Midwest Motors manufactures automobiles.

“Midwest Motors manufactures automobiles. Which
of the following would not be considered direct materials by the company?
A) Sheet metal used in automobiles body.
B) Tires.
C) Interior leather.
D) CD
Player.
E)
Wheel lubricant.

Which
of the following is a product cost?

Glass in an automobile

Advertising

The
salary of the vice president

Insurance
for factory building.

The
corporate controller’s salary would be considered a(n):

manufacturing
cost.

product
cost.

administrative cost.

selling
expense.

Manufacturing
overhead:

can
be either a variable cost or a fixed cost.

includes
the costs of advertising.

includes all factory labor costs.

includes
all fixed costs.

Which
one of the following costs should NOT be considered an indirect cost of
serving a particular customer at a Dairy Queen fast food outlet?

the cost of the hamburger patty in
the burger they ordered.

the
wages of the employee who takes the customer’s order.

the
cost of heating and lighting the kitchen.

the
salary of the outlet’s manager.

Which of the following statements
represents a similarity between financial and managerial accounting?

Both
are useful in providing information for external users.

Both
are governed by GAAP.

Both draw upon an organizations
accounting system.

Both
rely heavily on published financial statements.

7. The accounting
records of Hill Corporation revealed the following selected costs: Sales
commissions, $40,000; plant supervision, $94,000; and administrative expenses,
$185,000. Hill’s period costs total:
A) $40,000.
B) $94,000.
C) $185,000.
D) $225,000.
E) $319,000.

An employee accidentally
overstated the year’s advertising expense by $50,000. Which of the following correctly depicts
the effect of this error?

Cost of goods
manufactured will be overstated by $50,000.

Cost of goods sold will
be overstated by $50,000.

Both cost of goods
manufactured and cost of goods sold will be overstated by $50,000.

None of the above.

If there is a change in
the level of the number of units produced:

fixed
costs per unit will be the same and variable costs per unit will change.

fixed and variable costs per unit
will change.

fixed and variable costs per unit
will remain the same.

fixed costs per unit will change and
variable costs per unit will be the same.

10.

Which of the following will decrease
a companys breakeven point?

Decreasing the contribution margin
per unit.

Increasing the variable cost per
unit.

Increasing the total fixed costs.

Increasing
the selling price per unit.

11.

When 10,000 units are produced,
variable costs are $18 per unit. Therefore, when 30,000 units are produced
variable costs will:

will total $540,000.

decrease to $12 per unit.

decrease to $6 per unit.

increase
to $54 per unit

Use the following graph for the
following question (question 12):

.0/msohtmlclip1/01/clip_image002.png””>

12.
In the graph (above) the line
C represents:
A)
fixed
cost line
B)
variable cost line
C)
total revenue line
D)
total cost line
E)
profit line

13.
At a break-even point of
400 units sold, variable expenses were $4,000 and fixed expenses were $2,000.
What will the 401st unit sold contribute to profit?
A) $0
B) $5
C) $10
D) $15

14. North Company
sells a single product. The product has a selling price of $30 per unit and
variable expenses of 70% of sales. If the company’s fixed expenses total
$60,000 per year, then it will have a break-even of:
A) $60,000
B) $85,714
C) $42,000
D) $200,000

15. Which of the
following formulas is used to calculate the contribution margin ratio?
A) (Sales – Fixed expenses) Sales
B) (Sales – Cost of goods
sold) Sales
C) (Sales – Variable expenses) Sales
D) (Sales – Total expenses) Sales

16. Fenestre
Corporation’s contribution margin ratio is 25%. The company’s break-even is
80,000 units and the selling price of its only product is $4.00 a unit. What
are the company’s fixed expenses?
A) $80,000
B) $320,000
C) $20,000
D) $120,000

17.

Which of the following is an equation
of a total cost function for a product with variable and fixed costs?

Y = a + bx

Y = a

Y = bx

Y = abx

18. Management
accounting is:
A) Fun.
B)
Fun.
C) Fun.
D) Fun.

19. Consider
a decision facing a company of either accepting or rejecting a special offer
for one of its products. A cost that is not relevant is:
A) direct materials.
B) variable overhead.
C) fixed overhead that will be
avoided if the special offer is accepted.
D) common fixed overhead that will continue if
the special offer is not accepted.

20.

In generating cost information for
determining whether or not to delete a product line, the most important
distinction to identify is:

direct versus indirect costs

fixed versus variable costs

manufacturing versus
non-manufacturing costs

avoidable
versus unavoidable costs

21. When
there is a production constraint, a company should emphasize the products
with:
A) the highest unit contribution
margins.
B) the highest contribution
margin ratios.
C) the highest contribution
margin per unit of the constrained resource.
D) the highest contribution
margins and contribution margin ratios.

