Process Costing Example for Lakeland Chemical

https://clicktime.symantec.com/3Ai2CoKfZZUH6oDafEeaS1F7Vc?u=https%3A%2F%2Fconnect.mheducation.
com%2Fclass%2F
Sl Key Word
1 Peyton - What is DMC?
2 Harrison - What is COGM?
3 Dorsett - What is COGS?
4 Beckett - Cost of Material used in April?
5 Younkin Corporation - What is Period Cost?
6 Shu Corporation
7 Stingray - What is COGS?
8 Variable Cost
9 Variable Cost
10 Rainier
11 Upton - What is COGS?
12 Amaz-a-Nation
13 Not considered a direct cost of Service Dept
14 Fixed Cost
15 Fixed Cost
16 Bicycle problem - What is sunk cost?
17 Not an example of Variable Cost?
18 Low Production & One-of-Kind
19 Tempest
20 Dixon Company
21 Branson
22 Texas Plating - Balance WIP Inventory
23 Falcon - What is COGM?
Sl Question
Use the following labor budget data for Roy &

Miller Accounting, LLP.
1 If overhead is applied on the Monoco
engagement based on a single-cost driver
basis,
what is the total cost of the engagement?

2 Miller Accounting, LLP.
What is the overhead rate for partners, if
separate rates are used for partners and staff
accountants?
Miller Accounting, LLP.
The budgeted overhead cost for the year is
$1,260,000. The company has estimated that
one-third of the budgeted overhead cost is
3 incurred to support the firm’s two partners,
and two-thirds goes to support the staff
accountants. The current audit bid for
Monoco Industries requires $18,000 in direct
partner professional labor, $30,000 in direct
staff accountant professional labor, $5,000 in
direct material.
What is the overhead rate based on a single
cost driver (rounded to the nearest
percentage)?
4
Which of the following statements is true?
Dubois Decors is an interior decorator in St.

Louis, Missouri. The following costs were
incurred in the firm’s contract to redecorate a
5 corporate CEO’s office.
Overhead is applied to contracts using a
predetermined overhead rate calculated
annually. The rate is based on direct
professional labor cost.
What is the total cost of the firm’s contract to

redecorate the CEO’s office?
Osgood Company, which applies overhead at

6 the rate of 190% of direct material cost,
began work on job no. 101 during June
On the basis of this information, the total
overhead applied to job no. 101 amounted to:
7 Which of the following types of companies
would most likely use process costing?
8 If the amount of effort and attention to

products varies substantially throughout a
company's various manufacturing operations,
the company might consider the use of:
Morgan Manufacturing recently sold goods

9 that cost $35,000 for $45,000 cash. The
journal entries to record this transaction
would include:
Barnacle Industries incurred and applied the
following manufacturing costs:
10 During 20x2, Barnacle finished products
costing $78,000. Products costing $32,500
were sold for $41,600. What is the balance of
Finished Goods on Barnacle’s balance sheet
as of December 31, 20x2?
Barnacle Industries incurred and applied the

following manufacturing costs:
11 During 20x2, Barnacle finished products
costing $78,000. Products costing $32,500
were sold for $41,600. What is the balance of
Work-in-Process on Barnacle’s balance sheet
as of December 31, 20x2?
Douglas, Inc., employs a normal costing

12 system. The following information pertains to
the year just ended.
Based on this information, what is the total
direct-labor cost for the year?

system. The following information pertains to
13 the year just ended.
Based on this information, what is the value
of the company’s work-in-process inventory
on December 31.

system. The following information pertains to
14 the year just ended.
Based on this information, what amount is
the total cost of direct material used during
the year?
15 The final step in recognizing the completion
of production requires a company to:
Norwood Corporation uses a predetermined

16 overhead rate of $20 per machine hour. In
deriving this figure, the company's
accountant used:
17 Which of the following entities would not
likely be a user of job-costing systems?
18 Which of the following statements about
manufacturing cost flows is false?
Jetison Industries makes batches of custom
novelty items for companies to give away at
career fairs. Job X24 for Xcel Corporation
19 consists of 2,000 pens that light up inside the
pen base when you write. In addition, the
name and address of Xcel Corp. is printed on
the pens. Direct material for these pens
amount to $1,500; direct labor is $2,800; and
manufacturing overhead is $1,600. Based on
this information, what is the cost per pen for
Job X24?
20 Job-order costs are most useful for:
Blakely charges manufacturing overhead to

products by using a predetermined
21 application rate, computed on the basis of
machine hours. The following data pertain to
the current year:
Overhead applied to production totaled:
22 If a company sells goods that cost $80,000 for
$92,000, the firm will:
23
Manufacturing overhead:
24 Which of the following is not considered to be
a service department?
Metalica Company applies overhead based on

machine hours. At the beginning of 20x1, the
25 company estimated that manufacturing
overhead would be $500,000, and machine
hours would total 20,000. By 20x1 year-end,
actual overhead totaled $525,000, and actual
machine hours were 25,000. On the basis of
this information, the 20x1 predetermined
overhead rate was:
26 In the two-stage cost allocation process, costs
are assigned:
The primary difference between normalized
27 and actual costing methods lies in the
determination of a job's:
28 As production takes place, all manufacturing
costs are added to the:
The controller for Jack’s Rabbits, Inc.,
estimates that the company’s fixed overhead
is $150,000 per year. He also has determined
29 that the variable overhead is approximately
$0.20 per rabbit raised and sold. Since the
company has a single product, overhead is
applied on the basis of output units, or in
other words, rabbits raised and sold.
What is the predetermined overhead rate per
rabbit if the output estimate or prediction is
150,000 rabbits?
30 Which of the following is not a drawback of
actual costing?
Farrina Manufacturing uses a predetermined

31 overhead application rate of $8 per direct
labor hour. A review of the company's
accounting records for the year just ended
discovered the following:
Simone's actual labor hours worked totaled:
32 When selecting a volume-based cost driver,

the goal is to:
33 When using normal costing, the total

production cost of a job is composed of:
34 Which of the following statements about
manufacturing cost flows is false?
35 Which of the following manufacturers would
most likely use job-order costing?
36 Which of the following statements regarding
work in process is not correct?
37 Which of the following statements about the

use of direct labor as a cost driver is false?
38 The assignment of direct labor cost to
individual jobs is based on:
Sl Question
Lakeland Chemical manufactures a product
called Zing. Direct materials are added at the
beginning of the process, and conversion
activity occurs uniformly throughout
production. The beginning work-in-process
inventory is 60% complete with respect to
1 conversion; the ending work-in-process
inventory is 20% complete. The following
data pertain to May:
Using the weighted-average method of

process costing, the equivalent units of direct
materials total:

: Using the weighted-average method of

process costing, the cost per unit of
conversion activity is:

3
conversion; the ending work-in-process
Total conversion costs ÷ Equivalent units for

total conversion costs = $187,380 ÷ 69,400

process costing, the cost of goods completed
and transferred during May is:


process costing, the cost per unit of direct
materials is:

6 inventory is 20% complete. The following
Cost of good completed and transferred out =

Units completed and transferred out × (sum
of per unit costs for direct material and
conversion) = 68,000 × ($1.18 + 2.70) =
$263,840.
7
The equivalent units of conversion are equal

to Units completed and transferred out (100%
conversion) + Ending WIP (20% conversion) =
68,000 + (7,000 × 20%) = 69,400 units.

8
Total costs in Ending WIP = (Ending WIP

material equivalent units × Per unit cost for
materials) + (Ending WIP conversion
equivalent units × Per unit cost for conversion
costs) = (7,000 × $1.18) + (7,000 × 20% ×
$2.70) = $12,040.
Which of the following are needed under

weighted-average process costing to calculate
9
the cost of goods completed during the
period?
Which of the above are needed to calculate

the total cost of the ending work-in-process
10
inventory under the weighted-average
process-costing method?
Which of the following data are needed to

11 calculate total equivalent units under the
weighted-average method?
Covington Corporation uses a process-cost
accounting system. The company adds direct
materials at the start of its production
process; conversion cost, on the other hand,
is incurred evenly throughout manufacturing.
12 The firm has no beginning work-in-process
inventory; its ending work in process is 40%
complete. Which of the following sets of
percentages would be used to calculate the
correct number of equivalent units in the
ending work-in-process inventory?
Gambino Construction adds materials at the

beginning of production and incurs
conversion cost uniformly throughout
manufacturing. Consider the data that follow.
Conversion cost in the beginning work-in-

13 process inventory totaled $120,000, and
August conversion cost totaled $270,000.
Assuming use of the weighted-average
method, which of the following choices
correctly depicts the number of equivalent
units for conversion cost and the conversion
cost per equivalent unit?
Which of the following is true concerning cost

14 drivers for the predetermined overhead rate
in a process-costing system?
Equivalent-unit calculations are necessary to
15
allocate manufacturing costs between:
Agee Company uses a process-costing system

for its single product. Material A is added at
the beginning of the process; in contrast,
material B is added when the units are 50%
complete. The firm's ending work-in-process
inventory consists of 4,000 units that are 75%
16
complete.
Which of the following correctly expresses

the equivalent units of production with
respect to materials A and B in the ending
work-in-process inventory?
Ashley Corporation uses a process-cost
accounting system. The company adds direct
materials and direct labor at the start of its
production process; overhead cost is incurred
evenly throughout manufacturing. The firm
17 has no beginning work-in-process inventory;
its ending work in process is 40% complete.
Which of the following sets of percentages
would be used to calculate the correct
number of equivalent units in the ending
Peach Company uses a weighted-average

process-costing system. Company records
disclosed that the firm completed 40,000
units during the month and had 10,000 units
in process at month-end, 20% complete.
Conversion costs associated with the
18 beginning work-in-process inventory
amounted to $231,000, and amounts that
relate to the current month totaled $966,000.
If conversion is incurred uniformly throughout

manufacturing, Peach's equivalent-unit cost
is:
Bratton Corporation had 6,500 units of work

in process on April 1. During April, 19,100
units were completed and as of April 30,
19
5,100 units remained in production.
How many units were started during April?
When computing the conversion cost per

equivalent unit under the weighted-average
20
method of process costing, all of the following
information would be needed except:
Forte Co., had 3,000 units of work in process

on April 1 that were 60% complete. During
April, 11,000 units were started and as of
April 30, 4,000 units that were 40% complete
21
remained in production.
How many units were completed during

April?
When determining the cost of a
22 manufactured good under an operation-
costing system, a company would:
Claremore Industries uses a weighted-

average process-costing system. All materials
are added at the beginning of the process;
conversion costs are incurred evenly
throughout production. The company finished
40,000 units during the period and had
23
15,000 units in progress at year-end, the
latter at the 40% stage of completion. Total
material costs amounted to $220,000;
conversion costs were $414,000.
The cost of goods completed is:
Claremore Industries uses a weighted-

average process-costing system. All materials
are added at the beginning of the process;
conversion costs are incurred evenly
throughout production. The company finished
40,000 units during the period and had
24
15,000 units in progress at year-end, the
latter at the 40% stage of completion. Total
material costs amounted to $220,000;
conversion costs were $414,000.
The cost of the ending work in process is:
Xin Co., had 3,000 units of work in process on

April 1 that were 60% complete. During April,
10,000 units were completed and as of April
25 30, 4,000 units that were 40% complete

Universal Manufacturing uses a weighted-
average process-costing system.
All materials are introduced at the start of
manufacturing, and conversion costs are
incurred evenly throughout the process. The
company's beginning and ending work-in-
process inventories totaled 10,000 units and
26 15,000 units, respectively, with the latter
units being 2/3 complete at the end of the
period. Universal started 30,000 units into
production and completed 25,000 units.
Manufacturing costs follow.
Universal's equivalent-unit cost for materials

is:
Forrest Corporation, a new company, adds

material at the beginning of its production
process; conversion cost, in contrast, is
incurred evenly throughout manufacturing.
During May, the firm completed 15,000 units
27
and had ending work in process of 2,000
units, 60% complete. Equivalent-unit costs
were: materials, $15; conversion, $22.
The cost of Forrest’s completed production is:
Forrest Corporation, a new company, adds

material at the beginning of its production
process; conversion cost, in contrast, is
incurred evenly throughout manufacturing.
During May, the firm completed 15,000 units
28 and had ending work in process of 2,000
units, 60% complete. Equivalent-unit costs
were: materials, $15; conversion, $22.
The cost of the company's ending work-in-

process inventory is:
When calculating unit costs under the

29 weighted-average process-costing method,
the unit cost is based on:
Barton Corporation, which adds materials at

the beginning of production, uses a weighted-
average process-costing system. Consider the
30 data that follow.
The company's cost per equivalent unit for

materials is:
Mohawk Machining, which uses a process-
costing system, adds material at the
conversion cost evenly throughout
manufacturing. The following selected
31 information was taken from the company's
accounting records:
On the basis of this information, the ending

work-in-process inventory's stage of
completion is:
Norton Textile Co. manufactures a variety of

fabrics. All materials are introduced at the
beginning of production; conversion cost is
incurred evenly through manufacturing. The
Weaving Department had 2,000 units of work
in process on April 1 that were 30% complete
32 as to conversion costs. During April, 9,000
units were completed and on April 30, 4,000
units remained in production, 40% complete
with respect to conversion costs.
The equivalent units of conversion for April

total:
Linder Corporation had 8,200 units of work in

process on November 1. During November,
26,800 units were started and as of
November 30, 7,900 units remained in
33
production.
How many units were completed during

November?
Domkowski began operations on January 1 of

the current year. The company uses a
process-costing system, and conversion cost
is incurred evenly throughout manufacturing.
By January 31, the firm had completed 56,000
34 units.
Which of the following statements is true

about the ending work-in-process inventory if
equivalent units for conversion cost totaled
59,000 units?
35 Which of the following statements is false?

Frankenberger Company, which uses a
weighted-average process-costing system,
had 7,000 units in production at the end of
the current period that were 60% complete.
Material A is introduced at the beginning of
the process; material B is introduced at the
36
end of the process; and conversion cost is
introduced evenly throughout manufacturing.
Equivalent-unit production costs follow.
The cost of the company's ending work-in-

process inventory is:
Alton Company uses a process-costing system

for its single product. Material A is added at
the beginning of the process; in contrast,
material B is added when the units are 75%
complete. The firm's ending work-in-process
inventory consists of 6,000 units that are 80%
37
complete.
Which of the following correctly expresses

the equivalent units of production with
respect to materials A and B in the ending
St. Onge, Inc. uses a process-costing system.

