
2,500
4.
Question : (TCO 5) In full costing, when does fixed manufacturing overhead
become an expense?
Student Answer:
In the period when other fixed costs are at the highest
level
In the period when the product is sold
In the period when the expense is incurred
When the controller decides that the expense should be recognized
5.
Question : (TCO 5) Variable costing income is a function of:
Student Answer:
Units sold only.
Units produced only
Both units sold and units produced.
Neither units sold nor units. produced
6.
Question : (TCO 5) Peak Manufacturing produces snow blowers. The selling
price per snow blower is $100. Costs involved in production are:
$0
7.
Question : (TCO 6) Which of the following is not a reason that companies
allocate costs?
Student Answer:
To calculate the full cost of products for financial
reporting purposes
To discourage managers from using external suppliers
To reduce the frivolous use of company resources
8.
Question : (TCO 6) Which of the following statements about cost pools isnot
true?
Student Answer:
The costs in each of the cost pools should be
homogeneous or similar.
Managers must make a cost-benefit decision when determining how many cost
pools are appropriate.
Only four different kinds of costs may be included in a single cost pool.
More cost pools usually provide more accurate information, but are more
expensive.
9.
Question : (TCO 6) The building maintenance department for Jones
Manufacturing Company budgets annual costs of $4,200,000 based on the expected
operating level for the coming year. The costs are allocated to two production
departments. The following data relate to the potential allocation bases:
Production Dept. 1 Production Dept. 2
Square footage
15,000
45,000
Direct labor hours 25,000
50,000
If Jones assigns costs to departments based on square footage, how much total
costs will be allocated to Production Department 1?
Student Answer:
$1,050,000
$1,575,000
$2,100,000
$1,400,000
The following monthly data are available for RedEx, which produces only one
product that it sells for $84 each. Its unit variable costs are $28 and its total fixed
expenses are $64,960. Sales during April totaled 1,600 units.
(a) How much is the breakeven point in sales dollars for RedEx?
(b) How many units must RedEx sell in order to earn a profit of $24,640?
(c) A new employee suggests that RedEx sponsor a company softball team as a
form of advertising. The cost to sponsor the team is $1,792. How many more units
must be sold to cover this cost?