1. Which of the following is not a difference between financial accounting and managerial accounting?
A) Financial accounting is primarily concerned with reporting the past, while managerial accounting is more concerned with the future.
B) Managerial accounting uses more nonmonetary information than is used in financial accounting.
C) Managerial accounting is primarily concerned with providing information for external users while financial accounting is concerned with internal users.
D) Financial accounting must follow GAAP while managerial accounting is not required to follow GAAP.
2. Variable cost per unit:
A) increases when the number of units produced increases.
B) Does not change when the number of units produced increases.
C) decreases when the number of units produced increases.
D) decreases when the number of units produced decreases.
3. 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?
A) the trip to Cancun that you will not be able to take if you buy the car
B) the cost of the car you are trading in
C) the cost of your books for this term
D) the cost of your car insurance last year
4. Shula’s 347 Grill has budget 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 total variable cost?
5. Which of the following costs is not part of manufacturing overhead?
A) electricity for the factory
B) depreciation of factory equipment
C) salaries for the production supervisors
D) health insurance for sales staff
6. Which of the following is not a period cost?
A) Advertising costs
B) accounting staff salaries
C) direct materials
D) depreciation of accounting office equipment
7. 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?
8. BCS Company applies manufacturing overhead based on direct labor cost. Information concerning manufacturing overhead and labor for August follows:
Overhead cost $174,000 $171,000
Direct labor hours 5,800 5,900
Direct labor cost $87,000 $89,975
How much is the predetermined overhead rate?
9. During 2011, Magus Company applied overhead using a job-order costing system at a rate of $12 per direct labor hours. Estimated direct labor hours for the year were 150,000, and estimated overhead for the year was $1,800,000. Actual direct labor hours for 2011 were 140,000 and actual overhead was $1,700,000.
What the amount of under or is over applied overhead for the year?
A) $100,000 under applied
B) $20,000 under applied
C) $100,000 over applied
D) $120,000 under applied
10. Companies in which of the following industries would not be likely to use process costing?
D) auto body shop
11. Caliente Company uses process costing. At the beginning of the month, there were 3,000 units in process, 70% complete with respect to material and 60% complete with respect to conversion costs. 20,000 units were started during the month and 20,000 units were completed. The units in ending work in process inventory were 90% complete with respect to material and 30% complete with respect to conversion costs. How many equivalent units will be used in calculating the cost per unit for materials?
12. 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?
13. 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?
1. The margin of safety is the difference between
B) Expected level of sales and the break-even point.
C) Budgeted fixed costs and actual fixed costs.
D) Selling price and variable cost per unit.
2. 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?
3. Paula Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is Paula’s margin of safety?
4. In variable costing, when does fixed manufacturing overhead become an expense?
B) In the period when the product is sold
C) In the period when the expense is incurred
D) In the period when other expenses are at the lowest level
5. Which of the following items on a variable costing income statement will change in direct proportion to a change in sales?
A) Sales, contribution margin, fixed costs
B) Sales, variable costs, contribution margin
C) Sales, variable costs, contribution margin, fixed costs
D) Sales, variable costs, and fixed costs
6. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are:
Direct Material per unit $20
Direct Labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year $148,500
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?
7. Which of the following is not a reason that companies allocate costs?
A) To calculate the full cost of products for financial reporting purposes
B) To discourage managers from using external suppliers
C) To reduce the frivolous use of company resources
D) To provide information needed by managers to make appropriate decisions
8. An allocation base:
A) Is the minimum amount to be allocated to a cost object.
B) Coordinates the manufacturing overhead costs as they are incurred.
C) Will always be less than the variable costs for a product.
D) Relates the cost pool to the cost objectives.
9. Sierra Company allocates the estimated $200,000 of its accounting department costs to its production and sales departments because the accounting department supports the other two departments, particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:
How much of the accounting department costs will be allocated to the production and sales departments?
A) Production: $150,000 Sales: $50,000
B) Production: $180,000 Sales: $60,000
C) Production: $1,800,000 Sales: $600,000
D) Production: $22,222 Sales: $66,667
10. A company is currently making a necessary component in house (the company is producing the component for its own use). The company has received an offer to buy the component from an outside supplier. A machine is being rented to make the component. If the company were to buy the component, the machine would no longer be rented. The rent on the machine, in relation to the decision to make or buy the component, is:
A) sunk and therefore not relevant.
B) Avoidable and therefore not relevant.
C) Avoidable and therefore relevant.
D) Unavoidable and therefore relevant.
11. Ricket Company has 1,500 obsolete calculators that are carried in inventory at a cost of $13,200. If these calculators are upgraded at a cost of $9,500, they could be sold for $22,500. Alternatively, the calculators could be sold "as is" for $9,000. What is the net advantage or disadvantage of reworking the calculators?
A) $13,000 advantage
B) $4,000 advantage
C) $9,200 disadvantage
D) $200 disadvantage
12. YXZ Company’s market for the Model 55 has changed significantly, and YXZ has had to drop the price per unit from $275 to $135. There are some units in the work in process inventory that have costs of $160 per unit associated with them. YXZ could sell these units in their current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be sold for $135 each.
Which of the following is the amount of sunk costs in this problem?
A) $160 per unit
B) $10 per unit
C) $125 per unit
D) $100 per unit