(EPIC) ACC 102 FINAL EXAM MEGATEST STUDY GUIDE

This will be awesome.

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):

Indirect material cost

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

The amount paid to the individual who stains a chair.

Which of the following is NOT a period cost?

Depreciation of factory maintenance equipment.

Given the cost formula, Y = $16,000 + $3.40X, total cost for an activity level of 4,000 units would be:

$29,600

A factory supervisor’s wages are classified as:

	Indirect labor	Fixed manufacturing overhead
A)	No	No
B)	Yes	Yes
C)	Yes	No
D)	No	Yes

Choice B

Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device.

Mark purchased a machine two years ago to make experimental boards and the machine has been completely depreciated now. The machine will be used to manufacture the new board. The cost of this machine is:

a sunk cost

Which of the following is not a period cost?

Indirect materials

In the equation, y = a + bX, the y represents:

The total mixed cost.

Which of the following statements are true?

1. The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead.

2. The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead.

Both statements

Manufacturing overhead includes:

all manufacturing costs except direct labor and direct materials.

Contribution margin is:

Sales less variable production, variable selling, and variable administrative expenses.

In a job-order costing system that is based on machine-hours, which of the following formulas is correct?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Department A and on machine-hours in Department B. At the beginning of the year, the Corporation made the following estimates:

	Department A	Department B
Direct labor cost	$ 60,000	$ 40,000
Manufacturing overhead	$ 90,000	$ 45,000
Direct labor-hours	6,000	9,000
Machine-hours	2,000	15,000

What predetermined overhead rates would be used in Department A and Department B, respectively?

150% and $3.00

Which of the following is correct concerning reactions to INCREASES in activity? (hint: Please recall the cost behavior table we discussed in class using the Hawks' Pizza store case example.)

	Total Variable Cost	Variable Cost Per Unit
A)	Increases	Decreases
B)	Constant	Decreases
C)	Decreases	Constant
D)	Increases	Constant

Choice D

Assume the following:

1. Estimated fixed manufacturing overhead for the coming period of $200,000

2. Estimated variable manufacturing overhead of $2.00 per direct labor hour

3. Estimated direct labor-hours to be worked in the coming period of 55,000 hours.

The predetermined plantwide overhead rate for the period is closest to:

$5.64.

An example of a committed fixed cost is:

a long-term equipment lease payment.

Assume the following information for a merchandising company:

Sales	$ 483,000
Variable selling expenses	$ 25,000
Cost of goods sold	$ 350,000
Fixed administrative expenses	$ 50,000
Fixed selling expenses	$ 40,000
Variable administrative expenses	$ 5,000

What is the company's contribution margin?

$103,000.

Brault Corporation has provided the following information:

	Cost per Unit	Cost per Period
Direct materials	$ 6.85
Direct labor	$ 3.85
Variable manufacturing overhead	$ 1.25
Fixed manufacturing overhead		$ 97,200
Sales commissions	$ 1.00
Variable administrative expense	$ 0.55
Fixed selling and administrative expense		$ 40,500

If 10,000 units are sold, the variable cost per unit sold is closest to:

$13.50

The salary paid to the president of a company would be classified on the income statement as a(n):

administrative expense.

Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?

Production supplies.

Which of the following statements is false?

Prime costs include manufacturing overhead.

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing.

Direct costs:

can be easily traced to a particular cost object.

Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device.

Rent on the administrative office space for his new company is:

a period cost

Fixed costs expressed on a per unit basis:

decrease with increases in activity. (i.e., inverse relation)

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?

Gross margin will increase.

If manufacturing overhead is underapplied, then:

the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

Gullett Corporation had $26,000 of raw materials on hand on November 1. During the month, the Corporation purchased an additional $75,000 of raw materials. The journal entry to record the purchase of raw materials would include a:

debit to Raw Materials of $75,000

Refer to the T-account below:

Work In Process

Debit		Credit
Balance	30,000	(12)	270,000
(4)	90,000
(6)	70,000
(9)	110,000
Balance	30,000

Entry (12) could represent which of the following?

The cost of goods manufactured transferred to Finished Goods.

Assume the following:

Sales	$ 100,000
Adjusted cost of goods sold	$ 47,000
Selling and administrative expense	$ 31,300

What is the net operating income?