22. Which of the following are valid reasons for eliminating a
product line?
I. The product line’s contribution margin is negative.
II. The product line’s traceable fixed costs plus its allocated common
corporate costs are less than its contribution margin.

A) Only I
B) Only II
C) Both I and II
D) Neither I nor II

23. Vanikoro
Corporation currently has two divisions which had the following operating
results for last year:

.0/msohtmlclip1/01/clip_image004.png””>

Since the Rubber Division sustained a loss,
the president of Vanikoro is considering the elimination of this division. All
of the fixed costs for the division could be eliminated if the division was
dropped except of the allocated corporate fixed costs. If the Rubber Division
was dropped at the beginning of last year, how much higher or lower would
Vanikoro’s total net operating income have been for the year?
A) $10,000
higher
B) $40,000 lower
C) $50,000 higher
D) $100,000 lower

24. Division
A makes a part that it sells to customers outside of the company. Data
concerning this part appear below:

.0/msohtmlclip1/01/clip_image006.png””>

Division B of the same company would like to use the part manufactured by
Division A in one of its products. Division B currently purchases a similar
part made by an outside company for $38 per unit and would substitute the part
made by Division A. Division B requires 5,000 units of the part each period.
Division A has ample capacity to produce the units for Division B without any
increase in fixed costs and without cutting into sales to outside customers. If
Division A sells to Division B rather than to outside customers, the variable
cost be unit would be $1 lower. What should be the lowest acceptable transfer
price from the perspective of Division A?
A) $40
B) $38
C) $30
D) $29

25. Division
X makes a part with the following characteristics:

.0/msohtmlclip1/01/clip_image008.png””>

26.
Media, Inc., an advertising agency,
applies overhead to jobs based on direct professional labor hours. Overhead was estimated to be $150,000, direct
professional labor hours were estimated to be 15,000, and direct professional
labor cost was projected to be $225,000.
During the year, Media incurred actual overhead costs of $146,000,
actual direct professional labor hours of 14,500, and actual direct labor cost
of $222,000. By year-end, the firms
overhead was:
A) $1,000 underapplied
B) $1,000
overapplied
C) $4,000
underapplied
D) $4,000
overapplied
E) $5,000
underapplied

27. Which of the following is the proper
sequence in an activity-based costing system?
A) Identification
of cost drivers, identification of cost pools, calculation of cost application
rates, assignment of cost to products.
B) Identification of cost pools,
identification of cost drivers, calculation of cost application rates, assignment
of cost to products.
C) Assignment
of cost to products, identification of cost pools, identification of cost
drivers, calculation of cost application rates,.
D) Calculation
of cost application rates, identification of cost drivers, identification of
cost pools, assignment of cost to products.

28. Which of the following statements is
true?
A) A
traditional volume-based system based on direct labor generally undercosts high
volume product lines.
B) In
a traditional volume-based costing system based on direct labor, low volume
products generally subsidize high volume products.
C) An
activity-based costing system generally undercosts low-volume, complex product
lines.
D) A
traditional volume-based costing system based on direct labor generally undercosts
low-volume, complex product lines.

29. Hamilton Company applies overhead based
on direct labor hours. At the beginning
of 2005, the company estimated that manufacturing overhead would be $700,000,
and direct labor hours would be 10,000. Actual overhead by the conclusion of
2005 amounted to $800,000 and actual direct labor hours were 14,000. On the
basis of this information, Horton’s 2005 predetermined overhead rate is:
A) $50.00
B) $70.00
C) $80.00
D) $57.14

30. Sunshine Company currently uses
traditional costing procedures, applying $400,000 of overhead to products X and
Y on the basis of direct labor hours.
The firm is considering a shift to activity-based costing and the
creation of individual cost pools that will use direct labor hours (DLH),
production setups (SU), and number of parts components (PC) as cost
drivers. Data on the cost pools and
respective driver volumes follow.

Product

Pool No. 1
(Driver: DLH)

Pool No. 2
(Driver: SU)

Pool No. 3
(Driver: PC)

400

1,300

600

700

Pool Cost

$160,000

$140,000

$100,000

The overhead cost allocated to product Y by using traditional costing procedures would
be:

A) $ 36,000.
B) $160,000.
C) $240,000.
D) $266,000.
E) $300,000

You MUST show
your work to receive credit for your answers and to receive partial
credit. Please try to be as neat and
organized as possible.