A newly-hired accountant identified the
38
following procedures that must be performed
by the close of business on Friday:
Warren Industries uses a process-costing

system for its single product, which is
manufactured from Material X and Material
Y. X and Y are introduced to the product as
follows:
The company started and completed 40,000
39 units during the period, and had an ending
work-in-process inventory amounting to
8,000 units, 20% complete.
Which of the following choices correctly

expresses the total equivalent units of
production for Material X and Material Y?
Unit costs in a process-costing system are

40
derived by using:
Which of the following best describes the
procedures used in operation costing to
41
assign direct-material and conversion costs to
production?
Gutierrez, which uses a process-costing

system, adds all material at the beginning of
production and incurs conversion cost evenly
throughout manufacturing. The information
that follows relates to the period just ended:
42
expresses the total equivalent units of
production with respect to material and
conversion cost?
Oxford, Inc., which uses a process-cost

accounting system, began operations on
January 1 of the current year. The company
incurs conversion cost evenly throughout
43 manufacturing. If Oxford started work on
3,000 units during the period and these units
were 70% of the way through manufacturing,
it would be correct to say that the company
has:
Corrigan, Inc. overstated the percentage of

work completed with respect to conversion
cost on the ending work-in-process inventory.
44
What is the effect of this overstatement on
conversion-cost equivalent units and physical
units manufactured, respectively?
Fulton Corporation adds all materials at the

conversion cost evenly throughout
manufacturing. The company completed
45 70,000 units during the year and had 12,000
units in process at year end, 20% complete
with respect to conversion cost.
Equivalent units for the year total:
All of the following statements about an

46
operation-costing system are true except:
Sl Question
St. Vincent’s, Inc., currently uses traditional
costing procedures, applying $800,000 of
overhead to products Beta and Zeta on the
basis of direct labor hours. The company is
considering a shift to activity-based costing
and the creation of individual cost pools that
1 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.
The overhead cost allocated to Zeta by using

activity-based costing procedures would be

will use direct labor hours (DLH), production
2 setups (SU), and number of parts components
For above, The overhead cost allocated to

Zeta by using traditional costing procedures
would be


Beta by using activity-based costing
procedures would be:
will use direct labor hours (DLH), production
4

Beta by using traditional costing procedures
would be:
2: Which of the following activity cost pools

5 and activity measures likely has the lowest
degree of correlation?
3: Consider the following statements:
I. Product diversity creates costing problems

because diverse products tend to utilize
manufacturing activities in different ways.
II. Overhead costs that are not incurred at the
unit level create costing problems because
6
such costs do not vary with traditional
application bases such as direct labor hours or
machine hours.
III. Product diversity typically exists when a
single product (e.g., a ballpoint pen) is made
in different colors.
Which of the above statements is (are) true?
Which of the following statements is (are)

true about non-value-added activities?
I. Non-value-added activities are often

unnecessary and dispensable.
7 II. Non-value-added activities may be
necessary but are being performed in an
inefficient and improvable manner.
III. Non-value-added activities can be
eliminated without deterioration of product
quality, performance, or perceived value.
Edwards Company manufactures low-cost
wooden chairs and uses activity-based
costing. The following information is for the
month of March.
8
Each chair consists of 4 parts and the direct
materials cost per chair is $7.00.
Based on the information given for Edwards
Company, what is the cost of materials
handling and assembly per chair?
Carlin and Marley, an accounting firm,

provides consulting and tax planning services.
For many years, the firm's total administrative
cost (currently $270,000) has been allocated
to services on this basis of billable hours to
clients. A recent analysis found that 55% of
the firm's billable hours to clients resulted
from tax planning services, while 45%
resulted from consulting services.
The firm, contemplating a change to activity-

based costing, has identified three
components of administrative cost, as
follows:
9
A recent analysis of staff support found a
strong correlation with the number of clients
served. In contrast, in-house computing and
miscellaneous office cost varied directly with
the number of computer hours logged and
number of client transactions, respectively.
Consulting clients served totaled 35% of the
total client base, consumed 30% of the firm's
computer hours, and accounted for 20% of
the total client transactions.
If Carlin and Marley switched from its current

accounting method to an activity-based
costing system, the amount of administrative
cost chargeable to consulting services would:
Ice Land offers 2 types of skating lessons for
children—advanced and hockey skating
lessons. The company has two different
activities—skating instruction and
maintenance—that provide input into its cost
objectives. Data on estimated overhead for
10
the year follows:
The company provides 2,400 hockey skating

lessons and 1,200 advanced skating lessons
each year. How much overhead will be
assigned to each hockey skating lesson?
Fortner Technologies manufactures products

X and Y, applying overhead on the basis of
labor hours. X, a low-volume product,
requires a variety of complex manufacturing
procedures. Y, on the other hand, is both a
11 high-volume product and relatively simplistic
in nature. What would an activity-based
costing system likely disclose about products
X and Y as a result of Fortner’s current
accounting procedures?
Miami Production manufactures products X

and Y, applying overhead on the basis of labor
hours. X is a high-volume product and
relatively simplistic in nature. Y is both a low-
12 volume product and requires a variety of
complex manufacturing procedures. What
would an activity-based costing system likely
disclose about products X and Y as a result of
Miami’s current accounting procedures?
Colonial Company manufactures decorative

wall clocks and uses activity-based costing.
Each clock consists of 20 separate parts
totaling $95 in direct materials, and requires
13 2.5 hours of machine time to produce.
Additional information is as follows:
What is the cost of materials handling per

clock?
For above, What is the cost of assembling per

clock?

For above, What is the total manufacturing

cost per clock?

For above, What is the number of finished

clocks?

For above, What is the cost of machining per

clock?
Bridges and Lloyd, an accounting firm,
to services on the basis of billable hours to

follows:
18 A recent analysis of staff support found a

strong correlation between the number of
staff personnel and the number of clients
served (consulting, 20; tax planning, 60). In
contrast, in-house computing and
Consulting consumed 30% of the firm's
computer hours and had 20% of the total
client transactions.
If Bridges and Lloyd switched from its current

accounting method to an activity-based
costing system, the amount of administrative
cost chargeable to consulting services would:
Bridges and Lloyd, an accounting firm,
to services on the basis of billable hours to

follows:
19 A recent analysis of staff support found a

strong correlation between the number of
staff personnel and the number of clients
served (consulting, 20; tax planning, 60). In
contrast, in-house computing and
Consulting consumed 30% of the firm's
computer hours and had 20% of the total
client transactions.
For above, Assuming the use of activity-based

costing, the proper percentage to use in
allocating staff support costs to tax planning
services is
20 Consumption ratios are useful in determining:
The adoption of a 24/7 employee hotline for

21
workplace complaints is an example of a
22 The adoption of a 24/7 customer service help

line is an example of a:
Flagler Corporation takes eight hours to

complete the setup process for a certain
electrical component, with the setup cost
23 averaging $150 per hour. If the company's
competitor can accomplish the same process
in six hours, Flagler’s non-value-added cost
would be
Barnett Products manufactures three types of
remote-control devices: Economy, Standard,
and Deluxe. The company, which uses
activity-based costing, has identified five
activities (and related cost drivers). Each
24 activity, its budgeted cost, and related cost
driver is identified below.
Under Barnett’s activity-based costing system,

what is the per-unit overhead cost of
Economy?

25 activity, its budgeted cost, and related cost

what is the per-unit overhead cost of
Standard?

26
activity, its budgeted cost, and related cost

what is the per-unit overhead cost of Deluxe?

27
What is Barnett’s pool rate for the material-

insertion activity?
28
What is Barnett’s pool rate for the packaging

activity?

What is Barnett’s pool rate for the finishing

activity?
An example of a customer-value-added
29
activity is:
Pound Industries’ customer service

department follows up on customer
complaints by telephone inquiry. During a
recent period, the department initiated 7,000
calls and incurred costs of $203,000. If 2,940
30
of these calls were for the company's
wholesale operation (the remainder were for
the retail division),
costs allocated to the retail division should
amount to
Pound Industries’ customer service

department follows up on customer
complaints by telephone inquiry. During a
31 recent period, the department initiated 7,000
calls and incurred costs of $203,000. If 2,940
of these calls were for the company's
wholesale operation (the remainder were for
the retail division),
costs allocated to the wholesale operation
should amount to:
Flavorful Manufacturing sells a number of
goods whose selling price is heavily
32 influenced by cost. A recent study of product
no. 519 revealed a traditionally-derived total
cost of $1,019, a selling price of $1,850 based
on that figure, and a newly computed activity-
based total cost of $1,215.
Sleek, Inc. is a manufacturer that assigns cost

using activity-based costing principles.
33 Activities have been identified and classified
as being either value-added or non-value-
added as to each product.
Which of the following activities used in
Sleek’s production process is non-value-
added?
Dawg Town produces dog tags and bowls

with the name of your dog permanently
etched into a stainless steel label. Indirect
etching costs are allocated to tags and bowls
based on the amount of time spent on the
laser etching machine. The company has
34
budgeted etching costs of $4,224 per month
and expects to spend 4,800 hours on the
etching labels each month. Each dog tag uses
24 minutes and each bowl uses 6 minutes of
laser etching time. How much of the etching
costs will be allocated to each dog tag?
Skyline Florists uses an activity-based costing

system to compute the cost of making floral
bouquets and delivering the bouquets to its
commercial customers. Company personnel
who earn $180,000 typically perform both
tasks; other firm-wide overhead is expected
to total $70,000. These costs are allocated as
35 follows:
Skyline anticipates making 20,000 bouquets

and 4,000 deliveries in the upcoming year.
The cost of wages and salaries and other

overhead that would be charged to each
bouquet made is:
Skyline Florists uses an activity-based costing
system to compute the cost of making floral
bouquets and delivering the bouquets to its
commercial customers. Company personnel
who earn $180,000 typically perform both
tasks; other firm-wide overhead is expected
to total $70,000. These costs are allocated as
36 follows:
Skyline anticipates making 20,000 bouquets

and 4,000 deliveries in the upcoming year.
The cost of wages and salaries and other

overhead that would be charged to each
delivery is closest to:
Baxter customer service department follows

up on customer complaints by telephone
inquiry. During a recent period, the
department initiated 10,000 calls and
37 incurred costs of $312,000. Of these calls,
3,800 were for the company's wholesale
operation; the remainder was for the retail
division.
Costs allocated to the retail division are:
Rocket Products manufactures three types of

38
Assume that Rocket is using a volume-based
costing system, and the preceding overhead
costs are applied to all products on the basis
of direct labor hours.
The overhead cost that would be assigned to
the Deluxe product line is closest to:
Rocket Products manufactures three types of
39
Assume that Rocket is using a volume-based
costing system, and the preceding overhead
costs are applied to all products on the basis
of direct labor hours.
For above, The overhead cost that would be
assigned to the Standard product line is
closest to:
If Fowler Corporation changes to activity-

40 based costing (ABC), this method normally
results in:
During a recent accounting period, Falcon

Express’ shipping department processed 26
orders. Each order typically takes four hours
to complete. However, the average time
41
increased to five hours because of various
departmental inefficiencies. If shipping labor
is paid $14 per hour, the company's non-
value-added cost would be:
Magnolia Industries combines all

manufacturing overhead into a single cost
pool and allocates this overhead to products
42
by using machine hours. Activity-based
costing would likely show that with
Magnolia’s current procedures that:
Cozy Nights Industries manufactures down-

filled comforters and uses activity-based
costing. The following information is provided
for September.
43 Each comforter consists of 4 parts and the
direct materials cost per comforter is $14.00.
Based on the information given for Cozy

Nights Industries, what is the total
manufacturing cost per comforter?
for September.
Each comforter consists of 4 parts and the
44 direct materials cost per comforter is $14.00.
For above, If the cost of purchasing nearly

the same comforter from a supplier is $88.80,
what should Cozy Night do to maximize
profits?

for September.
Each comforter consists of 4 parts and the
45
direct materials cost per comforter is $14.00.
Based on the information given for Cozy

Nights Industries, what is the cost of materials
handling and assembly per comforter?
Arnold Corporation's customers differ greatly

with respect to number of required sales
contacts (e.g., phone calls and sales visits),
46 account payment patterns, and
design/engineering change orders.
Which of the following choices likely denotes
an ideal customer from Arnold’s perspective?
Motor Mike builds recreational motor homes.

47 All of the following activities add value to the
finished product except:
International Gems sells fine jewelry and has
implemented activity-based costing. Costs in
the shipping department have been divided
into three cost pools. The first cost pool
contains costs that are related to packaging
and shipping. International has determined
that the number of boxes shipped is an
appropriate cost driver for these costs. The
second cost pool is made up of costs related
to the final inspection of each item before it is
shipped and the cost driver for this pool is the
48 number of individual items that are
inspected. The final cost pool is used for
general operations of the department and the
cost driver is the number of orders.
Information about the activities is
summarized below:
During December, 4,000 items were sold,

reflecting 800 orders that were packed and
shipped in 2,100 boxes. What amount is
allocated to each order for general operations
of the department?

summarized below:
During the period, the Southern sales office

generated 240 orders for a total of 3,560
items, which were shipped in 1,200 boxes.
What amount of shipping department costs
should be allocated to these sales?
summarized below:
An order is shipped to a retail customer who

has ordered 6 individual items. This order will
be shipped in 3 separate boxes. What is the
packing and shipping cost that will be
allocated to the order?

51 to the final inspection of each item before it is
number of individual items that are
summarized below:
Which of the following would activity-based

52
costing most likely lead to?
Starwatch Manufacturing sells a number of
goods whose selling price is heavily
influenced by cost. A recent study of product
no. 520 revealed a traditionally-derived total
53 cost of $1,623 and a selling price of $1,850
based on that figure. A newly computed
activity-based total cost is $1,215.

The overhead cost allocated to Beta by using

activity-based costing procedures would be:

The overhead cost allocated to Beta by using

traditional costing procedures would be:
Towler Inc. manufactures products J and K,
applying overhead on the basis of labor
hours. J, a low-volume product, requires a
variety of complex manufacturing
procedures. K, on the other hand, is both a
56
high-volume product and relatively simplistic
in nature. What would an activity-based
costing system likely disclose about products J
and K as a result of Towler’s current
accounting procedures?
Sl Question
Food Mart produces gourmet cookies, which

sell for $16 a basket. Variable costs per basket
are $6 and fixed costs are $5,000 per month.
1
If Food Mart expects to sell 1,500 baskets of
cookies, what is the margin of safety in
number of baskets?
The contribution income statement differs

2 from the traditional income statement in
which of the following ways?
3 Narchie
Triangular graph
Refer to the figure above. The triangular area
4
between the horizontal axis and Line A, to the
left of 4,000, represents:
Narchie sells a single product for $50.

Variable costs are 60% of the selling price,
5 and the company has fixed costs that amount
to $400,000. Current sales total 16,000 units.
Break even units?

and the company has fixed costs that amount
6
If Narchie sells 24,000 units, its safety margin
will be:

and the company has fixed costs that amount
7 to $400,000. Current sales total 16,000 units.
In order to produce a target profit of $22,000,
Narchie's dollar sales must total:
8 and the company has fixed costs that amount
Each unit that Narchie sells will:
Markham Industries is studying the

profitability of a change in operation and has
9 gathered the following information:
Should Markham Industries make the
change?
Denise sells silk scarves at a hobby fair. Each

scarf sells for $25 and has a variable cost of
$15. Denise’s booth rental for one day is $30.
10
Based on this information,
how many scarves must Denise sell to break-
even?
Denise sells silk scarves at a hobby fair. Each

scarf sells for $25 and has a variable cost of
$15. Denise’s booth rental for one day is $30.
11
Based on this information,
what total revenue amount does Denise need
to earn to break-even?
A recent income statement of Carson

Corporation reported the following data:
12
If these data are based on the sale of 5,000
units, the break-even sales would be:
Ripley Co. sold 2,000 units in March at a price

of $35 per unit. The variable cost per unit is
13
$20.
What is the total contribution margin?
Dane Company has a break-even point of

120,000 units.
14 If the firm's sole product sells for $40 and
fixed costs total $480,000, the variable cost
per unit must be:
Garrison Company provides the following

15 information about its product:
What is the contribution-margin ratio?
Applewood’s Bakery sells three large muffins

for every 2 small muffins sold. A small muffin
sells for $3.00, with a variable cost of $2.00. A
16 large muffin sells for $5.00, with a variable
cost of $2.50.
What is the weighted-average contribution
margin?
A company has fixed costs of $900 and a per-
17 unit contribution margin of $3.
Ahmed & Co. makes and sells two types of

shoes, Plain and Fancy. Data concerning these
products are as follows:
Sixty percent of the unit sales are Plain, and
18
annual fixed expenses are $45,000.
Assuming that the sales mix remains
constant, the number of units of Fancy that
Ahmed must sell to break even is:

19
For above, Assuming that the sales mix
remains constant, the number of units of
Plain that Ahmed must sell to break even is

20
Assuming that the sales mix remains
constant, the total number of units that
Ahmed must sell to break even is:

21 Sixty percent of the unit sales are Plain, and
For Above, The weighted-average unit
contribution margin is:
Quigley Glass Industries sells glass vases at a

wholesale price of $2.50 per unit. The
variable cost is $1.75 per unit. Monthly fixed
costs are $7,500. If Quigley’s current sales are
22
25,000 units per month, and Quigley wants to
increase operating income by 20%,
how many additional units should be sold (to
the nearest unit)?
Flower Depot, Inc. sells a single product for
$10. Variable costs are $4 per unit and fixed
costs total $120,000 at a volume level of
23 10,000 units.
What dollar sales level would Flower Depot
have to achieve to earn a target profit of
$240,000?
The following information relates to Paternus

Company:
If a manager at Paternus desired to
24 determine the percentage impact on income
of a given percentage change in sales,
the manager would multiply the percentage
increase/decrease in sales revenue by:
Refer to the figure above. Assume that the

company whose cost structure is depicted in
25 the figure expects to produce a profit for the
upcoming accounting period. The profit
would be shown on the graph by the letter:
Santa Fe Production sells a single product to

wholesalers. The company's budget for the
upcoming year revealed anticipated unit sales
of 31,600, a selling price of $20, variable cost
26
per unit of $8, and total fixed costs of
$360,000.
If Santa Fe’s unit sales are 200 units less than
anticipated, its break-even point will:
Santa Fe Production sells a single product to

wholesalers. The company's budget for the
upcoming year revealed anticipated unit sales
27 of 31,600, a selling price of $20, variable cost
per unit of $8, and total fixed costs of
$360,000.
Santa Fe’s safety margin in units is:
At a volume of 20,000 units, Almount

Industries reported sales revenues of
28 $1,000,000, variable costs of $300,000, and
fixed costs of $260,000.
The company's break-even point in units is:
Ripley Co. sold 2,000 units in March at a price

of $35 per unit.
29
The variable cost per unit is $20. What is the
total contribution margin?
Operating leverage predicts the effects fixed
30 costs have on changes in operating income
when:
The assumptions on which cost-volume-profit
31 analysis is based appear to be most valid for
businesses:

true regarding a company that has
implemented flexible manufacturing systems
and activity-based costing?
I. The company has erred, as these two

practices used in conjunction with one
another will severely limit the firm's ability to
analyze costs over the relevant range.
32 II. Costs formerly viewed as fixed under
traditional-costing systems may now be
considered variable with respect to changes
in cost drivers such as number of setups,
number of material moves, and so forth.
III. As compared with the results obtained
under a traditional-costing system, the
concept of break-even analysis loses
meaning.
When advanced manufacturing systems are

installed, what effect does such installation
usually have on fixed costs and the break-
even point?
33 Fixed Costs Break-even Point

A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Do not change Does not change
At a volume level of 500,000 units, Sullivan

reported the following information:
34
The company's contribution-margin ratio is
closest to:
Hsu, Inc. sells a single product for $12.