$21,700

Leelanau Corporation uses a job-order costing system. The following data are for last year:

Work in process beginning balance	$ 10,500
Work in process ending balance	$ 19,000
Cost of goods manufactured	$ 323,000
Direct materials	$ 115,000
Direct Labor	$ 78,000

Leelanau applies overhead using a predetermined rate. What amount of overhead was applied to work in process last year?

$138,500

The journal entry to record the cost of goods sold during the period includes:

a credit to Finished Goods.

In October, Raddatz Incorporated incurred $73,000 of direct labor costs and $6,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

debit to Manufacturing Overhead of $6,000

During September at Renfro Corporation, $65,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record this requisition would include a debit to Manufacturing Overhead of:

$4,000

When manufacturing overhead is applied to production, it is added to (regarding costs flow using T-accounts)

the Work in Process account.

Maysonet Corporation uses a job-order costing system and has provided the following partially completed T-account summary for the past year.

Work in Process

Debit		Credit
Balance 1/1	18,000	Credits	?
Debits	520,000
Balance 12/31	34,000

The cost of completed jobs transferred from Work in Process to Finished Goods (i.e., Cost of Goods Manufactured) during the year was:

$504,000

The cost of goods manufactured is:

the amount transferred from Work in Process to Finished Goods.

Refer to the T-account below:

Manufacturing Overhead

Debit		Credit
(2)	4,000	(9)	150,000
(3)	15,000
(4)	80,000
(5)	30,000
(6)	25,000
	154,000		150,000
Balance	4,000

Entry (4) could represent which of the following except?

Overhead cost applied to Work in Process.

Which of the following is not one of the three inventory accounts reported on the balance sheet?

Cost of goods sold

Dukes Corporation used a predetermined overhead rate this year of $2 per direct labor-hour, based on an estimate of 20,000 direct labor-hours to be worked during the year. Actual costs and activity during the year were:</p><table style="min-width: 50px;"><colgroup><col style="min-width: 25px;"><col style="min-width: 25px;"></colgroup><tbody><tr><th colspan="1" rowspan="1" style="margin: 0px; padding: 0px 0px 0px 15px; font: inherit; width: 500px; text-align: left; vertical-align: middle;"><p>Actual manufacturing overhead cost incurred</p></th><td colspan="1" rowspan="1" style="margin: 0px; padding: 0px 10px 0px 0px; font: inherit; vertical-align: middle; width: 100px; text-align: right;"><p>$ 38,000

Actual direct labor-hours worked

18,500

The overapplied or underapplied manufacturing for the year was:

$1,000 underapplied

Cassius Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.

Sales (7,000 units)	$ 210,000
Variable expenses	136,500
Contribution margin	73,500
Fixed expenses	67,200
Net operating income	$ 6,300

The number of units that must be sold to achieve a target profit of $31,500 is closest to:

9,400 units

Bois Corporation has provided its contribution format income statement for January.

Sales	$ 426,400
Variable expenses	260,000
Contribution margin	166,400
Fixed expenses	120,900
Net operating income	$ 45,500

If the company's sales volume increases by 7%, its net operating income should increase by about:

26%

Stockmaster Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.

Sales (8,000 units)	$ 320,000
Variable expenses	192,000
Contribution margin	128,000
Fixed expenses	121,600
Net operating income	$ 6,400

The margin of safety in dollars is closest to:

$16,000

Sorin Incorporated, a company that produces and sells a single product, has provided its contribution format income statement for January.

(Hint: try to add Per Unit column for Sales, variable expenses, and Contribution Margin!)

Sales (4,800 units)	$ 100,800
Variable expenses	55,440
Contribution margin	45,360
Fixed expenses	34,500
Net operating income	$ 10,860

If the company sells 5,200 units, its total contribution margin should be closest to:

Note: Do not round intermediate calculations.

$49,140

Which of the following statements is true?

Contribution margin − fixed expenses = net operating income

A manufacturer of cedar shingles has supplied the following data:

Bundles of cedar shakes produced and sold	360,000
Sales revenue	$ 2,412,000
Variable manufacturing expense	$ 1,170,000
Fixed manufacturing expense	$ 714,000
Variable selling and administrative expense	$ 414,000
Fixed selling and administrative expense	$ 82,000
Net operating income	$ 32,000

The company's contribution margin ratio is closest to:

34.3%

Which of the following statements is true?