Problem 1
.0/msohtmlclip1/01/clip_image009.png””> The Koski Company has established standards as
follows:

.0/msohtmlclip1/01/clip_image011.png””>

Actual production figures for the past year were as follows:

.0/msohtmlclip1/01/clip_image013.png””>
Direct material purchased (1,600 pounds) $6,560
.0/msohtmlclip1/01/clip_image014.png””>
Required:

A. What is the materials price variance (amount and
favorable or unfavorable)?

B. What is materials quantity variance (amount and
favorable or unfavorable)?

C. What is the labor rate variance (amount and
favorable or unfavorable)?

D. What is the labor efficiency variance (amount and
favorable or unfavorable)?

Problem 2
The constraint at Bulman Corporation is time on a
particular machine. The company makes three products that use this machine.
Data concerning those products appear below:

.0/msohtmlclip1/01/clip_image016.png””>

B) In what order should the company produce the
three products in case of a machine breakdown that limits the available
processing time on the machine?

Problem
3

Ryland, Inc., manufactures two products, Regular and
Deluxe. Ryland uses a traditional
costing system and applies overhead on the basis of direct labor hours (cost
driver). Anticipated overhead and direct
labor time for the upcoming accounting period are $1,600,000 and 25,000 hours,
respectively. Information about the
company’s products follows.

REGULAR

DELUXE

Estimated total production volume

3,000 units

4,000 units

Direct materials cost (per unit)

$28

$42

Direct labor cost (per unit)

$45 (3 hrs @ $15/hr)

$60 (4 hrs @ $15/hr)

Recently,
the controller of Ryland, Inc. began to wonder whether the company was
accurately costing its products, so she decided to try-out activity based
costing (ABC).

The
controller identified three major activities: order processing, machine
processing, and product inspection.
These activities are driven by number of orders processed, machine hours
worked, and inspection hours, respectively.
Rylands budgeted total overhead of $1,600,000 is subdivided as follows:
order processing, $250,000; machine processing, $1,200,000; and product
inspection, $150,000.

Data
relevant to these activities follow.

Orders
Processed

Machine Hours Worked

InspectionHours

Regular

320

16,000

4,000

Deluxe

180

24,000

6,000

Total

500

40,000

10,000

Required:
A. What is the unit
cost of REGULAR under both the
current costing system and ABC costing system?