Variable costs are $8 per unit and fixed costs
35 total $360,000 at a volume level of 60,000
units. Assuming that fixed costs do not
change, Hsu’s break-even point would be:
A manager who wants to determine the
percentage impact on income of a given
36 percentage change in sales would multiply
the percentage increase/decrease in sales
revenue by the:
Charriott sells a single product at $200 per

unit. The firm's most recent income
statement revealed unit sales of 2,000,
variable costs per unit of $50, and fixed costs
37 of $120,000. Management believes that a
20% drop in selling price will boost sales by
20%.
If this reduction in selling price is
implemented,
The following information relates to Dazie

Company:
38
Dazie's operating leverage factor is closest to:
All other things being equal, a company that

sells multiple products should attempt to
39 structure its sales mix so the greatest portion
of the mix is composed of those products
with the highest:
The difference between budgeted sales

40
revenue and break-even sales revenue is the:
You are analyzing Barroz Corporation and

Newton Corporation and have concluded that
Barroz has a higher operating leverage factor
than Newton. Which one of the following
41 choices correctly depicts (1) the relative use
of fixed costs (as opposed to variable costs)
for the two companies and (2) the percentage
change in income caused by a change in
sales?
Starlight Co. makes and sells only one

product. The unit contribution margin is $6
42 and the break-even point in unit sales is
24,000.
The company's fixed costs are:
A 25% increase in production volume will

43
result in:
Thai Two sells hot pots for $40 each. The
company incurs monthly fixed costs of
44 $5,000. The contribution-margin ratio is 20%.
Based on this information, what is the
variable cost per hot pot?
Which of the following occurs if a company

45
experiences an increase in its fixed costs?
Finn’s budget for the upcoming year revealed

the following figures:
46
If the company's break-even sales total
$750,000, Finn’s safety margin would be:
A recent income statement of Benton

47
units, the break-even point would be:
Gandee Company has an operating leverage

factor of 5. Which of the following statements
is true?
48
Thus, an 8% change in ______ should result in
a 40% change in _____. The respective
amounts that change are:
A company, subject to a 40% tax rate, desires

to earn $500,000 of after-tax income. How
49 much should the firm add to fixed costs when
figuring the sales revenues necessary to
produce this income level?
Samuels, Inc. is subject to a 40% income tax

rate. The following data pertain to the period
just ended when the company produced and
50 sold 45,000 units:
How many units must Samuels sell to earn an

after-tax profit of $180,000?
A recent income statement of McClennon

51
If the company desired to earn a target profit
of $1,270,000, it would have to sell:
Elise Corporation has the following sales mix
for its three products: A, 20%; B, 35%; and C,
45%. Fixed costs total $400,000 and the
52
weighted-average contribution margin is
$100. How many units of product A must be
sold to break-even?
Which of the following would produce the

53 largest increase in the contribution margin
per unit?
McGuire Corporation sells three products: R,

S, and T. Budgeted information for the
54 upcoming accounting period follows.
The company's weighted-average unit

contribution margin is:
Sarafine, Inc. sells a single product for $20.

Variable costs are $8 per unit and fixed costs
55 total $120,000 at a volume level of 5,000
units. Assuming that fixed costs do not
change, Sarafine’s break-even sales would be:

56
experiences a decrease in its fixed costs?
Assuming no change in sales volume, an
57 increase in company's per-unit contribution
margin would:
Partner Industries sells a single product for

$50 that has a variable cost of $30. Fixed
costs amount to $5 per unit when anticipated
58
sales targets are met. If the company sells
one unit in excess of its break-even volume,
profit will be:
At a volume of 20,000 units, Almount

Industries reported sales revenues of
59 $1,000,000, variable costs of $300,000, and
fixed costs of $260,000. The company's
contribution margin per unit is:

60
was able to reduce its variable cost per unit?
Refer to the figure above. Assume that the

company whose cost structure is depicted in
61 the figure expects to produce a profit for the
upcoming accounting period. The profit
would be shown on the graph by the letter:
Which of the following would occur if a
62
company increases its variable cost per unit?
A recent income statement of Benton

63
units, the contribution margin per unit would
be:
Sl Question
Cycle Sporting Goods sells bicycles

throughout the northeastern United States.
The following data were taken from the most
recent quarterly sales forecast:
1
On the basis of the information presented,
how many bicycles should the company
purchase in August?
Nevis Motors manufactures a product

requiring 0.5 ounces of platinum per unit. The
cost of platinum is approximately $360 per
ounce; the company maintains an ending
platinum inventory equal to 10% of the
2 following month's production usage. The
following data were taken from the most
recent quarterly production budget:
The cost of platinum to be purchased to

support August production is:
Nikolas Industries has a cash balance of

$20,000 on July 1, 20x8. The company is in
the process of preparing the cash budget for
the third quarter, with budgeted cash
collections and payments as follows:
3
There are no budgeted capital expenditures
or financing transactions during the quarter.
Using the data above, what is the projected
cash balance at the end of September?
4
cash balance at the end of August?

5
cash balance at the end of July?
Houseman, Inc. anticipates sales of 50,000

units, 48,000 units, 51,000 units and 50,000
units in July, August, September and October,
respectively. Company policy is to maintain
6 an ending finished-goods inventory equal to
40% of the following month's sales. On the
basis of this information
how many units would the company plan to
produce in September?
Houseman, Inc. anticipates sales of 50,000

units, 48,000 units, 51,000 units and 50,000
units in July, August, September and October,
respectively. Company policy is to maintain
7 an ending finished-goods inventory equal to
40% of the following month's sales. On the
basis of this information
how many units would the company plan to
produce in July?
Elon & Company had 3,000 units in finished-
goods inventory on December 31. The
following data are available for the upcoming
year:
8
Desired ending finished-goods inventory
2,500 2,100
The number of units the company expects to
sell in January is:
Dealer Enterprises (DE) anticipated that

84,000 process hours would be worked
during an upcoming accounting period when,
in fact, 92,000 hours were actually worked.
9 One of the company's cost functions is
expressed as follows:
What budgeted dollar amount would appear
in DE's static budget and flexible budget for
the preceding cost function?
Barrington Industries anticipated selling

29,000 units of a major product and paying
sales commissions of $6 per unit. Actual sales
and sales commissions totaled 31,500 units
10
and $182,700, respectively. If the company
used a static budget for performance
evaluations, Barrington would report a cost
variance of:
A direct-labor efficiency variance cannot be

11
caused by
Vito, Inc. had an unfavorable labor efficiency

variance and an unfavorable materials
12
quantity variance.Which department might
be held accountable for these variances?
Listed below are five variances (and possible

causes) that are under review by
13 management of Knight Company.
Which of the following is least likely to cause
the variance indicated?
Which of the following would be considered

14 when preparing a company's sales forecast?
Nevis’ production data for a new deluxe
product were taken from the most recent
quarterly production budget:
In addition, Nevis produces 5,000 units a

15
month of its standard product. It takes two
direct labor hours to produce each standard
unit and 2.25 direct labor hours to produce
each deluxe unit. Nevis’ cost per labor hour is
$15.
Morgan Company's budgeted income

statement reflects the following amounts
Sales are collected 50% in the month of sale,
30% in the month following sale, and 19% in
the second month following sale. One percent
of sales is uncollectible and expensed at the
16
end of the year.
Morgan pays for all purchases in the month

following purchase and takes advantage of a
3% discount. The following balances are as of
January 1:
A company's sales forecast would likely

17
consider all of the following factors except:
Commerce Corporation has a high probability

of operating at 40,000 activity hours during
the upcoming period, and lower probabilities
of operating at 30,000 hours and 50,000
18 hours. The company's flexible budget
revealed the following:
If Commerce operated at 35,000 hours, its

total budgeted cost would be:
Commerce Corporation has a high probability

of operating at 40,000 activity hours during
the upcoming period, and lower probabilities
of operating at 30,000 hours and 50,000
hours. The company's flexible budget
19 revealed the following:
Commerce’s flexible-budget formula, where Y

is defined as total cost and AH represents
activity hours, is:
Which of the following would not be
20 considered if a company desires to establish a
series of practical manufacturing standards?
Which of the following combinations of

direct-material variances might prompt
21
management to undertake a detailed
variance investigation?
Which of the following is a criticism of

22 standard costing, as applied to today's
manufacturing environment?
Lamar Corporation's purchasing manager

obtained a special price on an aluminum alloy
from a new supplier, resulting in a direct-
material price variance of $9,500F. The alloy
produced more waste than normal, as
evidenced by a direct-material quantity
variance of $2,000U, and was also difficult to
use. This slowed worker efficiency, generating
23 a $2,500U labor efficiency variance.
To help remedy the situation, the production

manager used senior line employees, which
gave rise to a $900U labor rate variance. If
overall product quality did not suffer, what
variance amount is best used in judging the
appropriateness of the purchasing manager's
decision to acquire substandard material?
Wu Production Company, which uses activity-

based budgeting, is in the process of
24 preparing a manufacturing overhead budget.
Which of the following would likely appear on
that budget?
Gallonte Inc. began operations in April of this

year. It makes all sales on account, subject to
the following collection pattern: 30% are
collected in the month of sale; 60% are
collected in the first month after sale; and
25
10% are collected in the second month after
sale. If sales for April, May, and June were
$60,000, $80,000, and $70,000, respectively,
what were the firm's budgeted collections for
June?
26 10% are collected in the second month after
May?

27 10% are collected in the second month after
quarter?
Jerome Copper Company budgeted 126,000

process hours for the month of October when
one of the company’s cost functions was
budgeted to be $2,976,000. The process
hours actually worked during October were
135,000. Jerome Copper Company
28
experienced a cost variance of $40,000
unfavorable related to this cost function. If
the company’s cost function includes a $16
per process hour rate,
what is the formula used by Jerome Copper
Company to derive its flexible budget?
The following selected data pertain to

Flagship Corporation:
29
July's cash disbursements are expected to be:
Fortune Inc. has budgeted sales for June and

July at $680,000 and $720,000, respectively.
Sales are 80% credit, of which 70% is
30 collected in the month of sale and 30% is
collected in the following month.
What is the accounts receivable balance on
July 31?
Bacon has budgeted sales for the first quarter
of the next year to be 30,000 units. The
inventory in hand at the beginning of quarter
31
is 5,000 units. The desired ending inventory is
10,000 units. What is the budgeted
production for the quarter?
Express Meals is a local bistro that has

budgeted inventory purchases as follows:
Express pays for 20% of their purchases
during the month of purchase, 70% during
32 the month following the purchase, and the
remaining 10% two months after the month
of purchase.
What is the budgeted accounts payable
balance on November 30?
To derive the raw material to purchase during

an accounting period, an accountant would
33
calculate the raw material required for
production and then:
A flexible overhead budget might include

34
which of the following items:
A flexible budget for 15,000 hours revealed

variable manufacturing overhead of $90,000
and fixed manufacturing overhead of
35
$120,000.
The budget for 25,000 hours would reveal
total overhead costs of:

and fixed manufacturing overhead of
36
$120,000.
The budget for 20,000 hours would reveal
total overhead costs of:

notes a characteristic associated with
37
perfection standards and one associated with
practical standards?
A production supervisor generally has little
38 influence over the:
Which of the following would have no effect,
39 either direct or indirect, on an organization's
cash budget?
An examination of Hyong Corporation's
inventory accounts revealed the following
information:
40
Hyong’s finished product requires four units
of raw materials. On the basis of this
information, how many finished products
were manufactured during June?
Auditory Company, which applies overhead to

production on the basis of machine hours,
reported the following data for the period
41 just ended:
If Auditory estimates four hours to
manufacture a completed unit, the
company's fixed-overhead budget variance
would be:
Bender Corporation has a favorable materials

quantity variance. Which department would
42
likely be asked to explain the cause of this
variance?
Rainbow, Inc. began operations on January 1

of the current year with a $12,000 cash
balance. Forty percent of sales are collected
in the month of sale; 60% are collected in the
month following sale. Similarly, 20% of
purchases are paid in the month of purchase,
and 80% are paid in the month following
43
purchase. The following data apply to January
and February:
If operating expenses are paid in the month

incurred and include monthly depreciation
charges of $2,500, determine the change in
Rainbow’s cash balance during February
Doral Corp. has provided a part of its budget

for the third quarter:
44 The cash balance on July 1 is $12,000. Assume

that there will be no financing transactions or
costs during the quarter. What is the cash
balance at the end of July?
Doral Corp. has provided a part of its budget
for the third quarter:
45 The cash balance on July 1 is $12,000. Assume

that there will be no financing transactions or
costs during the quarter. What is the cash
balance at the end of August?
Which of the following would be considered if

46 a company desires to establish a series of
practical manufacturing standards?
Terrence Corporation plans to sell 41,000

units of its single product in March. The
company has 2,800 units in its March 1
finished-goods inventory and anticipates
47 having 2,400 completed units in inventory on
March 31. On the basis of this information,
how many units does Terrence plan to
produce during March?
Company A uses a heavily participative

budgeting approach whereas at Company B,
48 top management develops all budgets and
imposes them on lower-level personnel.
Which of the following statements is false?
Dalton Industries makes all purchases on

account, subject to the following payment
pattern:
49 If purchases for January, February, and March
were $200,000, $180,000, and $230,000,
respectively,
what were the firm's budgeted payments in
March?

50 and fixed manufacturing overhead of
$120,000. The budget for 25,000 hours would
reveal total overhead costs of:
Strongheart Enterprises anticipated selling
27,000 units of a major product and paying
sales commissions of $6 per unit. Actual sales
and sales commissions totaled 27,500 units
51
and $171,400, respectively. If the company
used a flexible budget for performance
evaluations, Strongheart would report a cost
variance of:
A direct-material quantity variance can be

52
caused by all of the following except:
Karma Company has prepared its operating

budget for the first quarter of 20x9. The
53 company forecasts sales of $50,000 in
February, $60,000 in March, and $70,000 in
April. Variable and fixed expenses are as
follows:
For an airline, which of the following would

54
not be an operational budget?
Guiness Inc. has a budgeted production of

8,000 units. Each unit requires 40 minutes of
direct labor work to complete. The direct
55
labor rate is $100 per hour.
What is the budgeted cost of direct labor for
the month?
Hsu plans to sell 40,000 units of product no.