Sales − variable expenses = contribution margin

Assume the following:

1. selling price per unit = $30

2. variable expense per unit = $18

3. total fixed expenses = $31,200

Given these three assumptions, the unit sales needed to break-even is:

2,600 units.

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?

(Fixed expenses + Target net profit) ÷ Contribution margin ratio

The variable expense ratio equals:

Variable expenses ÷ sales.

The usual starting point for a master budget is:

the sales forecast or sales budget.

When preparing a direct materials budget, the required purchases of raw materials in units equals:

raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

All of Gaylord Corporation's sales are on account. 35% of the sales on account are collected in the month of sale, 45% in the month following the sale, and the remaining 20% are collected in the second month following the sale. The following are the budgeted sales data for the company:

	January	February	March	April
Total sales	$50,000	$60,000	$40,000	$30,000

What is the amount of cash that should be collected in March?

$51,000

Parwin Corporation plans to sell 34,000 units during August. If the company has 13,500 units on hand at the start of the month, and plans to have 14,500 units on hand at the end of the month, how many units must be produced during the month?

35,000

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 3,600 direct labor-hours will be required in January. The variable overhead rate is $4 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,200 per month, which includes depreciation of $3,560. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$54,040

Yerkey Corporation makes one product and has provided the following information to help prepare the master budget:

Budgeted unit sales, February	10,700	units
Variable selling and administrative expense	$ 2.00	per unit sold
Fixed selling and administrative expense	$ 60,000	per month

The estimated selling and administrative expense for February is closest to:

$81,400

Sparks Corporation has a cash balance of $18,000 on April 1. The company must maintain a minimum cash balance of $10,000. During April, expected cash receipts are $98,000. Cash disbursements during the month are expected to total $112,000. Ignoring interest payments, during April the company will need to borrow:

$6,000

Knappert Corporation makes one product and has provided the following information:

1. Each unit of finished goods requires 3 pounds of raw materials. The raw materials cost $5.00 per pound.

2. The direct labor wage rate is $24.00 per hour. Each unit of finished goods requires 2.8 direct labor-hours.

3. Manufacturing overhead is entirely variable and is $11.00 per direct labor-hour.

4. The variable selling and administrative expense per unit sold is $3.80. The fixed selling and administrative expense per month is $50,000.

The unit product cost is closest to:

$113.00

Roberts Enterprises has budgeted sales in units for the next five months as follows:

June	4,640	units
July	7,800	units
August	5,440	units
September	6,980	units
October	3,840	units

Past experience has shown that the ending inventory for each month must be equal to 30% of the next month's sales in units. The inventory on May 31 contained 1,392 units. The company needs to prepare a production budget for the second quarter of the year.

The total number of units to be produced in July is:

7,092 units

Which of the following statements is true?

1. Segment margin is sales less variable expenses less traceable fixed expenses.

2. The salary paid to a store manager is not a traceable fixed expense of the store.

Only statement Ione is true.

Which of the following equations is true?

Dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall contribution margin (CM) ratio.

In absorption costing, a complete definition of unit product cost includes:

Direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead.

Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores?

the cost of corporate advertising aired during the Super Bowl

Assume a company has four divisions. Division A has sales, variable expenses, and traceable fixed expenses of $200,000, $98,000, and $28,000, respectively. If the company as a whole has common fixed expenses of $50,000, what is Division A’s segment margin?

$74,000

Assume a company has four divisions. Division A has sales, variable expenses, and traceable fixed expenses of $200,000, $102,000, and $29,400, respectively. If the company as a whole has common fixed expenses of $50,000, then Division A’s dollar sales to break even is closest to:

$60,000.

Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $310,000, variable expenses of $155,100, and traceable fixed expenses of $71,300. The Alpha Division has sales of $620,000, variable expenses of $339,800, and traceable fixed expenses of $133,500. The total amount of common fixed expenses not traceable to the individual divisions is $135,200. What is the company's net operating income?

$95,100

J Corporation has two divisions. Division A has a contribution margin of $79,300 and Division B has a contribution margin of $126,200. If total traceable fixed expenses are $72,400 and total common fixed expenses are $34,900, what is J Corporation's net operating income?

