ACC 211 Exam 3

Jones Inc., a cosmetics manufacturer, has been asked to provide a private label version of its most popular lip stick by a large discount chain. The tubes would be labeled with the name of the chain and the chain would pay Jones $4.10 per tube rather than the regular $5.00 price. Which type of decision is this?

A special order decision

Which of the following is true of target pricing?

It requires the use of fewer materials, labor, and processes during production, delivery and customer service

The overall decision of establishing a cost leadership position for a firm is an example of a:

strategic decision

When a manager makes a sell-or-process-further decision, _____.

additional costs and revenues beyond the split-off point should be considered

Jones Inc. is considering dropping its specialty product line and has assembled the following information:

Sales$220,000

Variable costs 125,000

Contribution margin 95,000

Less: Fixed costs 114,000

Net loss ($19,000)

$31,000 of the fixed costs is for depreciation on equipment that can be used for other products. What is the benefit or loss of keeping the specialty product line?

$12,000

Ace Manufacturing produces two products: A and B. Unit contribution margins for A and B are $10 and $70 respectively. Product A uses 2 direct labor hour, and product B uses 5 direct labor hours. Direct labor is Ace's constrained resource. What is the contribution margin per direct labor hour for each product?

$5 for Product A and $14 for Product B

When managers consider a product mix, _____.

they must choose the alternative that maximizes total contribution margin

Beta Company manufactures laptops and is designing a new model that has very advanced features, which Beta hopes consumers will view as high-end features. The new laptop has a target price of $800. Management requires a 25% profit on new product revenues. Calculate the target cost of the laptop.

$600

Which of the following is true of product mix?

Product mix refers to the relative amount of each product manufactured (or service provided) by a company

Moccasin Company makes televisions and is evaluating a make-or-buy decision. If it opts for making the televisions internally, it has to pay additional salary to the plant supervisor for working a second shift. The additional salary paid to the supervisor is an example of a(n):

relevant fixed cost

Identify the equation used to calculate the target cost of a product.

Target Cost = Target Price - Desired Profit

If a company has a policy of charging its customers 15% above direct materials and labor costs. The costs incurred are as follows:

Direct materials $62,000

Direct labor 4,000

What is the price charged by the company?

$75,900

Markup:

is a percentage applied to a base cost and includes desired profit and any costs not included in the base cost

An advantage of target costing is that:

it forces managers to control costs

In a keep-or-drop decision:

segmented reports prepared on a variable-costing basis are important

Adams Company makes 130,000 units per year of a part used in its ice cream machine. An outside supplier offered to sell it to Adams for $97.00. Currently, Adams has the following costs to manufacture it:

Direct materials $35.10

Direct labor 38.00

Variable overhead 2.00

Fixed overhead 33.20

Total costs $108.30

If the offer is accepted, all direct labor cost would be avoided. However, $15.40 of fixed overhead will continue even if the part is purchased from outside. How much of the unit product cost of $108.30 is relevant for decision making?

$92.90

Which of the following is an example of a direct fixed cost?

Cost of a mold for a product

Jones Inc. is considering dropping its specialty product line and has assembled the following information:

Sales $190,000

Variable costs 130,000

Contribution margin 60,000

Less: Fixed costs 79,000

Net loss ($19,000)

$28,000 of the fixed costs is for depreciation on equipment that can be used for other products. What is the benefit or loss of keeping the specialty product line?

$9,000

Jones Inc. is considering dropping its specialty product line and has assembled the following information:

Sales $190,000

Variable costs 125,000

Contribution margin 65,000

Less: Fixed costs 85,000

Net loss ($20,000)

$32,000 of the fixed costs is for depreciation on equipment that can be used for other products. What is the benefit or loss of keeping the specialty product line?

$12,000

A strategic plan:

plots a direction for an organization's future activities

Which of the following is a financial budget?

A pro forma balance sheet

Silver Inc. has budgeted production costs of $2,700,000, budgeted beginning finished goods inventory of $375,000, and budgeted ending finished goods inventory of $250,000 for the month. Silver's budgeted cost of goods sold for this month is:

$2,825,000

Which of the following is true of a direct materials purchases budget?

It must be separately prepared for every type of raw material used

In an overhead budget, _____

both variable and fixed overhead items are included

Excellent Corp. expects the following total sales for the coming year:

Quarter 1 $10,000

Quarter 2 $12,000

Quarter 3 $15,000

Quarter 4 $20,000

From past experience, Excellent Corp. expects that, on average, 20% of total sales are cash and 80% of total sales are on credit. Of the credit sales, Excellent Corp. expects that 80% will be paid in cash during the quarter of sale, and the remaining 20% will be paid in the following quarter. The balance in Accounts Receivable as of the last quarter of the prior year was $1,500. This will be collected in cash during the first quarter of the coming year. Calculate the total amount of cash receipts from sales expected in Quarter 1 of the coming year.

$9,900

Interest on short-term borrowing:

is excluded from the cash disbursements section of a cash budget

After examining the records of Theta Company for the month of October, the following information is obtained:

Beginning cash balance $2,700

Cash receipts 51,000

Cash payments 35,000

Minimum cash balance 1,000

Loan repayments 15,000

Based on the given information, calculate Theta's cash surplus (deficiency) for the month of October.

$17,700

The actual and budgeted costs for Learner Corp.'s actual level of activity are as follows:

Actual Costs Budgeted Costs Units produced 1,500 1,500

Direct materials cost$5,650$5,010

Direct labor cost 1,680 1,460

VOH:

Maintenance 715 625

Power 270 210

FOH:

Grounds keeping 1,490 1,280

Depreciation 520 520

Which of the following conclusions can be made based on the provided data?