75 in June, and each of these units requires
five square feet of raw material. Pertinent
data follow
56
If the company purchases 201,000 square
feet of raw material during the month, the
estimated raw-material inventory on June 30
would be:
Holiday Company prepares packed lunches

for hikers in Yosemite. Hikers order their
lunches by 10 pm and their lunch is left at
their hotel room door in a re-useable
insulated bag by 5 am the following morning.
Holiday budgeted 5,000 lunches for July and
each lunch requires 0.50 process hours.
57
Holiday’s static budget for electricity for the
month is $3,000. Actual sales, process hours,
and electricity cost totaled 5,100 lunches,
2,480 PH, and $3,040, respectively. If the
company used a static budget for
performance evaluations, Holiday would
report a cost variance of:
Overton Industries has the following sales
forecasts for its hip waders next year:
58
What is Overton’s estimated sales in units for
next year?
Which of the following statements best

describes the relationship between the sales-
59
forecasting process and the master-budgeting
process?
Sigmo Company, which uses a standard cost

system, budgeted $800,000 of fixed overhead
when 50,000 machine hours were
60
anticipated. Other data for the period were:
Sigmo’s fixed-overhead budget variance is:
Virginia Enterprises makes all purchases on

account, subject to the following payment
pattern:
61 If purchases for April, May, and June were
$200,000, $160,000, and $250,000,
respectively, what was the firm's budgeted
payables balance on June 30?
Seven Falls Cuisines has the following flexible-

62 budget formula:
budget formula:
63
true?

budget formula:
64
What is Seven Falls’ budgeted total cost if its
process hours equal 25,000?
Situation 1: Loren Company recently
purchased materials from a new supplier at a
very attractive price. The materials were
found to be of poor quality, and the
company's laborers struggled significantly as
they shaped the materials into finished
product.
65 Situation 2: In a desperate move to make up

for some of the time lost, the Loren Company
manufacturing supervisor brought in more-
senior employees from another part of the
plant
Which of the following variances would have

a high probability of arising from both of
these situations?
Solution Enterprises incurred $828,000 of

fixed overhead during the period. During that
same period, the company applied $845,000
66 of fixed overhead to production and reported
an unfavorable budget variance of $41,000.
How much was Solution’s budgeted fixed
overhead?
Zhou, Inc. is planning its overhead costs for an

upcoming period when 85,000 machine hours
are expected to be worked. Activity may drop
as low as 78,000 hours if some overdue
67 equipment maintenance procedures are
performed; on the other hand, activity could
jump to 94,000 hours if one of Zhou's major
competitors likely goes bankrupt. A flexible
overhead budget would best be based on:
Farre Company has prepared the following

purchases budget:
All purchases are paid for as follows: 10% in
the month of purchase, 50% in the following
68 month, and 40% two months after purchase.
What are the total cash payments made in
November for purchases? November
purchases + October purchases + September
purchases
When considering whether to investigate a

69 variance, managers should consider all of the
following except the variance's:
A company that uses activity-based budgeting
performs the following:
70
Which of the following denotes the proper
order of the preceding activities?
Chong Corporation recently prepared a

flexible budget for water usage at its
manufacturing plant. Budgeted water cost at
various projected production levels is as
follows:
71
Actual units produced amounted to 60,000.
Actual cost incurred for water usage was
$4,500. What was Chong’s cost variance for
water?
Chong Corporation has a highly automated

production facility. Which of the following
72 correctly shows the two factors that would
likely have the most direct influence on the
company's manufacturing overhead budget?
Panama Co. prepared the following flexible

overhead budget where PH is process hour.
73
Which of the answers provided correctly
completes the table?
Blaylock plans to sell 85,000 units of product

no. 794 in May, and each of these units
requires three units of raw material. Pertinent
74 data follow
On the basis of the information presented,
how many units of raw material should
Blaylock purchase for use in May production?
The following events took place when
Managers A, B, and C were preparing budgets
for the upcoming period:
1. Manager A increased property tax
expenditures by 2% when she was informed
of a recent rate hike by local authorities.
2. Manager B reduced sales revenues by 4%
when informed of recent aggressive actions
75 by a new competitor.
3. Manager C, who supervises employees
with widely varying skill levels, used the
highest wage rate in the department when
preparing the labor budget.
Assuming that the percentage amounts given
are reasonable, which of the preceding cases
is (are) an example of building slack in
budgets?
Harrington makes all sales on account,

subject to the following collection pattern:
30% are collected in the month of sale; 60%
are collected in the first month after sale; and
10% are collected in the second month after
76 sale. If sales for June, July, and August were
$120,000, $160,000, and $220,000,
respectively,
August and the company's budgeted
receivables balance on August 31?
Question
Cachet is a division of Estate Industries. Estate has
a required rate of return on capital of 8 percent.
1 Cachet’s income is $320,000, its sales margin is
20%, and its capital turnover is 1. What is Cachet’s
residual income?
Summit Co. reported sales revenue of $15,000,000

2 and a 4% sales margin. Summit’s return on
investment was 15%. What is Summit’s income?

investment was 15%.
What is Summit’s invested capital?
and a 4% sales margin. Summit’s return on
4 investment was 15%. Summit’s manager receives a
bonus if ROI is 20% or greater. In which of the
following circumstances would the manager receive
a bonus?
Foxmoor Corporation uses an imputed interest rate
of 13% in the calculation of residual income.
5 Division X, which is part of Foxmoor, had invested
capital of $1,200,000 and an ROI of 16%. On the
basis of this information, X's residual income was:
6 A division's return on investment may be improved

by increasing
The difference between the profit margin
7 controllable by a segment manager and the
segment profit margin is caused by:
The following information was taken from the

segmented income statement of Restin, Inc.,
and the company's three divisions:
In addition, the company incurred common

8 fixed costs of $18,000. Which of the following
amounts should be used to evaluate whether
Restin, Inc., should continue to invest
company resources in the Los Angeles
division?

segmented income statement of Restin, Inc.,
and the company's three divisions:
9
In addition, the company incurred common
fixed costs of $18,000. Bay Area's segment
profit margin is:
Gulf Coast Enterprises (GCE) operates 87 stores

and has three divisions: Florida, Georgia, and
10 Alabama. Which of the following costs
would not appear on Georgia’s portion of GCE's
segmented income statement?
Management of Wee Ones (WO), an operator of
day-care facilities, wants the company's profit to be
subdivided by center. The firm's accountant has
provided the following data:
11 WO's advertising, which is handled by the home

office, is not reflected in the preceding figures and
amounted to $60,000. Assume that management
used the allocation base that is most influenced by
advertising effort and consistent with sound
managerial accounting practices. How much
advertising would be allocated to the Irvine center?
Stargazer Services Co. is organized in three

segments: Sky Mountain, Diamond View, and Star
Party. Data for the company and for these
12 segments follow
What are Diamond View’s controllable profit margin

and segment profit margin?
The following data relate to Department no. 3 of
Winslett Corporation:
13
On the basis of this information, Department no. 3's
variable operating expenses are:
14 Which of the following measures would reflect the

fixed costs controllable by a segment manager?
15 A profit center manager:

16 segments follow:
What are Star Party’s segment contribution margin

and noncontrollable fixed costs?
17 The basic idea behind residual income is to have a

division maximize its:
Vello, Inc. reported a return on investment of 12%,
18 a capital turnover of 5, and income of $180,000. On
the basis of this information, the company's
invested capital was:
For the period just ended, Trek Corporation's Trailer
Division reported profit of $54 million and invested
19 capital of $450 million. Assuming an imputed
interest rate of 10%, which of the following choices
correctly denotes Trailer’s return on investment
(ROI) and residual income?
The following information pertains to Travis
20 Concrete:
The company's imputed interest rate is 8%. The
ROI is:
The Holder Division of Extraordinary Enterprises
has a negative residual income of $540,000.
21 Holder’s management is contemplating an
investment opportunity that will reduce this negative
amount to $400,000. The investment:
segmented income statement of Restin, Inc., and
the company's three divisions:
22
In addition, the company incurred common fixed
costs of $18,000. Bay Area's segment profit margin
is:


23 costs of $18,000. Assume that the Los Angeles
division increases its promotion expense, a
controllable fixed cost, by $10,000. As a result,
revenues increased by $50,000. If variable
expenses are tied directly to revenues, the new Los
Angeles segment profit margin is:
Thurmon Retail has three stores in West Virginia.

24 Which of the following costs would likely be
included when computing the profit margin
controllable by store no. 3's manager?
Sandy Shores Corporation operates two stores: J
25 and K. The following information relates to J:
J's segment contribution margin is:

Bumble Company has two divisions, Grumble and
Humble. Bumble’s required rate of return on capital
26 is 11 percent. Grumble has a 25% sales margin,
20% ROI, and income of $200,000. What is
Grumble’s residual income?
Concrete:
27
The company's imputed interest rate is 8%. The
The residual income is:
The Markham Division of World Corporation, which
has income of $250,000 and an asset investment of
$1,562,500, is studying an investment opportunity
28 that will cost $450,000 and yield a profit of $67,500.
Assuming that World uses an imputed interest
charge of 14%, would the investment be attractive
to:
The following information relates to the Corner

Division of Hometown Enterprises:
29 Income for the period just ended: $1,500,000.

Invested capital: $12,000,000. If the company has
an imputed interest rate of 11%, Corner’s residual
income would be:
Crimson Industries is in the process of evaluating

allocation bases so that selected costs can be
charged to responsibility centers. Would the
30 number of employees likely be a good base for
allocating the costs of Human Resources, Building
and Grounds, and Repairs and Maintenance to user
centers?
31 Which of the following measures would reflect the

fixed costs controllable by a segment manager?
The following data relate to Department no. 2

of Velma Corporation:
32
On the basis of this information, fixed costs
traceable to Department no. 2 but
controllable by others are
Pride Company is preparing a segmented income

statement, subdivided into departments (billing,
33 purchasing, and telemarketing). Which of the
following choices correctly describes the accounting
treatment of the firm's compensation cost for key
executives (president and vice-presidents)?
The difference between the profit margin
34 controllable by a segment manager and the
segment profit margin is caused by:
The market value of Galleon’s debt and equity
capital totals $180 million, 80% of which is equity
related. An analysis conducted by the company's
35 finance department revealed a 7% after-tax cost of
debt capital and a 10% cost of equity capital. On
the basis of this information, Galleon’s weighted-
average cost of capital:

Concrete:
36
The company's imputed interest rate is 8%.
The sales margin is:
37 Which of the following statements

is incorrect regarding an investment center?
Which of the following would be the best measure
38 on which to base a segment manager's
performance evaluation for purposes of granting a
bonus?
For a company that uses responsibility accounting,
39 which of the following costs is least likely to appear
on a performance report of an assembly-line
supervisor?
Halpern Corporation is in the process of
overhauling the performance evaluation system for
its San Diego manufacturing division, which
40 produces and sells parts that are popular in the
aerospace industry. Which of the following
classifications is least likely to be chosen to
evaluate the overall operations of the San Diego
division?
For the period just ended, Global Industries’

Western Division reported profit of $31.9 million and
41 invested capital of $220 million. Assuming an
imputed interest rate of 12%, which of the following
choices correctly denotes Western’s return on
investment (ROI) and residual income?
Beach Corporation has a return on investment of
15%. A Beach division, which currently has a 13%
ROI and $750,000 of residual income, is
42 contemplating a massive new investment that will
(1) reduce divisional ROI and (2) produce $120,000
of residual income. If Beach strives for goal
congruence, the investment:
Tempest Enterprises had a sales margin of 5%,
43 sales of $4,000,000, and invested capital of
$5,000,000. The company's ROI was:
Concert Division reported a residual income of
$200,000 for the year just ended. The division had
44 $8,000,000 of invested capital and $1,000,000 of
income. On the basis of this information, the
imputed interest rate was:

45 In addition, the company incurred common fixed

costs of $18,000. Assuming use of a responsibility
accounting system, which of the following amounts
should be used to evaluate the performance of the
Los Angeles division manager?
Management of Wee Ones (WO), an operator of

day-care facilities, wants the company's profit to be
subdivided by center. The firm's accountant has
provided the following data:
WO's advertising, which is handled by the home

46 office, is not reflected in the preceding figures and
amounted to $60,000.
If advertising expense were allocated to centers

based on actual center profitability, the amount of
advertising expense allocated to the Irvine center
would be closest to:
47 A division's return on investment may be improved

by increasing:
investment was 15%. What is Summit’s capital
turnover?
49 Cost pools should be charged to responsibility

centers by using:
Which of the following is an appropriate base to

50 distribute the cost of building depreciation to
responsibility centers?
Endotrope Corporation has an after-tax operating
income of $3,200,000 and a 9% weighted-average
51 cost of capital. Assets total $7,000,000 and current
liabilities total $1,800,000. On the basis of this
information, Endotrope’s economic value added is:
The Nashville Division of Country Classics currently

reports a profit of $3.6 million. Divisional invested
52 capital totals $9.5 million; the imputed interest rate
is 12%. On the basis of this information, Nashville’s
residual income is:
53 segments follow:
What are Sky Mountain’s variable costs and

noncontrollable fixed costs?
The information that follows relates to Khan
Corporation:
54
On the basis of this information, the company's
sales revenue is:
Jamison Company had sales revenue and

55 operating expenses of $5,000,000 and $4,200,000,
respectively, for the year just ended. If invested
capital amounted to $6,000,000, the firm's ROI was:

Concrete:
56
The capital turnover is:
57 Distinguishing between controllable and noncontrolla

58
costs of $18,000. The profit margin controllable by
the Central Valley segment manager is:
The following information relates to Attor, Inc.:
59
If the company has a 10% weighted-average cost of
capital, its economic value added would be:
60 A revenue center manager:
The following information relates to the Falcon

Division of Xenon Enterprises
61
On the basis of this information, Falcon’s
weighted-average cost of capital is closest to:
Decentralized firms can delegate authority by

structuring an organization into responsibility
62 centers. Which of the following organizational
segments is most like a totally independent,
standalone business where managers are
expected to "make it on their own"?
Swift Software operates stores within five

regions. Regional managers are held
accountable for marketing, advertising, and
sales decisions, and all costs incurred within
their region. In addition, regional managers
decide whether new stores will open, where
the stores will be located, and whether the
63 stores will lease or purchase the facilities.
Store managers, in contrast, are accountable
for marketing, advertising, sales decisions,
and costs incurred within their stores. Ideally,
on the basis of this information, what type of
responsibility center should the software
company use to evaluate its regions and
stores?
64 Which of the following measures would reflect
65 Which of the following statements is incorrect regarding an investment center?
Horner Division has been stagnant over the

past five years, neither growing nor
contracting in size and profitability.
Investments in new property, plant, and
66 equipment have been minimal. Would the
division's use of total assets (valued at net
book value) when measuring ROI result in (1)
using numbers that are consistent with those
on the balance sheet and (2) a rising ROI over
time?
Republic Resorts owns numerous hotels on
each of the Hawaiian Islands. The company's
performance reporting system is structured
around the firm's organizational structure, with
information flowing from operating
67 departments at a particular property and later
respectively grouped by individual hotel, island
operation (i.e., division), and the company as
a whole. Which of the following best depicts
the detail level of the information given to a
department manager versus that reported to a
company vice-president?
Tranquil Beaches owns six hotels in Hawaii,

collectively known as the Hawaiian Division.
The various hotels, including the Surf & Sun,
have operating departments (such as
Maintenance, Housekeeping, and Food and
Beverage) that are evaluated as either cost
68 centers or profit centers. The Food and
Beverage Department, for example, is a profit
center, with activities divided into three
segments: Banquets and Catering,
Restaurants, and Kitchen. If Tranquil Beaches
uses a performance-reporting system that is
based on responsibility accounting, which of
the following disclosures is likely to occur?
69 The profit margin controllable by the segment manager would not include
70 Which of the following would have a low likeliho
71 All of the following actions are likely to increas

Miracle Green Corporation operates two
garden supply stores: A and B. The following
72 information relates to store A:
A's segment profit margin is:
73 A division's return on investment may be

improved by increasing:
Answer
155,500
133,000
390200/422,300
170,000/510.000/484,000
250,000
455,000
531,000
Vary directly with change in Activity
Constant on per-unit basis & change in total as activity changes
140,800/129,200
721000
770,000
Property taxes paid by dealer
Change on per-unit basis & constact in total as activity changes
Remain constant as activity changes
229
Straight Line Depreciation on a machine that has 5-yr service life
Job Shop
82%
105,000
270,000
130,000
519,000
Answer
96,200
75%
90%
Relative profitability depends upon the way we assign costs and
define outputs as successful or unsuccessful.
$191,000
51,300
Textile Manufacturers
departmental overhead rates.
a credit to Sales Revenue for $45,000.