$98,200

Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below:

	Total Company	Division L	Division Q
Sales	$ 474,000	$ 153,000	$ 321,000
Variable expenses	255,510	91,800	163,710
Contribution margin	218,490	61,200	157,290
Traceable fixed expenses	112,850	29,890	82,960
Segment margin	105,640	$ 31,310	$ 74,330
Common fixed expenses	56,250
Net operating income	$ 49,390

The break-even in sales dollars for Division Q is closest to: 

$169,306

Azuki Corporation operates in two sales territories, Urban and Rural. Data concerning last year’s operations appear below:

	Urban	Rural
Sales	$ 320,000	$ 80,000
Variable expenses	208,000	56,000
Contribution margin	112,000	24,000
Traceable fixed expenses	48,000	30,000
Segment margin	$ 64,000	$ (6,000)

Azuki's common fixed expenses were $25,000 last year.

What was Azuki Corporation's overall net operating income for last year?

$33,000

Tubaugh Corporation has two major business segments--East and West. In December, the East business segment had sales revenues of $320,000, variable expenses of $175,000, and traceable fixed expenses of $39,000. During the same month, the West business segment had sales revenues of $990,000, variable expenses of $512,000, and traceable fixed expenses of $189,000. The common fixed expenses totaled $286,000 and were allocated as follows: $143,000 to the East business segment and $143,000 to the West business segment.

The contribution margin of the West business segment is:

$478,000

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

	Total Company	Blue Division	Gold Division
Sales	$ 522,000	$ 391,000	$ 131,000
Variable expenses	160,670	89,930	70,740
Contribution margin	361,330	301,070	60,260
Traceable fixed expenses	286,000	239,000	47,000
Segment margin	75,330	$ 62,070	$ 13,260
Common fixed expenses	73,080
Net operating income	$ 2,250

The Blue Division’s dollar sales to break-even is closest to:

$310,390

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

	Total Company	Blue Division	Gold Division
Sales	$ 522,000	$ 391,000	$ 131,000
Variable expenses	160,670	89,930	70,740
Contribution margin	361,330	301,070	60,260
Traceable fixed expenses	286,000	239,000	47,000
Segment margin	75,330	$ 62,070	$ 13,260
Common fixed expenses	73,080
Net operating income	$ 2,250

The company’s overall dollar sales to break-even is closest to:

$518,750

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

	Total Company	Blue Division	Gold Division
Sales	$ 522,000	$ 391,000	$ 131,000
Variable expenses	160,670	89,930	70,740
Contribution margin	361,330	301,070	60,260
Traceable fixed expenses	286,000	239,000	47,000
Segment margin	75,330	$ 62,070	$ 13,260
Common fixed expenses	73,080
Net operating income	$ 2,250

What is the company's overall net operating income if it operates at the break-even points (i.e., both divisions' segment margin becomes zero) for its two divisions?

$(73,080)

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

	Total Company	Blue Division	Gold Division
Sales	$ 522,000	$ 391,000	$ 131,000
Variable expenses	?	89,930	70,740
Contribution margin	?	301,070	60,260
Traceable fixed expenses	286,000	239,000	47,000
Segment margin	?	$ 62,070	$ 13,260
Common fixed expenses	73,080
Net operating income	?

The Wyrich Corporation’s Net Operating Income is:

$2,250

Which of the following statements is false?

Budgets enable each department to function independently from other departments.

Which of the following costs is not relevant when deciding whether to keep or replace a piece of equipment?

The original cost of the asset that would be replaced. 

Nasser Incorporated reported the following results from last year’s operations:

Sales	$ 12,600,000
Variable expenses	7,760,000
Contribution margin	4,840,000
Fixed expenses	3,706,000
Net operating income	$ 1,134,000
Average operating assets	$ 6,000,000

Last year's return on investment (ROI) was closest to:

18.9%

Opportunity costs are always:

relevant costs.

Solly Corporation produces a product for national distribution. Standards for the product are:

• Materials: 12 ounces per unit at 60¢ per ounce.

• Labor: 2 hours per unit at $8 per hour.