There is an unfavorable variance for grounds keeping

To create a meaningful performance report, _____

actual costs and expected costs must be compared at the same level of activity

Which of the following budgets enables a firm to compute expected costs for a range of activity levels?

A flexible budget

Which of the following is a key feature of an ideal budget?

Participative budgeting

Budgetary slack exists when a manager deliberately:

underestimates revenues

Assume that the salespeople of Excellent Corp. are paid 3% of sales as commission. The level of sales is $220,000 for this month, and the only fixed selling costs are $25,000. Excellent's budgeted selling costs for this month are:

$31,600

Which of the following formulas is used to compute units to be produced while preparing a production budget?

Units to Be Produced = Expected Units Sales + Units in Desired Ending Inventory - Units in Beginning Inventory

An overhead budget shows the expected cost of all production costs:

other than direct materials and direct labor

Silver Inc. has budgeted production costs of $2,800,000, budgeted beginning finished goods inventory of $370,000, and budgeted ending finished goods inventory of $250,000 for the month. Silver's budgeted cost of goods sold for this month is:

$2,920,000

Assume that the salespeople of Excellent Corp. are paid 2% of sales as commission. The level of sales is $270,000 for this month, and the only fixed selling costs are $30,000. Excellent's budgeted selling costs for this month are:

$35,400

Which of the following budgets serves as the basis for all other operating budgets and most financial budgets?

A sales budget

Which of the following equations is used to calculate the ending cash balance while preparing a cash budget?

Ending Cash Balance = Cash Available - Expected Cash Disbursements

After examining the records of Gamma Inc. for the month of December, the following information is obtained:

Beginning cash balance $2,500

Cash receipts 56,000

Cash payments 40,000

Loan repayments 10,000

Based on the given information, compute Gamma's ending cash balance for the month of December.

$8,500

After examining the records of Theta Company for the month of October, the following information is obtained:

Beginning cash balance $2,500

Cash receipts 58,000

Cash payments 32,000

Minimum cash balance 1,000

Loan repayments 10,000

Based on the given information, calculate Theta's cash surplus (deficiency) for the month of October.

$27,500

Gamma Inc. manufactures Product X using a single raw material. The standard quantity of input for the month of February was 1,500 units of raw material for 1,000 units of Product X. The actual output for the month of February was 1,300 units. Compute the standard quantity of raw material for actual output (SQ) of Product X.

1,950

In a standard costing system, costs are assigned to products using quantity and price standards:

for direct materials, direct labor, and overhead.

Ideal standards:

demand maximum efficiency.

Alpha Company manufactures vitamin capsules packed in containers of 50 capsules each. 9,000 containers are produced during the first week of September. The unit quantity standard for machine operators is 0.50 hours per container and the actual machine operator hours used were 0.30 per container. Compute the operator hours that should be used for the actual output of 9,000 containers.

4,500 hours

Which of the following equations is used to determine standard hours allowed?

Standard Hours Allowed = Unit Labor Standard × Actual Output

Which of the following is used to calculate material efficiency variance?

Usage Variance = (Actual Quantity - Standard Quantity) × Standard Price per Unit

Which of the following equations is used to determine the total budget variance?

Total Variance = (Actual Price per Unit × Actual Quantity of Input Used) - (Standard Price per Unit × Standard Quantity of Input Allowed for the Actual Output)

Peridot Inc. manufactures cooking oil. The actual quantity of input used for the month of June was 500 liters. The actual price per liter of raw material was $5 per liter, while the standard price per liter was $2.00 per liter. Determine the material price variance of the month of June.

$1,500 U

Alpha Company manufactures Product P and sells it in packs of 10 units. The actual results for the first week in January are as follows:

Actual production 20,000 packs of Product P

Actual cost of raw material Q96,500 units at $0.85

Actual cost of labor 500 hours at $6.25

Standard quantity of raw material 90,000 units for 20,000 units of Product P

Standard price of raw material Q $0.77

Calculate the total material variance for Product P for the first week in January.

$12,725 U

The materials usage variance should be calculated:

based on the amount of materials used in production.

Identify the equation used to determine material price variance.

Material Price Variance = (Actual Price per Unit - Standard Price per Unit) × Actual Quantity of Input Used

Which of the following variances is the difference between actual fixed overhead and budgeted fixed overhead?

The fixed overhead spending variance

Boysenberry Inc. manufactures specialized equipment to be used in motor bikes. The actual variable overhead for the month of January was $9,800. The standard hours allowed for production were 1,150 hours, and the standard variable overhead rate was $6 per hour. Determine the total variable overhead variance of Boysenberry for the month of January.

$2,900 U

Which of the following is true of total variable overhead variance?

It is the difference between actual and applied variable overheads.

Which of the following account balances increases when usage of materials is recorded?

Work in Process

When the variances are not material in amount, the variances for materials and labor are closed to:

Cost of Goods Sold

Smitten Company manufactures Product A using a single raw material. Smitten used 6,900 units of raw material to manufacture 5,900 units of Product A. The standard price of the raw material is $5 and the standard quantity of raw material for the actual output is 7,600 units. What is the entry to record the issuance and usage of materials?

Debit Work in Process, 38,000

Credit Materials Usage Variance, 3,500

Credit Materials, 34,500

Smitten Company manufactures Product A using a single raw material. Smitten used 6,800 units of raw material to manufacture 5,900 units of Product A. The standard price of the raw material is $5 and the standard quantity of raw material for the actual output is 7,500 units. What is the entry to record the issuance and usage of materials?

Debit Work in Process, 37,500

Credit Materials Usage Variance, 3,500

Credit Materials, 34,000

Which of the following is true of labor variances?

An unfavorable labor rate variance is credited to Accrued Payroll.