45,500
39,000
937,500
300,000
812,500
debit Finished-Goods Inventory and credit Work-in-Process
Inventory.
a denominator of budgeted machine hours for the current

accounting period.
None of these, because all are likely users.

When a company sells goods that cost $54,000 for $60,000, the
firm will enter $6,000 in an account entitled Profit on Sale.
2.95
Determining the cost of a specific project.
384,000
reduce Finished-Goods Inventory by $80,000.

is a pool of indirect production costs that must somehow be
attached to each unit manufactured.
Machining Department
25/Hr
from service departments, to production departments, to jobs.
manufacturing overhead costs.
Work-in-Process Inventory account.

1.2
Costs avoid the estimation associated with predetermined

overhead rates.
48,100
choose an input that varies in a pattern that is most similar to the

pattern with which overhead costs vary.
direct material, direct labor, and applied manufacturing overhead.

When a company sells goods that cost $54,000 for $60,000, the
firm will enter $6,000 in an account entitled Profit on Sale.
Custom-furniture manufacturers.
Work-in-Process Inventory is credited when goods are sold.
Direct labor is gaining importance in many manufacturing

applications with respect to being a significant cost driver.
the actual time spent on each job multiplied by the wage rate.
Answer
75,000
69,400
$2.70
75,000
$1.18
263,840
69,400
12,040
Unit Cost Yes/ EU No
Unit Cost Yes/ EU Yes
Units completed during the period and work-to-date on ending

work in process
Material: 100%
Conversion: 40%
EU: 65,000
CC: $6
It is true that if direct labor cost is the cost driver, direct labor and
manufacturing overhead may be combined into the single
element of conversion cost.
units completed and ending work in process.
4000
4000
DM: 100%
DL: 100%
MO: 40%
$28.50
17,700
Computing conversion cost per equivalent unit under the

weighted-average method of process costing does not require the
conversion work performed during the current period on the
beginning work-in-process.
10,000
trace direct-material cost to each product produced and use a
predetermined application rate for conversion cost.
520,000
114,000
11,000
$6
555,000
56,400
A summation of the costs in the beginning work-in-process

inventory plus costs incurred in the current period
$2.05
60%
10,600
27,100
The ending work-in-process inventory of 10,000 physical units was

30% complete
The total cost of each unit in process costing is not found by

dividing the total factory costs by the number of units completed.
115,220
Equivalent units are 6,000 for each Material A and B, since A is

added at the beginning and the 75% mark for B’s addition has
already passed when the product is 80% complete.
Analysis of physical flows of units

Calculation of equivalent units
Calculation of unit costs
Assignment of costs to completed units still in process
Material X: 48,000
Material Y: 40,000
equivalent units.
DMC: Similar to those in Job Costing
CC: Similar to Process Costing
Material EU: 90,000

Conversion EU: 84,000
Even though the units are not complete, the company still has
3,000 physical units in production.
Since Corrigan overstated the percentage of work completed on

ending work-in-process conversion cost, the conversion cost
equivalent units would be overstated and the physical units
manufactured show no effect of the error.
72,400
direct material and conversion costs are traced to each batch of

product produced.
Answer
356,000
560,000
444,000
240,000
Activity Cost Pool: Employee travel to job sites

Activity Measure: Number of employees
I & II
All of these are true about non-value-added activities.

$12.40 per chair
$32,500 Decrease
$33.84
X: Overcosted
Y: Overcosted
X: Overcosted
Y: Undercosted
$1.60 per clock

$7.00 per clock
$124.30 per clock
Cannot be determined with the information given
$18.00
$23,500 Decrease
75%
the existence of product-line diversity.
business-value-added activity.
customer-value-added activity.
$300 non-value added cost

$164
$272
$440
$11 per part

$100 per order shipped
Final painting and polishing of the product is an example of a

$117740
$85,260
The company may have been extremely competitive in the
marketplace from a price perspective, based on these facts.
raw materials storage activity.
$0.35
$19.63 (rounded)
$193,440
$456,471
$11,41,176
Substantially greater unit costs for low-volume products than are

reported by traditional product costing.
$364
Activity-based costing would likely show that with Magnolia's

current procedures that the company's high-volume products are
overcosted.
$89.20 per comforter

Purchase the comforter from the supplier.
D (Few, Rapid, Few)
Storage of a vehicle in the sales area would be a non-value-added

activity.
$8.50
$14,200
$12.60
Activity-based costing systems often lead to raising the sale price

of low-volume products.
Product no. 520 could be labeled as being overcosted by
Starwatch's traditional costing procedures.
$444,000
$240,000
Choice C
Undercosted: J
OvercostedL: K
Answer
1,000
cost-volume-profit relationships can be analyzed more easily from

the contribution income statement.
Profit
Loss
Will break-even by selling 20,000 Units
$200,000
$1,055,000
Increase profit by $20
No, because the company will be worse off by $4,000.
3 Scarves
$75
$2,000,000
$30,000 total contribution margin
$36
75%
$1.90 per muffin

Each unit "contributes" $3 toward covering the fixed costs of $900
and once the break-even point is reached, the company will
increase income at the rate of $3 per unit.
2000 units of Fancy
3000 break-even units of Plain
5000
$9
3000 additional units

$600,000
Operating leverage factor: 4
No change
1600 units
7429 units
$30,000 contribution margin

Sales volume changes
Over the short run
II Only
Choice A [both Fixed costs & Break-even point increased]
0.67
90000 units
Operating leverage factor
Change in operating income [$36,000]
Contribution margin
Safety margin
Choice A [both Greater]
$1,44,000
25% increase in total variable costs

$32
The break-even point would increase.
$90,000
14,667 units [rounded] 3000000
An 8% change in sales revenue should result in a 40% change in

income 20000
$833,333 150
61,000 units
8600 units
800 units of A
7% increase in selling price
$3.55
$200,000
The break-even point would decrease
Increase income
$20
$35
Contribution margin: increase

Break-even point: decrease
G
Contribution margin: decrease
Break-even point: increase
$150
Answer
2,040
$195,840
$54,600
$46,100
$35,700
50,600
49,200
9,900
Choice B
Status: 19,84,000
Flexible: 21,12,000
Producing fewer finished units than originally planned
Purchasing
because bad materials can harm labor efficiency and Production,
because inefficient workers may use more materials than allowed
The need to close a plant for two days because of blizzard

conditions; material quantity variance, part no. 542
Choice D
Anticipated Advertising Campaigns: Yes
General Economic Trends: Yes
Expected Competitive Actions: Yes
Direct labor cost for the quarter would be budgeted at: $553,950.
Direct labor cost for August would be budgeted at: $187,125.
Direct labor cost for July would be budgeted at: $183,750.
If it takes two direct labor hours to produce each unit and Nevis’
cost per labor hour is $15, direct labor cost for August would be
budgeted at: 1,100 × 2 × $15 = $33,000
Direct labor cost for September would be budgeted at: $183,075
Morgan’s expected cash balance at the end of January is: $94,160

Morgan’s expected cash balance at the end of February is:
$1,13,300
Cash Receipts: $1,14,000
Cash Payments: $94,860
the company's product costing policy.

top management's attitude toward decentralized operating
structures.
$8,77,500
$4.50AH+$7,20,000
Production time lost during unusual machinery breakdowns
All of the answers are correct
$4,100 F
Batch-level costs: Production setup
$75000
$60000
$153,000
Y = $16(Total process hours) + $960,000
$674000
$172,800
35,000
$347,000
Add the desired ending raw-material inventory and subtract the

beginning raw-material inventory
Choice D
Direct Material: NO
Electricity: YES
Insurance and Property Tax: YES
$270,000
$240,000
Choice B
Perfection Standards: Result in many unfavoravle variances
Practical Standards: Are often attainable by workers
direct-material price variance
None
45,000
$22000 unfavorable
Production
$4500 increase
$39,600
Both normal defect rates in an assembly process and quantity
discounts associated with purchases of direct materials
40,600 units
Budget padding will likely be a greater problem at Company B
$197,000
$270,000
$6400 U
All of these could result in a direct-materials quantity variance
What are the total selling and administrative expenses for the
month of April? $47,500.
month of March. $43,000.
month of February. $38,500.
A cash receipts budget of flying consumers
$533,333.33
25000 square feet
$40U
41,485 pairs
The sales forecast is typically completed before the master budget

and has significant impact on the master budget
$9900 favorable
$183,000
Y = $13PH + $450,000 where PH is defined as process hours
All the answers are correct
$775,000
Situation 1: Material quantity variance, unfavorable
Situation 2: Material price variance, favorable
$787,000
78,000 hours, 85,000 hours, and 94,000 hours
$74,290 paid in cash
nature, namely, whether it is favorable or unfavorable

2-1-3
$300 favourable
The two factors that would likely have the most direct influence
on the company's manufacturing overhead budget are production
volume and management judgment
Choice A
(1 ) = $ 0.50; (2 ) = $ 3,960 .
264,000 units of raw material

III only
Choice B
August Collections: $174,000
August 31 Receivables Balance: $170,000
Answer
192,000
$600,000
$4,000,000
Invested capital is $3,000,000.
$36,000
capital turnover or sales margin.
Fixed expenses traceable to the segment but controllable by

others.
$10,000
$20,000
Georgia’s allocated share of general GCE corporate overhead.

$21,000
$52
Not determinable
Segment Contribution Margin: No

Profit Margin Controllable by Segment Manager: Yes
Segment Profit Margin: Yes
Profit margin controllable by the segment manager and the

segment profit margin are measures that reflect fixed costs
controllable by a segment manager
May be the manager who oversees the operations of a retail store
Segment contribution margin = $120

noncontrollable fixed costs = $36.
income in excess of a corporate imputed interest charge.
$15,00,000
Choice A
12% & $9 Mn
20%
Should be pursued because it is attractive from both the divisional

and corporate perspectives.
$22,500
Hourly labor costs incurred by personnel at store no. 3.
$700,000
$90,000
$54,000
Choice D
$180,000
Choice C
Human Resources: Yes
Buildings & Grounds: No
Repairs & Maintenance: No.

Profit margin controllable by the segment manager and the

segment profit margin are measures that reflect fixed costs
controllable by a segment manager.
$260,000
The cost is not charged to the departments because it is neither

easily traceable to the departments nor controllable by the
departments.
Fixed expenses traceable to the segment but controllable by
others.
9.4%
6%
An investment center manager does not have the ability to

produce revenue.
Profit margin controllable by the segment manager.
Assembly-line facilities depreciation.
Cost centre
Choice D
'ROI: 14.5%
RI: $5.5 Mn
Should be acquired because it produces $120,000 of residual

income for the division.
4%
10%
25,000
$40,543
Capital turnover or sales margin
3.75
Budgeted amounts of allocation bases because the behavior of

one responsibility center should not influence the allocations to
other responsibility centers.
Square feet occupied by the responsibility centers.

$2,732,000
$2,460,000
$92
$40,000,000
13.33%
3.33
An increase in the effectiveness of a cost management system and

an increase in the quality of performance information.
$75,000
$680,000
may be involved with the sale of a new marketing program to a
client.
9.5%
A standalone would be an investment center.
Choice D
Choice D
An investment center manager does not have the ability to
produce revenue
Choice A
Choice B
The profit of the Surf & Sun hotel will appear on the Hawaiian
Division's performance report disclosure would likely occur.
a share of the company’s common fixed expenses and income tax

expense.
Both the billing department of an Internet Services Provider (ISP)
and the mayor's office in a large city have a low likelihood of being
profit centers
A decrease in the number of units sold would not increase ROI.
$105,000
A division’s return on investment may be improved by increasing

Sl Key Word
1 Peyton - What is DMC?
2 Harrison - What is COGM?
3 Dorsett - What is COGS?
4 Beckett - Cost of Material used in April?
5 Younkin Corporation - What is Period Cost?
6 Shu Corporation
7 Stingray - What is COGS?
8 Variable Cost
9 Variable Cost
10 Rainier
11 Upton - What is COGS?
12 Amaz-a-Nation
13 Not considered a direct cost of Service Dept
14 Fixed Cost
15 Fixed Cost
16 Bicycle problem - What is sunk cost?
17 Not an example of Variable Cost?
18 Low Production & One-of-Kind
19 Tempest
20 Dixon Company
21 Branson
22 Texas Plating - Balance WIP Inventory
23 Falcon - What is COGM?
Answer
155,500
133,000
390200/422,300
170,000/510.000/484,000
250,000
455,000
531,000
Vary directly with change in Activity
Constant on per-unit basis & change in total as activity changes
140,800/129,200
721000
770,000
Property taxes paid by dealer
Change on per-unit basis & constact in total as activity changes
Remain constant as activity changes
229
Straight Line Depreciation on a machine that has 5-yr service life
Job Shop
82%
105,000
270,000
130,000
519,000
Sl
7
8
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
Question
Use the following labor budget data for Roy & Miller Accounting, LLP.
If overhead is applied on the Monoco engagement based on a single-cost driver basis,
what is the total cost of the engagement?
What is the overhead rate for partners, if separate rates are used for partners and staff accountants?
The budgeted overhead cost for the year is $1,260,000. The company has estimated that one-third of the
budgeted overhead cost is incurred to support the firm’s two partners, and two-thirds goes to support the
staff accountants. The current audit bid for Monoco Industries requires $18,000 in direct partner
professional labor, $30,000 in direct staff accountant professional labor, $5,000 in direct material.
What is the overhead rate based on a single cost driver (rounded to the nearest percentage)?
Dubois Decors is an interior decorator in St. Louis, Missouri. The following costs were incurred in the firm’s
contract to redecorate a corporate CEO’s office.
Overhead is applied to contracts using a predetermined overhead rate calculated annually. The rate is based
on direct professional labor cost.
What is the total cost of the firm’s contract to redecorate the CEO’s office?
Osgood Company, which applies overhead at the rate of 190% of direct material cost, began work on job no.
101 during June
On the basis of this information, the total overhead applied to job no. 101 amounted to:
Which of the following types of companies would most likely use process costing?
If the amount of effort and attention to products varies substantially throughout a company's various
manufacturing operations, the company might consider the use of:
Morgan Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The journal entries to record
this transaction would include:
Barnacle Industries incurred and applied the following manufacturing costs:
During 20x2, Barnacle finished products costing $78,000. Products costing $32,500 were sold for $41,600.
What is the balance of Finished Goods on Barnacle’s balance sheet as of December 31, 20x2?
Barnacle Industries incurred and applied the following manufacturing costs:
During 20x2, Barnacle finished products costing $78,000. Products costing $32,500 were sold for $41,600.
What is the balance of Work-in-Process on Barnacle’s balance sheet as of December 31, 20x2?
Douglas, Inc., employs a normal costing system. The following information pertains to the year just ended.
Based on this information, what is the total direct-labor cost for the year?
Based on this information, what is the value of the company’s work-in-process inventory on December 31.
Based on this information, what amount is the total cost of direct material used during the year?
The final step in recognizing the completion of production requires a company to:
Norwood Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this figure,
the company's accountant used:
Which of the following entities would not likely be a user of job-costing systems?
Which of the following statements about manufacturing cost flows is false?
Jetison Industries makes batches of custom novelty items for companies to give away at career fairs. Job X24
for Xcel Corporation consists of 2,000 pens that light up inside the pen base when you write. In addition, the
name and address of Xcel Corp. is printed on the pens. Direct material for these pens amount to $1,500;
direct labor is $2,800; and manufacturing overhead is $1,600. Based on this information, what is the cost per
pen for Job X24?
Job-order costs are most useful for:
Blakely charges manufacturing overhead to products by using a predetermined application rate, computed
on the basis of machine hours. The following data pertain to the current year:
Overhead applied to production totaled:
If a company sells goods that cost $80,000 for $92,000, the firm will:
Manufacturing overhead:
Which of the following is not considered to be a service department?
Metalica Company applies overhead based on machine hours. At the beginning of 20x1, the company
estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000. By 20x1
year-end, actual overhead totaled $525,000, and actual machine hours were 25,000. On the basis of this
information, the 20x1 predetermined overhead rate was:
In the two-stage cost allocation process, costs are assigned:
The primary difference between normalized and actual costing methods lies in the determination of a job's:
As production takes place, all manufacturing costs are added to the:
The controller for Jack’s Rabbits, Inc., estimates that the company’s fixed overhead is $150,000 per year. He
also has determined that the variable overhead is approximately $0.20 per rabbit raised and sold. Since the
company has a single product, overhead is applied on the basis of output units, or in other words, rabbits
raised and sold.
What is the predetermined overhead rate per rabbit if the output estimate or prediction is 150,000 rabbits?
Which of the following is not a drawback of actual costing?
Farrina Manufacturing uses a predetermined overhead application rate of $8 per direct labor hour. A review
of the company's accounting records for the year just ended discovered the following:
Simone's actual labor hours worked totaled:
When selecting a volume-based cost driver, the goal is to:
When using normal costing, the total production cost of a job is composed of:
Which of the following statements about manufacturing cost flows is false?