B.
Is the DELUXE product line under or over costed by the
traditional costing system?
Explain.

Midwest
Motors manufactures automobiles. Which
of the following would not be considered direct materials by the company? A) Sheet metal used in automobiles body. B) Tires. C) Interior leather.D) CD
Player.E)
Wheel lubricant.2.Which
of the following is a product cost?A)Glass in an automobileB)AdvertisingC)The
salary of the vice presidentD)Insurance
for factory building.3.The
corporate controller’s salary would be considered a(n):A)manufacturing
cost.B)product
cost.C)administrative cost.D)selling
expense.4.Manufacturing
overhead:A)can
be either a variable cost or a fixed cost.B)includes
the costs of advertising.C)includes all factory labor costs.D)includes
all fixed costs.5.Which
one of the following costs should NOT be considered an indirect cost of
serving a particular customer at a Dairy Queen fast food outlet?A)the cost of the hamburger patty in
the burger they ordered.B)the
wages of the employee who takes the customer’s order.C)the
cost of heating and lighting the kitchen.D)the
salary of the outlet’s manager.6.Which of the following statements
represents a similarity between financial and managerial accounting?A)Both
are useful in providing information for external users.B)Both
are governed by GAAP.C)Both draw upon an organizations
accounting system.D)Both
rely heavily on published financial statements.7. The accounting
records of Hill Corporation revealed the following selected costs: Sales
commissions, $40,000; plant supervision, $94,000; and administrative expenses,
$185,000. Hill’s period costs total: A) $40,000. B) $94,000. C) $185,000. D) $225,000. E) $319,000.8.An employee accidentally
overstated the year’s advertising expense by $50,000. Which of the following correctly depicts
the effect of this error?A)Cost of goods
manufactured will be overstated by $50,000.B)Cost of goods sold will
be overstated by $50,000.C)Both cost of goods
manufactured and cost of goods sold will be overstated by $50,000. D)None of the above.9.If there is a change in
the level of the number of units produced:A)fixed
costs per unit will be the same and variable costs per unit will change.B)fixed and variable costs per unit
will change.C)fixed and variable costs per unit
will remain the same.D)fixed costs per unit will change and
variable costs per unit will be the same.10.Which of the following will decrease
a companys breakeven point?A)Decreasing the contribution margin
per unit.B)Increasing the variable cost per
unit.C)Increasing the total fixed costs.D)Increasing
the selling price per unit.11.When 10,000 units are produced,
variable costs are $18 per unit. Therefore, when 30,000 units are produced
variable costs will:A)will total $540,000. B)decrease to $12 per unit. C)decrease to $6 per unit.D)increase
to $54 per unitUse the following graph for the
following question (question 12):.0/msohtmlclip1/01/clip_image002.png””>12.
In the graph (above) the line
C represents:A)
fixed
cost lineB)
variable cost line C)
total revenue line D)
total cost lineE)
profit line13.
At a break-even point of
400 units sold, variable expenses were $4,000 and fixed expenses were $2,000.
What will the 401st unit sold contribute to profit? A) $0B) $5C) $10D) $1514. North Company
sells a single product. The product has a selling price of $30 per unit and
variable expenses of 70% of sales. If the company’s fixed expenses total
$60,000 per year, then it will have a break-even of:
A) $60,000
B) $85,714
C) $42,000
D) $200,00015. Which of the
following formulas is used to calculate the contribution margin ratio?
A) (Sales – Fixed expenses) Sales
B) (Sales – Cost of goods
sold) Sales
C) (Sales – Variable expenses) Sales
D) (Sales – Total expenses) Sales16. Fenestre
Corporation’s contribution margin ratio is 25%. The company’s break-even is
80,000 units and the selling price of its only product is $4.00 a unit. What
are the company’s fixed expenses?
A) $80,000
B) $320,000
C) $20,000
D) $120,00017.Which of the following is an equation
of a total cost function for a product with variable and fixed costs?A)Y = a + bx B)Y = aC)Y = bxD)Y = abx18. Management
accounting is: A) Fun. B)
Fun. C) Fun.D) Fun.19. Consider
a decision facing a company of either accepting or rejecting a special offer
for one of its products. A cost that is not relevant is:
A) direct materials.
B) variable overhead.
C) fixed overhead that will be
avoided if the special offer is accepted.
D) common fixed overhead that will continue if
the special offer is not accepted.20.In generating cost information for
determining whether or not to delete a product line, the most important
distinction to identify is: A)direct versus indirect costsB)fixed versus variable costsC)manufacturing versus
non-manufacturing costsD)avoidable
versus unavoidable costs21. When
there is a production constraint, a company should emphasize the products
with:
A) the highest unit contribution
margins.
B) the highest contribution
margin ratios.
C) the highest contribution
margin per unit of the constrained resource.
D) the highest contribution
margins and contribution margin ratios.22. Which of the following are valid reasons for eliminating a
product line?
I. The product line’s contribution margin is negative.
II. The product line’s traceable fixed costs plus its allocated common
corporate costs are less than its contribution margin.
A) Only I
B) Only II
C) Both I and II
D) Neither I nor II23. Vanikoro
Corporation currently has two divisions which had the following operating
results for last year: .0/msohtmlclip1/01/clip_image004.png””> Since the Rubber Division sustained a loss,
the president of Vanikoro is considering the elimination of this division. All
of the fixed costs for the division could be eliminated if the division was
dropped except of the allocated corporate fixed costs. If the Rubber Division
was dropped at the beginning of last year, how much higher or lower would
Vanikoro’s total net operating income have been for the year? A) $10,000
higher
B) $40,000 lower
C) $50,000 higher
D) $100,000 lower24. Division
A makes a part that it sells to customers outside of the company. Data
concerning this part appear below:

.0/msohtmlclip1/01/clip_image006.png””>

.0/msohtmlclip1/01/clip_image008.png””>

Division Y of the same company would like to purchase 10,000 units each period
from Division X. Division Y now purchases the part from an outside supplier at
a price of $17 each.Suppose Division X has ample excess capacity to handle all
of Division Y’s needs without any increase in fixed costs and without cutting
into sales to outside customers. If Division X refuses to accept the $17 price
internally and Division Y continues to buy from the outside supplier, the
company as a whole will be:
A) worse off by $70,000 each
period.
B) better off by $10,000 each
period.
C) worse off by $60,000 each period.
D) worse off by $20,000 each
period.26.
Media, Inc., an advertising agency,
applies overhead to jobs based on direct professional labor hours. Overhead was estimated to be $150,000, direct
professional labor hours were estimated to be 15,000, and direct professional
labor cost was projected to be $225,000.
During the year, Media incurred actual overhead costs of $146,000,
actual direct professional labor hours of 14,500, and actual direct labor cost
of $222,000. By year-end, the firms
overhead was:A) $1,000 underappliedB) $1,000
overappliedC) $4,000
underappliedD) $4,000
overappliedE) $5,000
underapplied27. Which of the following is the proper
sequence in an activity-based costing system?A) Identification
of cost drivers, identification of cost pools, calculation of cost application
rates, assignment of cost to products.B) Identification of cost pools,
identification of cost drivers, calculation of cost application rates, assignment
of cost to products.C) Assignment
of cost to products, identification of cost pools, identification of cost
drivers, calculation of cost application rates,.D) Calculation
of cost application rates, identification of cost drivers, identification of
cost pools, assignment of cost to products.28. Which of the following statements is
true?A) A
traditional volume-based system based on direct labor generally undercosts high
volume product lines.B) In
a traditional volume-based costing system based on direct labor, low volume
products generally subsidize high volume products.C) An
activity-based costing system generally undercosts low-volume, complex product
lines.D) A
traditional volume-based costing system based on direct labor generally undercosts
low-volume, complex product lines.29. Hamilton Company applies overhead based
on direct labor hours. At the beginning
of 2005, the company estimated that manufacturing overhead would be $700,000,
and direct labor hours would be 10,000. Actual overhead by the conclusion of
2005 amounted to $800,000 and actual direct labor hours were 14,000. On the
basis of this information, Horton’s 2005 predetermined overhead rate is:A) $50.00B) $70.00C) $80.00 D) $57.14 30. Sunshine Company currently uses
traditional costing procedures, applying $400,000 of overhead to products X and
Y on the basis of direct labor hours.
The firm is considering a shift to activity-based costing and the
creation of individual cost pools that will use direct labor hours (DLH),
production setups (SU), and number of parts components (PC) as cost
drivers. Data on the cost pools and
respective driver volumes follow. ProductPool No. 1(Driver: DLH)Pool No. 2(Driver: SU)Pool No. 3(Driver: PC)X400251,300Y60075 700Pool Cost$160,000$140,000$100,000 The overhead cost allocated to product Y by using traditional costing procedures would
be: A) $ 36,000. B) $160,000. C) $240,000. D) $266,000.E) $300,000 You MUST show
your work to receive credit for your answers and to receive partial
credit. Please try to be as neat and
organized as possible.Problem 1 .0/msohtmlclip1/01/clip_image009.png””> The Koski Company has established standards as
follows:

.0/msohtmlclip1/01/clip_image011.png””>

Actual production figures for the past year were as follows:

.0/msohtmlclip1/01/clip_image013.png””>Direct material purchased (1,600 pounds) $6,560.0/msohtmlclip1/01/clip_image014.png””> Required:

A. What is the materials price variance (amount and
favorable or unfavorable)?

B. What is materials quantity variance (amount and
favorable or unfavorable)?

C. What is the labor rate variance (amount and
favorable or unfavorable)?

D. What is the labor efficiency variance (amount and
favorable or unfavorable)?

Problem 2The constraint at Bulman Corporation is time on a
particular machine. The company makes three products that use this machine.
Data concerning those products appear below:

.0/msohtmlclip1/01/clip_image016.png””>

Assume that sufficient time is available on the constrained machine to satisfy
demand for all but the least profitable product. RequiredA) What is the contribution margin per constrained
resource for each product?B) In what order should the company produce the
three products in case of a machine breakdown that limits the available
processing time on the machine? Problem
3Ryland, Inc., manufactures two products, Regular and
Deluxe. Ryland uses a traditional
costing system and applies overhead on the basis of direct labor hours (cost
driver). Anticipated overhead and direct
labor time for the upcoming accounting period are $1,600,000 and 25,000 hours,
respectively. Information about the
company’s products follows. REGULARDELUXEEstimated total production volume3,000 units4,000 unitsDirect materials cost (per unit)$28$42 Direct labor cost (per unit)$45 (3 hrs @ $15/hr)$60 (4 hrs @ $15/hr)Recently,
the controller of Ryland, Inc. began to wonder whether the company was
accurately costing its products, so she decided to try-out activity based
costing (ABC). The
controller identified three major activities: order processing, machine
processing, and product inspection.
These activities are driven by number of orders processed, machine hours
worked, and inspection hours, respectively.
Rylands budgeted total overhead of $1,600,000 is subdivided as follows:
order processing, $250,000; machine processing, $1,200,000; and product
inspection, $150,000.Data
relevant to these activities follow. Regular32016,000 4,000Deluxe18024,000 6,000Total50040,00010,000 Required:A. What is the unit
cost of REGULAR under both the
current costing system and ABC costing system?B.
Is the DELUXE product line under or over costed by the
traditional costing system?
Explain. “

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