During the month of December, the company produced 1,000 units. Actual cost information for the month follows:

• Materials: 14,000 ounces purchased and used at a total cost of $7,700.

• Labor: 2,500 hours worked at a total cost of $20,625.

The labor efficiency variance is:

$4,000 U

A segment of a business responsible for both revenues and expenses would be called:

a profit center.

When a company makes a decision for its new investment, avoidable costs are always:

relevant costs.

Which statement(s) is (are) true in material variance analysis?

A. Typically, the purchasing manager (or department) is responsible for material price variance.  

B. Generally, the production manager (or department) is accountable for material quantity variance.  

C. The production manager may also be responsible for an unfavorable price variance if express delivery fees are incurred due to a poorly managed production schedule.  

D. The purchasing manager can be held accountable for unfavorable quantity variance if a larger quantity of material is needed because lower-quality material was purchased, resulting in the necessity for more material to produce the required amount of products for the market.  

All of the above

Runyon Incorporated reported the following results from last year’s operations:

Sales	$ 16,800,000
Variable expenses	12,230,000
Contribution margin	4,570,000
Fixed expenses	3,394,000
Net operating income	$ 1,176,000

The company’s average operating assets were $7,000,000.

Last year's turnover was closest to:

2.40

Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:

avoidable costs.

Assume that you are trying to decide between watching a movie at the local theatre or renting a movie at town house and watching it on your own television. After watching the movie at your chosen venue, you plan to order indian food to be delivered to your town house. Regarding the decision at hand, the cost of renting a movie at your town house is a:

differential cost.

Which of the following would be considered an operating asset in return on investment computations?

Accounts receivable.

Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.1 hours per unit. The variable overhead rate standard is $8.00 per hour. In January the company produced 8,700 units using 910 direct labor-hours. The actual variable overhead rate was $7.90 per hour.

The variable overhead rate variance for January is:

$91 F

Solly Corporation produces a product for national distribution. Standards for the product are:

• Materials: 12 ounces per unit at 60¢ per ounce.

• Labor: 2 hours per unit at $8 per hour.

During the month of December, the company produced 1,000 units. Actual cost information for the month follows:

• Materials: 14,000 ounces purchased and used at a total cost of $7,700.

• Labor: 2,500 hours worked at a total cost of $20,625.

The materials quantity variance is:

$1,200 U

Which of the following should be ignored when making decisions?

Sunk costs

A favorable labor rate variance indicates that

the standard rate exceeds the actual rate.

Solly Corporation produces a product for national distribution. Standards for the product are:

• Materials: 12 ounces per unit at 60¢ per ounce.

• Labor: 2 hours per unit at $8 per hour.

During the month of December, the company produced 1,000 units. Actual cost information for the month follows:

• Materials: 14,000 ounces purchased and used at a total cost of $7,700.

• Labor: 2,500 hours worked at a total cost of $20,625.

The materials price variance is:

$700 F

Lusk Corporation produces and sells 16,200 units of Product X each month. The selling price of Product X is $32 per unit, and variable expenses are $26 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $112,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be:

($57,200)

Worsell Incorporated reported the following results from last year’s operations:

Sales	$ 11,000,000
Variable expenses	8,200,000
Contribution margin	2,800,000
Fixed expenses	2,360,000
Net operating income	$ 440,000
Average operating assets	$ 5,000,000

The company’s minimum required rate of return is 10%. Last year's residual income was closest to:

($60,000)

Which of the following will NOT result in an increase in return on investment (ROI), assuming other factors remain the same?

An increase in operating assets.

Differential costs are always:

relevant costs.

Solly Corporation produces a product for national distribution. Standards for the product are:

• Materials: 12 ounces per unit at 60¢ per ounce.

• Labor: 2 hours per unit at $8 per hour.

During the month of December, the company produced 1,000 units. Actual cost information for the month follows:

• Materials: 14,000 ounces purchased and used at a total cost of $7,700.

• Labor: 2,500 hours worked at a total cost of $20,625.

The labor rate variance is:

$625 U

Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.20 hours per unit. The variable overhead rate standard is $8.60 per hour. In January the company produced 4,700 units using 1,000 direct labor-hours. The actual variable overhead rate was $8.50 per hour.

The variable overhead efficiency variance for January is:

$516 U