Which of the following manufacturers would most likely use job-order costing?
Which of the following statements regarding work in process is not correct?
Which of the following statements about the use of direct labor as a cost driver is false?
The assignment of direct labor cost to individual jobs is based on:
Answer
96,200
75%
90%
Relative profitability depends upon the way we assign costs and define outputs as
successful or unsuccessful.
$191,000
51,300
Textile Manufacturers
departmental overhead rates.
a credit to Sales Revenue for $45,000.
45,500
39,000
937,500
300,000
812,500
debit Finished-Goods Inventory and credit Work-in-Process Inventory.
a denominator of budgeted machine hours for the current accounting period.
None of these, because all are likely users.

When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000
in an account entitled Profit on Sale.
2.95
Determining the cost of a specific project.
384,000
reduce Finished-Goods Inventory by $80,000.
is a pool of indirect production costs that must somehow be attached to each unit
manufactured.
Machining Department
25/Hr
from service departments, to production departments, to jobs.

manufacturing overhead costs.
Work-in-Process Inventory account.
1.2
Costs avoid the estimation associated with predetermined overhead rates.
48,100
choose an input that varies in a pattern that is most similar to the pattern with which
overhead costs vary.
direct material, direct labor, and applied manufacturing overhead.

When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000
in an account entitled Profit on Sale.
Custom-furniture manufacturers.
Work-in-Process Inventory is credited when goods are sold.
Direct labor is gaining importance in many manufacturing applications with respect to
being a significant cost driver.
the actual time spent on each job multiplied by the wage rate.
Sl
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
Question
Lakeland Chemical manufactures a product called Zing. Direct materials are added at the beginning of the process, and conver
occurs uniformly throughout production. The beginning work-in-process inventory is 60% complete with respect to conversion
work-in-process inventory is 20% complete. The following data pertain to May:
Using the weighted-average method of process costing, the equivalent units of direct materials total:
: Using the weighted-average method of process costing, the cost per unit of conversion activity is:
Total conversion costs ÷ Equivalent units for total conversion costs = $187,380 ÷ 69,400
Using the weighted-average method of process costing, the cost of goods completed and transferred during May is:
Using the weighted-average method of process costing, the cost per unit of direct materials is:
Cost of good completed and transferred out = Units completed and transferred out × (sum of per unit costs for direct material
conversion) = 68,000 × ($1.18 + 2.70) = $263,840.
The equivalent units of conversion are equal to Units completed and transferred out (100% conversion) + Ending WIP (20% co
68,000 + (7,000 × 20%) = 69,400 units.
Total costs in Ending WIP = (Ending WIP material equivalent units × Per unit cost for materials) + (Ending WIP conversion equiv
Per unit cost for conversion costs) = (7,000 × $1.18) + (7,000 × 20% × $2.70) = $12,040.
Which of the following are needed under weighted-average process costing to calculate the cost of goods completed during th
Which of the above are needed to calculate the total cost of the ending work-in-process inventory under the weighted-averag
costing method?
Which of the following data are needed to calculate total equivalent units under the weighted-average method?
Covington Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production
conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process i
ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct nu
equivalent units in the ending work-in-process inventory?
Gambino Construction adds materials at the beginning of production and incurs conversion cost uniformly throughout manufa
Consider the data that follow.
Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion cost totaled $270,000. A
the weighted-average method, which of the following choices correctly depicts the number of equivalent units for conversion
conversion cost per equivalent unit?
Which of the following is true concerning cost drivers for the predetermined overhead rate in a process-costing system?
Equivalent-unit calculations are necessary to allocate manufacturing costs between:
Agee Company uses a process-costing system for its single product. Material A is added at the beginning of the process; in con
B is added when the units are 50% complete. The firm's ending work-in-process inventory consists of 4,000 units that are 75%
Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending w
inventory?
Ashley Corporation uses a process-cost accounting system. The company adds direct materials and direct labor at the start of
process; overhead cost is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its
process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equiva
ending work-in-process inventory?
Peach Company uses a weighted-average process-costing system. Company records disclosed that the firm completed 40,000
the month and had 10,000 units in process at month-end, 20% complete. Conversion costs associated with the beginning wor
inventory amounted to $231,000, and amounts that relate to the current month totaled $966,000.
If conversion is incurred uniformly throughout manufacturing, Peach's equivalent-unit cost is:
Bratton Corporation had 6,500 units of work in process on April 1. During April, 19,100 units were completed and as of April 30
When computing the conversion cost per equivalent unit under the weighted-average method of process costing, all of the fo
information would be needed except:
Forte Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 11,000 units were started and a
4,000 units that were 40% complete remained in production.
How many units were completed during April?
When determining the cost of a manufactured good under an operation-costing system, a company would:
Claremore Industries uses a weighted-average process-costing system. All materials are added at the beginning of the process
costs are incurred evenly throughout production. The company finished 40,000 units during the period and had 15,000 units in
year-end, the latter at the 40% stage of completion. Total material costs amounted to $220,000; conversion costs were $414,0
The cost of goods completed is:
Claremore Industries uses a weighted-average process-costing system. All materials are added at the beginning of the process
costs are incurred evenly throughout production. The company finished 40,000 units during the period and had 15,000 units in
year-end, the latter at the 40% stage of completion. Total material costs amounted to $220,000; conversion costs were $414,0
The cost of the ending work in process is:
Xin Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 10,000 units were completed and
4,000 units that were 40% complete remained in production.
Universal Manufacturing uses a weighted-average process-costing system.

All materials are introduced at the start of manufacturing, and conversion costs are incurred evenly throughout the process. T
beginning and ending work-in-process inventories totaled 10,000 units and 15,000 units, respectively, with the latter units bei
complete at the end of the period. Universal started 30,000 units into production and completed 25,000 units. Manufacturing
Universal's equivalent-unit cost for materials is:
Forrest Corporation, a new company, adds material at the beginning of its production process; conversion cost, in contrast, is
throughout manufacturing. During May, the firm completed 15,000 units and had ending work in process of 2,000 units, 60% c
Equivalent-unit costs were: materials, $15; conversion, $22.
The cost of Forrest’s completed production is:
Forrest Corporation, a new company, adds material at the beginning of its production process; conversion cost, in contrast, is
throughout manufacturing. During May, the firm completed 15,000 units and had ending work in process of 2,000 units, 60% c
Equivalent-unit costs were: materials, $15; conversion, $22.
The cost of the company's ending work-in-process inventory is:
When calculating unit costs under the weighted-average process-costing method, the unit cost is based on:
Barton Corporation, which adds materials at the beginning of production, uses a weighted-average process-costing system. Co
that follow.
The company's cost per equivalent unit for materials is:
Mohawk Machining, which uses a process-costing system, adds material at the beginning of production and incurs conversion
throughout manufacturing. The following selected information was taken from the company's accounting records:
On the basis of this information, the ending work-in-process inventory's stage of completion is:
Norton Textile Co. manufactures a variety of fabrics. All materials are introduced at the beginning of production; conversion co
evenly through manufacturing. The Weaving Department had 2,000 units of work in process on April 1 that were 30% complet
conversion costs. During April, 9,000 units were completed and on April 30, 4,000 units remained in production, 40% complete
to conversion costs.
The equivalent units of conversion for April total:
Linder Corporation had 8,200 units of work in process on November 1. During November, 26,800 units were started and as of
7,900 units remained in production.
How many units were completed during November?
Domkowski began operations on January 1 of the current year. The company uses a process-costing system, and conversion co
evenly throughout manufacturing. By January 31, the firm had completed 56,000 units.
Which of the following statements is true about the ending work-in-process inventory if equivalent units for conversion cost to
units?
Which of the following statements is false?
Frankenberger Company, which uses a weighted-average process-costing system, had 7,000 units in production at the end of
period that were 60% complete. Material A is introduced at the beginning of the process; material B is introduced at the end o
and conversion cost is introduced evenly throughout manufacturing. Equivalent-unit production costs follow.
The cost of the company's ending work-in-process inventory is:
Alton Company uses a process-costing system for its single product. Material A is added at the beginning of the process; in con
B is added when the units are 75% complete. The firm's ending work-in-process inventory consists of 6,000 units that are 80%
Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending w
inventory?
St. Onge, Inc. uses a process-costing system. A newly-hired accountant identified the following procedures that must be perfo
close of business on Friday:
Warren Industries uses a process-costing system for its single product, which is manufactured from Material X and Material Y.
introduced to the product as follows:
The company started and completed 40,000 units during the period, and had an ending work-in-process inventory amounting
20% complete.
Which of the following choices correctly expresses the total equivalent units of production for Material X and Material Y?
Unit costs in a process-costing system are derived by using:

Which of the following best describes the procedures used in operation costing to assign direct-material and conversion costs
Gutierrez, which uses a process-costing system, adds all material at the beginning of production and incurs conversion cost ev
manufacturing. The information that follows relates to the period just ended:
Which of the following choices correctly expresses the total equivalent units of production with respect to material and conve
Oxford, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year. The company in
cost evenly throughout manufacturing. If Oxford started work on 3,000 units during the period and these units were 70% of th
manufacturing, it would be correct to say that the company has:
Corrigan, Inc. overstated the percentage of work completed with respect to conversion cost on the ending work-in-process inv
What is the effect of this overstatement on conversion-cost equivalent units and physical units manufactured, respectively?
Fulton Corporation adds all materials at the beginning of production and incurs conversion cost evenly throughout manufactu
company completed 70,000 units during the year and had 12,000 units in process at year end, 20% complete with respect to c
Equivalent units for the year total:
All of the following statements about an operation-costing system are true except:
Answer
75,000
69,400
$2.70
75,000
$1.18
263,840
69,400
12,040
Unit Cost Yes/ EU No
Unit Cost Yes/ EU Yes

Units completed during the period and work-to-date on ending work in process
Material: 100%
Conversion: 40%
EU: 65,000
CC: $6
It is true that if direct labor cost is the cost driver, direct labor and manufacturing
overhead may be combined into the single element of conversion cost.
units completed and ending work in process.
4000
4000
DM: 100%
DL: 100%
MO: 40%
$28.50
17,700
Computing conversion cost per equivalent unit under the weighted-average method
of process costing does not require the conversion work performed during the
current period on the beginning work-in-process.
10,000
trace direct-material cost to each product produced and use a predetermined

application rate for conversion cost.
520,000
114,000
11,000
$6
555,000
56,400
A summation of the costs in the beginning work-in-process inventory plus costs

incurred in the current period
$2.05
60%
10,600
27,100
The ending work-in-process inventory of 10,000 physical units was 30% complete
The total cost of each unit in process costing is not found by dividing the total factory
costs by the number of units completed.
115,220
Equivalent units are 6,000 for each Material A and B, since A is added at the
beginning and the 75% mark for B’s addition has already passed when the product is
80% complete.
Analysis of physical flows of units

Calculation of equivalent units
Calculation of unit costs
Assignment of costs to completed units still in process
Material X: 48,000
Material Y: 40,000
equivalent units.
DMC: Similar to those in Job Costing
CC: Similar to Process Costing
Material EU: 90,000

Conversion EU: 84,000
Even though the units are not complete, the company still has 3,000 physical units in
production.
Since Corrigan overstated the percentage of work completed on ending work-in-

process conversion cost, the conversion cost equivalent units would be overstated Overstated: None
and the physical units manufactured show no effect of the error.
72,400
direct material and conversion costs are traced to each batch of product produced.
Sl
7
8
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Question
St. Vincent’s, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on t
direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that w
labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and re
volumes follow.
The overhead cost allocated to Zeta by using activity-based costing procedures would be
volumes follow.
For above, The overhead cost allocated to Zeta by using traditional costing procedures would be
volumes follow.
For above, The overhead cost allocated to Beta by using activity-based costing procedures would be:
volumes follow.
For above, The overhead cost allocated to Beta by using traditional costing procedures would be:
2: Which of the following activity cost pools and activity measures likely has the lowest degree of correlation?
3: Consider the following statements:
I. Product diversity creates costing problems because diverse products tend to utilize manufacturing activities in different way
II. Overhead costs that are not incurred at the unit level create costing problems because such costs do not vary with tradition
bases such as direct labor hours or machine hours.
III. Product diversity typically exists when a single product (e.g., a ballpoint pen) is made in different colors.
Which of the above statements is (are) true?
Which of the following statements is (are) true about non-value-added activities?
I. Non-value-added activities are often unnecessary and dispensable.

II. Non-value-added activities may be necessary but are being performed in an inefficient and improvable manner.
III. Non-value-added activities can be eliminated without deterioration of product quality, performance, or perceived value.
Edwards Company manufactures low-cost wooden chairs and uses activity-based costing. The following information is for the
March.
Each chair consists of 4 parts and the direct materials cost per chair is $7.00.
Based on the information given for Edwards Company, what is the cost of materials handling and assembly per chair?
Edwards Company manufactures low-cost wooden chairs and uses activity-based costing. The following information is for the
March.
Each chair consists of 4 parts and the direct materials cost per chair is $7.00.
Based on the information given for Edwards Company, what is total manufacturing cost per chair?
Carlin and Marley, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administr
(currently $270,000) has been allocated to services on this basis of billable hours to clients. A recent analysis found that 55% o
billable hours to clients resulted from tax planning services, while 45% resulted from consulting services.
The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows
A recent analysis of staff support found a strong correlation with the number of clients served. In contrast, in-house computin
miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respec
Consulting clients served totaled 35% of the total client base, consumed 30% of the firm's computer hours, and accounted for
total client transactions.
If Carlin and Marley switched from its current accounting method to an activity-based costing system, the amount of administ
chargeable to consulting services would:
Ice Land offers 2 types of skating lessons for children—advanced and hockey skating lessons. The company has two different a
skating instruction and maintenance—that provide input into its cost objectives. Data on estimated overhead for the year follo
The company provides 2,400 hockey skating lessons and 1,200 advanced skating lessons each year. How much overhead will b
each hockey skating lesson?
Fortner Technologies manufactures products X and Y, applying overhead on the basis of labor hours. X, a low-volume product
variety of complex manufacturing procedures. Y, on the other hand, is both a high-volume product and relatively simplistic in
would an activity-based costing system likely disclose about products X and Y as a result of Fortner’s current accounting proce
Miami Production manufactures products X and Y, applying overhead on the basis of labor hours. X is a high-volume product a
simplistic in nature. Y is both a low-volume product and requires a variety of complex manufacturing procedures. What would
based costing system likely disclose about products X and Y as a result of Miami’s current accounting procedures?
Colonial Company manufactures decorative wall clocks and uses activity-based costing. Each clock consists of 20 separate part
in direct materials, and requires 2.5 hours of machine time to produce. Additional information is as follows:
What is the cost of materials handling per clock?
For above, What is the cost of assembling per clock?

