3. (TCO 1) A retailer purchased some trendy clothes that have gone out of style and must be marked down to 40% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? (Points: 4)
the current selling price
the original selling price
the original purchase price
the anticipated profit
4. (TCO 1) Shula’s 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. What is the budgeted fixed cost per unit? (Points: 4)
5. (TCO 1) Which of the following costs is part of manufacturing overhead? (Points: 4)
salaries for the accounting personnel
wages for the janitorial staff for the sales offices
6. (TCO 1) Which of the following is a period cost? (Points: 4)
rent on a factory building
depreciation on production equipment
raw materials cost
commissions paid on each unit sold
7. (TCO 1) Red Runner’s Work in Process Inventory account has a beginning balance of $50,000 and an ending balance of $40,000. Direct materials used are $70,000 and direct labor used totals $35,000. Cost of goods sold totals $135,000. Manufacturing overhead applied is $20,000. How much is cost of goods manufactured? (Points: 4)
8. (TCO 2) Lanking Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for August follows:
Direct labor hours
Direct labor cost
How much is the predetermined overhead rate? (Points: 4)
9. (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? (Points: 4)
10. (TCO 3) Companies in which of the following industries would not be likely to use process costing? (Points: 4)
auto body shop
11. (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 Department’s work in process inventory at the end of the period? (Points: 4)
12. (TCO 3) During March, the varnishing department incurred costs of $90,250 for direct labor. The beginning inventory was 3,500 units and 10,000 units were transferred to the varnishing department from the sanding department during June. The direct labor cost in the beginning inventory was $27,270. The ending inventory consisted of 2,000 units, which were 25% complete with respect to direct labor. What is the cost per equivalent unit for direct labor? (Points: 4)
13. (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? (Points: 4)
1. (TCO 4) The margin of safety is the difference between (Points: 4)
total revenue and total fixed costs.
expected level of sales and the break-even point.
budgeted fixed costs and actual fixed costs.
selling price and variable cost per unit.
2. (TCO 4) Werth Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 units at a price of $20 per unit. How much is the break-even point in units? (Points: 4)
3. (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? (Points: 4)
4. (TCO 5) Which of the following is treated differently in full costing than in variable costing? (Points: 4)
Fixed manufacturing overhead
Variable manufacturing overhead
5. (TCO 5) Variable costing income is a function of: (Points: 4)
Units sold only.
Units produced only
Both units sold and units produced.
Neither units sold nor units. produced
6. (TCO 5) Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are:
Direct Material per unit
Direct Labor per unit
Variable manufacturing overhead per unit
Fixed manufacturing overhead per year
In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is cost of goods sold using full costing? (Points: 4)
7. (TCO 6) Which of the following is not a reason that companies allocate costs? (Points: 4)
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
To provide information needed by managers to make appropriate decisions
8. (TCO 6) Which of the following statements about cost pools is not
true? (Points: 4)
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. (TCO 6) AC Consulting Company has purchased a new $18,038 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. Each department has estimated the number of copies which will be made over the life of the copier.
If cost allocations are computed to four significant digits and the purchasing department makes 58,000 copies this year, how much overhead will be allocated to purchasing? (Points: 4)
10. (TCO 7) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision? (Points: 4)
The selling price of the completed units.
The costs incurred to process the units to this point.
The selling price of the partially completed units.
The costs that will be incurred to finish the units.
11. (TCO 7) BigByte Company has 12 obsolete computers that are carried in inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300. Alternatively, the computers could be sold "as is" for $9,000. What is the net advantage or disadvantage of reworking the computers? (Points: 4)
12. (TCO 7) Olde Store has 12,000 cans of crab meat just a week past the expiration date. Each can cost $0.31. The cans could be sold as is for $0.20 each, or relabeled and sold as gourmet cat food. The cost of relabeling the cans would be $0.04 per can and the cans would then sell for $0.29 per can. What should be done with the cans and why? (Points: 4)
The cans should be thrown away since there will be a loss with the other alternatives.
The cans should be relabeled into cat food since the sales price increases $0.09 per can and the cost is only $0.04 per can.
The cans should be put on clearance since there is no reason to put more money into something that is already selling below cost.
It doesn’t matter what you do since all alternatives result in a loss.