For above, What is the total manufacturing cost per clock?
For above, What is the number of finished clocks?
For above, What is the cost of machining per clock?
Bridges and Lloyd, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administr
(currently $250,000) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% o
A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients
(consulting, 20; tax planning, 60). In contrast, in-house computing and miscellaneous office cost varied directly with the numb
hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had
If Bridges and Lloyd switched from its current accounting method to an activity-based costing system, the amount of administ
chargeable to consulting services would:
Bridges and Lloyd, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administr
(currently $250,000) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% o
A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients
(consulting, 20; tax planning, 60). In contrast, in-house computing and miscellaneous office cost varied directly with the numb
hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had
For above, Assuming the use of activity-based costing, the proper percentage to use in allocating staff support costs to tax pla
Consumption ratios are useful in determining:

The adoption of a 24/7 employee hotline for workplace complaints is an example of a
The adoption of a 24/7 customer service help line is an example of a:
Flagler Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost av
per hour. If the company's competitor can accomplish the same process in six hours, Flagler’s non-value-added cost would be
Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which u
based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is
below.
Under Barnett’s activity-based costing system, what is the per-unit overhead cost of Economy?
below.
Under Barnett’s activity-based costing system, what is the per-unit overhead cost of Standard?
below.
Under Barnett’s activity-based costing system, what is the per-unit overhead cost of Deluxe?
below.
What is Barnett’s pool rate for the material-insertion activity?
below.
What is Barnett’s pool rate for the packaging activity?
below.
What is Barnett’s pool rate for the finishing activity?
below.
What is Barnett’s pool rate for Automated machinery activity
below.
What is Barnett’s pool rate for the material-handling activity?
An example of a customer-value-added activity is:
Pound Industries’ customer service department follows up on customer complaints by telephone inquiry. During a recent peri
department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company's wholesale oper
remainder were for the retail division),
costs allocated to the retail division should amount to
Pound Industries’ customer service department follows up on customer complaints by telephone inquiry. During a recent peri
department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company's wholesale oper
remainder were for the retail division),
costs allocated to the wholesale operation should amount to:
Flavorful Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no
a traditionally-derived total cost of $1,019, a selling price of $1,850 based on that figure, and a newly computed activity-based
$1,215.
Sleek, Inc. is a manufacturer that assigns cost using activity-based costing principles. Activities have been identified and classifi
either value-added or non-value-added as to each product.
Which of the following activities used in Sleek’s production process is non-value-added?
Dawg Town produces dog tags and bowls with the name of your dog permanently etched into a stainless steel label. Indirect e
allocated to tags and bowls based on the amount of time spent on the laser etching machine. The company has budgeted etch
$4,224 per month and expects to spend 4,800 hours on the etching labels each month. Each dog tag uses 24 minutes and each
minutes of laser etching time. How much of the etching costs will be allocated to each dog tag?
Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouque
commercial customers. Company personnel who earn $180,000 typically perform both tasks; other firm-wide overhead is exp
$70,000. These costs are allocated as follows:
Skyline anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year.
The cost of wages and salaries and other overhead that would be charged to each bouquet made is:
Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouque
commercial customers. Company personnel who earn $180,000 typically perform both tasks; other firm-wide overhead is exp
$70,000. These costs are allocated as follows:
Skyline anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year.
The cost of wages and salaries and other overhead that would be charged to each delivery is closest to:
Baxter customer service department follows up on customer complaints by telephone inquiry. During a recent period, the dep
initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company's wholesale operation; the re
for the retail division.
Costs allocated to the retail division are:
Rocket Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which u
below.
Assume that Rocket is using a volume-based costing system, and the preceding overhead costs are applied to all products on t
direct labor hours.
The overhead cost that would be assigned to the Deluxe product line is closest to:
Rocket Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which u
below.
Assume that Rocket is using a volume-based costing system, and the preceding overhead costs are applied to all products on t
direct labor hours.
For above, The overhead cost that would be assigned to the Standard product line is closest to:
If Fowler Corporation changes to activity-based costing (ABC), this method normally results in:
During a recent accounting period, Falcon Express’ shipping department processed 26 orders. Each order typically takes four h
complete. However, the average time increased to five hours because of various departmental inefficiencies. If shipping labor
hour, the company's non-value-added cost would be:
Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by us
hours. Activity-based costing would likely show that with Magnolia’s current procedures that:
Cozy Nights Industries manufactures down-filled comforters and uses activity-based costing. The following information is prov
September.
Each comforter consists of 4 parts and the direct materials cost per comforter is $14.00.
Based on the information given for Cozy Nights Industries, what is the total manufacturing cost per comforter?
September.
For above, If the cost of purchasing nearly the same comforter from a supplier is $88.80, what should Cozy Night do to maxim
September.
Based on the information given for Cozy Nights Industries, what is the cost of materials handling and assembly per comforter?
September.
Based on the information given for Cozy Nights Industries, what is the cost of packaging each comforter
Arnold Corporation's customers differ greatly with respect to number of required sales contacts (e.g., phone calls and sales vis
payment patterns, and design/engineering change orders.
Which of the following choices likely denotes an ideal customer from Arnold’s perspective?
Motor Mike builds recreational motor homes. All of the following activities add value to the finished product except:
International Gems sells fine jewelry and has implemented activity-based costing. Costs in the shipping department have been
three cost pools. The first cost pool contains costs that are related to packaging and shipping. International has determined th
of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final insp
item before it is shipped and the cost driver for this pool is the number of individual items that are inspected. The final cost po
general operations of the department and the cost driver is the number of orders. Information about the activities is summari
During December, 4,000 items were sold, reflecting 800 orders that were packed and shipped in 2,100 boxes. What amount is
each order for general operations of the department?
During the period, the Southern sales office generated 240 orders for a total of 3,560 items, which were shipped in 1,200 boxe
amount of shipping department costs should be allocated to these sales?
An order is shipped to a retail customer who has ordered 6 individual items. This order will be shipped in 3 separate boxes. Wh
packing and shipping cost that will be allocated to the order?
How much is the packaging and shipping cost for each box shipped
new customer orders two items that can be shipped in a single box. What is the total shipping department cost that will be all
order?
Which of the following would activity-based costing most likely lead to?
Starwatch Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product n
a traditionally-derived total cost of $1,623 and a selling price of $1,850 based on that figure. A newly computed activity-based
$1,215.
volumes follow.
The overhead cost allocated to Beta by using activity-based costing procedures would be:
volumes follow.
The overhead cost allocated to Beta by using traditional costing procedures would be:
Towler Inc. manufactures products J and K, applying overhead on the basis of labor hours. J, a low-volume product, requires a
complex manufacturing procedures. K, on the other hand, is both a high-volume product and relatively simplistic in nature. W
activity-based costing system likely disclose about products J and K as a result of Towler’s current accounting procedures?
Willow Springs produces various wooden bookcases, tables, storage units, and chairs. Which of the following would be include
the company's non-value-added activities?
Answer
356,000
560,000
444,000
240,000
Activity Cost Pool: Employee travel to job sites

Activity Measure: Number of employees
I & II
All of these are true about non-value-added activities.

$12.40 per chair
$24
$32,500 Decrease
$33.84
X: Undercosted
Y: Overcosted
X: Overcosted
Y: Undercosted
$1.60 per clock
$7.00 per clock

$124.30 per clock
Cannot be determined with the information given
$18.00
$23,500 Decrease
75%
the existence of product-line diversity.

business-value-added activity.
$300 non-value added cost
$164
$272
$440
$11 per part
$100 per order shipped
5 per labor hour
$24 per machine hour
Not 2.25
Final painting and polishing of the product is an example of a customer-value-added

activity.
$117740
$85,260
The company may have been extremely competitive in the marketplace from a price
perspective, based on these facts.
raw materials storage activity.
$0.35
7.15
$19.63 (rounded)
$193,440
$456,471
$11,41,176
Substantially greater unit costs for low-volume products than are reported by
traditional product costing.
$364
Activity-based costing would likely show that with Magnolia's current procedures that
the company's high-volume products are overcosted.
Purchase the comforter from the supplier.
Not 64.8
D (Few, Rapid, Few)
Storage of a vehicle in the sales area would be a non-value-added activity.
$8.50
$14,200
$12.60
Not 7.62 and 0.24
Not 14.7
Activity-based costing systems often lead to raising the sale price of low-volume
products.
Product no. 520 could be labeled as being overcosted by Starwatch's traditional

costing procedures.
$444,000
$240,000
Choice C
Undercosted: J
OvercostedL: K
Storage of completed bookcases in inventory is wrong

Sl
1
2
3
4
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
Question
Food Mart produces gourmet cookies, which sell for $16 a basket. Variable costs per basket are $6 and fixed costs are $5,000
Food Mart expects to sell 1,500 baskets of cookies, what is the margin of safety in number of baskets?
The contribution income statement differs from the traditional income statement in which of the following ways?
Narchie
Triangular graph
Refer to the figure above. The triangular area between the horizontal axis and Line A, to the left of 4,000, represents:
Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amoun
Current sales total 16,000 units.
Break even units?
If Narchie sells 24,000 units, its safety margin will be:
In order to produce a target profit of $22,000, Narchie's dollar sales must total:
Each unit that Narchie sells will:
Markham Industries is studying the profitability of a change in operation and has gathered the following information:
Should Markham Industries make the change?
Denise sells silk scarves at a hobby fair. Each scarf sells for $25 and has a variable cost of $15. Denise’s booth rental for one da
on this information,
how many scarves must Denise sell to break-even?
Denise sells silk scarves at a hobby fair. Each scarf sells for $25 and has a variable cost of $15. Denise’s booth rental for one da
on this information,
what total revenue amount does Denise need to earn to break-even?
A recent income statement of Carson Corporation reported the following data:
If these data are based on the sale of 5,000 units, the break-even sales would be:
Ripley Co. sold 2,000 units in March at a price of $35 per unit. The variable cost per unit is $20.
What is the total contribution margin?
Dane Company has a break-even point of 120,000 units.
If the firm's sole product sells for $40 and fixed costs total $480,000, the variable cost per unit must be:
Garrison Company provides the following information about its product:
What is the contribution-margin ratio?
Applewood’s Bakery sells three large muffins for every 2 small muffins sold. A small muffin sells for $3.00, with a variable cost
large muffin sells for $5.00, with a variable cost of $2.50.
What is the weighted-average contribution margin?
A company has fixed costs of $900 and a per-unit contribution margin of $3.
Ahmed & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows:
Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
Assuming that the sales mix remains constant, the number of units of Fancy that Ahmed must sell to break even is:
For above, Assuming that the sales mix remains constant, the number of units of Plain that Ahmed must sell to break even is
Assuming that the sales mix remains constant, the total number of units that Ahmed must sell to break even is:
For Above, The weighted-average unit contribution margin is:
Quigley Glass Industries sells glass vases at a wholesale price of $2.50 per unit. The variable cost is $1.75 per unit. Monthly fixe
$7,500. If Quigley’s current sales are 25,000 units per month, and Quigley wants to increase operating income by 20%,
how many additional units should be sold (to the nearest unit)?
Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level
units.
What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000?
The following information relates to Paternus Company:
If a manager at Paternus desired to determine the percentage impact on income of a given percentage change in sales,
the manager would multiply the percentage increase/decrease in sales revenue by:
Refer to the figure above. Assume that the company whose cost structure is depicted in the figure expects to produce a profit
upcoming accounting period. The profit would be shown on the graph by the letter:
Santa Fe Production sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated u
31,600, a selling price of $20, variable cost per unit of $8, and total fixed costs of $360,000.
If Santa Fe’s unit sales are 200 units less than anticipated, its break-even point will:
Santa Fe Production sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated u
31,600, a selling price of $20, variable cost per unit of $8, and total fixed costs of $360,000.
Santa Fe’s safety margin in units is:
At a volume of 20,000 units, Almount Industries reported sales revenues of $1,000,000, variable costs of $300,000, and fixed c
$260,000.
The company's break-even point in units is:
Ripley Co. sold 2,000 units in March at a price of $35 per unit.
The variable cost per unit is $20. What is the total contribution margin?
Operating leverage predicts the effects fixed costs have on changes in operating income when:
The assumptions on which cost-volume-profit analysis is based appear to be most valid for businesses:
Which of the following statements is (are) true regarding a company that has implemented flexible manufacturing systems an
costing?
I. The company has erred, as these two practices used in conjunction with one another will severely limit the firm's ability to a
over the relevant range.
II. Costs formerly viewed as fixed under traditional-costing systems may now be considered variable with respect to changes in
such as number of setups, number of material moves, and so forth.
III. As compared with the results obtained under a traditional-costing system, the concept of break-even analysis loses meanin
When advanced manufacturing systems are installed, what effect does such installation usually have on fixed costs and the br
Fixed Costs Break-even Point

A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Do not change Does not change
At a volume level of 500,000 units, Sullivan reported the following information:
The company's contribution-margin ratio is closest to:

Hsu, Inc. sells a single product for $12. Variable costs are $8 per unit and fixed costs total $360,000 at a volume level of 60,000
Assuming that fixed costs do not change, Hsu’s break-even point would be:
A manager who wants to determine the percentage impact on income of a given percentage change in sales would multiply th
increase/decrease in sales revenue by the:
Charriott sells a single product at $200 per unit. The firm's most recent income statement revealed unit sales of 2,000, variable
of $50, and fixed costs of $120,000. Management believes that a 20% drop in selling price will boost sales by 20%.
If this reduction in selling price is implemented,
The following information relates to Dazie Company:
Dazie's operating leverage factor is closest to:

All other things being equal, a company that sells multiple products should attempt to structure its sales mix so the greatest p
mix is composed of those products with the highest:
The difference between budgeted sales revenue and break-even sales revenue is the:
You are analyzing Barroz Corporation and Newton Corporation and have concluded that Barroz has a higher operating leverag
Newton. Which one of the following choices correctly depicts (1) the relative use of fixed costs (as opposed to variable costs) f
companies and (2) the percentage change in income caused by a change in sales?
Starlight Co. makes and sells only one product. The unit contribution margin is $6 and the break-even point in unit sales is 24,0
The company's fixed costs are:
A 25% increase in production volume will result in:
Thai Two sells hot pots for $40 each. The company incurs monthly fixed costs of $5,000. The contribution-margin ratio is 20%.
Based on this information, what is the variable cost per hot pot?
Which of the following occurs if a company experiences an increase in its fixed costs?
Finn’s budget for the upcoming year revealed the following figures:
If the company's break-even sales total $750,000, Finn’s safety margin would be:
A recent income statement of Benton Corporation reported the following data:
If these data are based on the sale of 20,000 units, the break-even point would be:
Gandee Company has an operating leverage factor of 5. Which of the following statements is true?
Thus, an 8% change in ______ should result in a 40% change in _____. The respective amounts that change are:
A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income. How much should the firm add to fixed co
figuring the sales revenues necessary to produce this income level?
Samuels, Inc. is subject to a 40% income tax rate. The following data pertain to the period just ended when the company prod
45,000 units:
How many units must Samuels sell to earn an after-tax profit of $180,000?
A recent income statement of McClennon Corporation reported the following data:
If the company desired to earn a target profit of $1,270,000, it would have to sell:
Elise Corporation has the following sales mix for its three products: A, 20%; B, 35%; and C, 45%. Fixed costs total $400,000 and
average contribution margin is $100. How many units of product A must be sold to break-even?
Which of the following would produce the largest increase in the contribution margin per unit?
McGuire Corporation sells three products: R, S, and T. Budgeted information for the upcoming accounting period follows.
The company's weighted-average unit contribution margin is:

Sarafine, Inc. sells a single product for $20. Variable costs are $8 per unit and fixed costs total $120,000 at a volume level of 5,
Assuming that fixed costs do not change, Sarafine’s break-even sales would be:
Which of the following occurs if a company experiences a decrease in its fixed costs?
Assuming no change in sales volume, an increase in company's per-unit contribution margin would:
Partner Industries sells a single product for $50 that has a variable cost of $30. Fixed costs amount to $5 per unit when anticip
targets are met. If the company sells one unit in excess of its break-even volume, profit will be:
At a volume of 20,000 units, Almount Industries reported sales revenues of $1,000,000, variable costs of $300,000, and fixed c
$260,000. The company's contribution margin per unit is:
Which of the following occurs if a company was able to reduce its variable cost per unit?
Refer to the figure above. Assume that the company whose cost structure is depicted in the figure expects to produce a profit
upcoming accounting period. The profit would be shown on the graph by the letter:
Which of the following would occur if a company increases its variable cost per unit?
A recent income statement of Benton Corporation reported the following data:
If these data are based on the sale of 20,000 units, the contribution margin per unit would be:
Answer
1,000
cost-volume-profit relationships can be analyzed more easily from the contribution

income statement.
Profit
Loss
Will break-even by selling 20,000 Units
$200,000
$1,055,000
Increase profit by $20
No, because the company will be worse off by $4,000.
3 Scarves
$75
$2,000,000
$30,000 total contribution margin
$36
75%
$1.90 per muffin
Each unit "contributes" $3 toward covering the fixed costs of $900 and once the
break-even point is reached, the company will increase income at the rate of $3 per
unit.
2000 units of Fancy

3000 break-even units of Plain
5000
$9
3000 additional units
$600,000
Operating leverage factor: 4
No change
1600 units
7429 units
$30,000 contribution margin

Sales volume changes
Over the short run
II Only
Choice A [both Fixed costs & Break-even point increased]
0.67
90000 units
Operating leverage factor
Change in operating income [$36,000]
Contribution margin
Safety margin
Choice A [both Greater]
$1,44,000
25% increase in total variable costs
$32
The break-even point would increase.
$90,000
14,667 units [rounded] 3000000
An 8% change in sales revenue should result in a 40% change in income 20000
$833,333 150
61,000 units
8600 units
800 units of A
7% increase in selling price
$3.55
$200,000
The break-even point would decrease
Increase income
$20
$35
Contribution margin: increase

Break-even point: decrease
Contribution margin: decrease

Break-even point: increase
$150
4.4
22
Sl
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
Question
Cycle Sporting Goods sells bicycles throughout the northeastern United States. The following data were taken from the most r
sales forecast:
On the basis of the information presented, how many bicycles should the company purchase in August?
Nevis Motors manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $360 p
company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data
from the most recent quarterly production budget:
The cost of platinum to be purchased to support August production is:
Nikolas Industries has a cash balance of $20,000 on July 1, 20x8. The company is in the process of preparing the cash budget fo
quarter, with budgeted cash collections and payments as follows:
There are no budgeted capital expenditures or financing transactions during the quarter. Using the data above, what is the pro
balance at the end of September?
Houseman, Inc. anticipates sales of 50,000 units, 48,000 units, 51,000 units and 50,000 units in July, August, September and O
respectively. Company policy is to maintain an ending finished-goods inventory equal to 40% of the following month's sales. O
this information
how many units would the company plan to produce in September?
Houseman, Inc. anticipates sales of 50,000 units, 48,000 units, 51,000 units and 50,000 units in July, August, September and O
respectively. Company policy is to maintain an ending finished-goods inventory equal to 40% of the following month's sales. O
this information
how many units would the company plan to produce in July?
Elon & Company had 3,000 units in finished-goods inventory on December 31. The following data are available for the upcomi
Desired ending finished-goods inventory 2,500 2,100
The number of units the company expects to sell in January is:
Dealer Enterprises (DE) anticipated that 84,000 process hours would be worked during an upcoming accounting period when,
hours were actually worked. One of the company's cost functions is expressed as follows:
What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?
Barrington Industries anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual s
commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluation
would report a cost variance of:
A direct-labor efficiency variance cannot be caused by
Vito, Inc. had an unfavorable labor efficiency variance and an unfavorable materials quantity variance.Which department migh
accountable for these variances?
Listed below are five variances (and possible causes) that are under review by management of Knight Company.
Which of the following is least likely to cause the variance indicated?
Which of the following would be considered when preparing a company's sales forecast?
Nevis’ production data for a new deluxe product were taken from the most recent quarterly production budget:
In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct labor hours to produce each stand
2.25 direct labor hours to produce each deluxe unit. Nevis’ cost per labor hour is $15.
Morgan Company's budgeted income statement reflects the following amounts

Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. On
sales is uncollectible and expensed at the end of the year.
Morgan pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances
January 1:
A company's sales forecast would likely consider all of the following factors except:
Commerce Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower pro
operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:
If Commerce operated at 35,000 hours, its total budgeted cost would be:
Commerce Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower pro
operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:
Commerce’s flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:
Which of the following would not be considered if a company desires to establish a series of practical manufacturing standard
Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance
Which of the following is a criticism of standard costing, as applied to today's manufacturing environment?
Lamar Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier, resulting in a dire
price variance of $9,500F. The alloy produced more waste than normal, as evidenced by a direct-material quantity variance of
was also difficult to use. This slowed worker efficiency, generating a $2,500U labor efficiency variance.
To help remedy the situation, the production manager used senior line employees, which gave rise to a $900U labor rate varia
product quality did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's
acquire substandard material?
Wu Production Company, which uses activity-based budgeting, is in the process of preparing a manufacturing overhead budge
following would likely appear on that budget?
Gallonte Inc. began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30
in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sa
May, and June were $60,000, $80,000, and $70,000, respectively,
what were the firm's budgeted collections for June?
what were the firm's budgeted collections for May?
what were the firm's budgeted collections for quarter?
Jerome Copper Company budgeted 126,000 process hours for the month of October when one of the company’s cost function
budgeted to be $2,976,000. The process hours actually worked during October were 135,000. Jerome Copper Company exper
variance of $40,000 unfavorable related to this cost function. If the company’s cost function includes a $16 per process hour r
what is the formula used by Jerome Copper Company to derive its flexible budget?
The following selected data pertain to Flagship Corporation:
July's cash disbursements are expected to be:

Fortune Inc. has budgeted sales for June and July at $680,000 and $720,000, respectively. Sales are 80% credit, of which 70% i
the month of sale and 30% is collected in the following month.
What is the accounts receivable balance on July 31?
Bacon has budgeted sales for the first quarter of the next year to be 30,000 units. The inventory in hand at the beginning of qu
units. The desired ending inventory is 10,000 units. What is the budgeted production for the quarter?
Express Meals is a local bistro that has budgeted inventory purchases as follows:
Express pays for 20% of their purchases during the month of purchase, 70% during the month following the purchase, and the
two months after the month of purchase.
What is the budgeted accounts payable balance on November 30?
To derive the raw material to purchase during an accounting period, an accountant would calculate the raw material required
and then:
A flexible overhead budget might include which of the following items:
A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of
The budget for 25,000 hours would reveal total overhead costs of:
The budget for 20,000 hours would reveal total overhead costs of:
Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with p
standards?
A production supervisor generally has little influence over the:

Which of the following would have no effect, either direct or indirect, on an organization's cash budget?
An examination of Hyong Corporation's inventory accounts revealed the following information:
Hyong’s finished product requires four units of raw materials. On the basis of this information, how many finished products we
manufactured during June?
Auditory Company, which applies overhead to production on the basis of machine hours, reported the following data for the p
ended:
If Auditory estimates four hours to manufacture a completed unit, the company's fixed-overhead budget variance would be:
Bender Corporation has a favorable materials quantity variance. Which department would likely be asked to explain the cause
variance?
Rainbow, Inc. began operations on January 1 of the current year with a $12,000 cash balance. Forty percent of sales are collec
month of sale; 60% are collected in the month following sale. Similarly, 20% of purchases are paid in the month of purchase, a
paid in the month following purchase. The following data apply to January and February:
If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the chan
cash balance during February
Doral Corp. has provided a part of its budget for the third quarter:
The cash balance on July 1 is $12,000. Assume that there will be no financing transactions or costs during the quarter. What is
Doral Corp. has provided a part of its budget for the third quarter:
The cash balance on July 1 is $12,000. Assume that there will be no financing transactions or costs during the quarter. What is
Which of the following would be considered if a company desires to establish a series of practical manufacturing standards?
Terrence Corporation plans to sell 41,000 units of its single product in March. The company has 2,800 units in its March 1 finis
inventory and anticipates having 2,400 completed units in inventory on March 31. On the basis of this information,
how many units does Terrence plan to produce during March?
Company A uses a heavily participative budgeting approach whereas at Company B, top management develops all budgets an
on lower-level personnel. Which of the following statements is false?
Dalton Industries makes all purchases on account, subject to the following payment pattern:
If purchases for January, February, and March were $200,000, $180,000, and $230,000, respectively,
what were the firm's budgeted payments in March?
budget for 25,000 hours would reveal total overhead costs of:
Strongheart Enterprises anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit. Actua
sales commissions totaled 27,500 units and $171,400, respectively. If the company used a flexible budget for performance eva
Strongheart would report a cost variance of:
A direct-material quantity variance can be caused by all of the following except:
Karma Company has prepared its operating budget for the first quarter of 20x9. The company forecasts sales of $50,000 in Feb
in March, and $70,000 in April. Variable and fixed expenses are as follows:
For an airline, which of the following would not be an operational budget?

Guiness Inc. has a budgeted production of 8,000 units. Each unit requires 40 minutes of direct labor work to complete. The dir
$100 per hour.
What is the budgeted cost of direct labor for the month?
Hsu plans to sell 40,000 units of product no. 75 in June, and each of these units requires five square feet of raw material. Perti
follow
If the company purchases 201,000 square feet of raw material during the month, the estimated raw-material inventory on Jun
Holiday Company prepares packed lunches for hikers in Yosemite. Hikers order their lunches by 10 pm and their lunch is left a
room door in a re-useable insulated bag by 5 am the following morning. Holiday budgeted 5,000 lunches for July and each lun
process hours. Holiday’s static budget for electricity for the month is $3,000. Actual sales, process hours, and electricity cost to
lunches, 2,480 PH, and $3,040, respectively. If the company used a static budget for performance evaluations, Holiday would r
variance of:
Overton Industries has the following sales forecasts for its hip waders next year:
What is Overton’s estimated sales in units for next year?
Which of the following statements best describes the relationship between the sales-forecasting process and the master-budg
Sigmo Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were
Other data for the period were:
Sigmo’s fixed-overhead budget variance is:
Virginia Enterprises makes all purchases on account, subject to the following payment pattern:
If purchases for April, May, and June were $200,000, $160,000, and $250,000, respectively, what was the firm's budgeted pay
on June 30?
Seven Falls Cuisines has the following flexible-budget formula:
Which of the following statements is (are) true?
What is Seven Falls’ budgeted total cost if its process hours equal 25,000?
Situation 1: Loren Company recently purchased materials from a new supplier at a very attractive price. The materials were fo
poor quality, and the company's laborers struggled significantly as they shaped the materials into finished product.
Situation 2: In a desperate move to make up for some of the time lost, the Loren Company manufacturing supervisor brought
employees from another part of the plant
Which of the following variances would have a high probability of arising from both of these situations?
Solution Enterprises incurred $828,000 of fixed overhead during the period. During that same period, the company applied $8
overhead to production and reported an unfavorable budget variance of $41,000. How much was Solution’s budgeted fixed ov
Zhou, Inc. is planning its overhead costs for an upcoming period when 85,000 machine hours are expected to be worked. Activ
low as 78,000 hours if some overdue equipment maintenance procedures are performed; on the other hand, activity could jum
hours if one of Zhou's major competitors likely goes bankrupt. A flexible overhead budget would best be based on:
Farre Company has prepared the following purchases budget:

All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after p
are the total cash payments made in November for purchases? November purchases + October purchases + September purch
When considering whether to investigate a variance, managers should consider all of the following except the variance's:
A company that uses activity-based budgeting performs the following:
Which of the following denotes the proper order of the preceding activities?
Chong Corporation recently prepared a flexible budget for water usage at its manufacturing plant. Budgeted water cost at var
production levels is as follows:
Actual units produced amounted to 60,000. Actual cost incurred for water usage was $4,500. What was Chong’s cost variance
Chong Corporation has a highly automated production facility. Which of the following correctly shows the two factors that wo
the most direct influence on the company's manufacturing overhead budget?
Panama Co. prepared the following flexible overhead budget where PH is process hour. Which of the answers provided correc
the table?
Blaylock plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of raw material. Perti
follow
On the basis of the information presented, how many units of raw material should Blaylock purchase for use in May productio
The following events took place when Managers A, B, and C were preparing budgets for the upcoming period:
1. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local authorities.
2. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor.
3. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the department whe
labor budget.
Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example of building slac
Harrington makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60%
the first month after sale; and 10% are collected in the second month after sale. If sales for June, July, and August were $120,0
and $220,000, respectively,
what were the firm's budgeted collections for August and the company's budgeted receivables balance on August 31?
Holiday Company prepares packed lunches for hikers in Yosemite. Hikers order their lunches by 10 pm and their lunch is left a
room door in a re-useable insulated bag by 5 am the following morning. Holiday budgeted 5,000 lunches for July and each lun
process hours. Holiday’s static budget for electricity for the month is $3,000. Actual sales, process hours, and electricity cost to
lunches, 2,480 PH, and $3,040, respectively. If the company used a flexible budget for performance evaluations, Holiday would
variance of:
Answer
2,040
$195,840
$54,600
$46,100
$35,700
50,600
49,200
9,900
Choice B
Status: 19,84,000
Flexible: 21,12,000
Producing fewer finished units than originally planned

Purchasing
because bad materials can harm labor efficiency and Production, because inefficient workers may
use more materials than allowed
The need to close a plant for two days because of blizzard conditions; material quantity variance,
part no. 542
Choice D
Anticipated Advertising Campaigns: Yes
General Economic Trends: Yes
Expected Competitive Actions: Yes
Direct labor cost for the quarter would be budgeted at: $553,950.
Direct labor cost for August would be budgeted at: $187,125.
Direct labor cost for July would be budgeted at: $183,750.
If it takes two direct labor hours to produce each unit and Nevis’ cost per labor hour is $15, direct
labor cost for August would be budgeted at: 1,100 × 2 × $15 = $33,000
Direct labor cost for September would be budgeted at: $183,075
Morgan’s expected cash balance at the end of January is: $94,160

Morgan’s expected cash balance at the end of February is: $1,13,300
Cash Receipts: $1,14,000
Cash Payments: $94,860
the company's product costing policy.

top management's attitude toward decentralized operating structures.
$8,77,500
$4.50AH+$7,20,000
Production time lost during unusual machinery breakdowns

$4,100 F
Batch-level costs: Production setup
$75000
$60000
$153,000
Y = $16(Total process hours) + $960,000
$674000
$172,800
35,000
$347,000
Add the desired ending raw-material inventory and subtract the beginning raw-material inventory
Choice D
Direct Material: NO
Electricity: YES
Insurance and Property Tax: YES
$270,000
$240,000
Choice B
Perfection Standards: Result in many unfavoravle variances
Practical Standards: Are often attainable by workers
direct-material price variance
None
45,000
$22000 unfavorable
Production
$4500 increase
$39,600
Both normal defect rates in an assembly process and quantity discounts associated with purchases
of direct materials
40,600 units
Budget padding will likely be a greater problem at Company B
$197,000
$270,000
$6400 U
All of these could result in a direct-materials quantity variance

What are the total selling and administrative expenses for the month of April? $47,500.
What are the total selling and administrative expenses for the month of March. $43,000.
What are the total selling and administrative expenses for the month of February. $38,500.
A cash receipts budget of flying consumers
$533,333.33
25000 square feet

$40U
41,485 pairs
The sales forecast is typically completed before the master budget and has significant impact on the
master budget
$9900 favorable
$183,000
Y = $13PH + $450,000 where PH is defined as process hours

All the answers are correct
$775,000
Situation 1: Material quantity variance, unfavorable

Situation 2: Material price variance, favorable
$787,000
78,000 hours, 85,000 hours, and 94,000 hours
$74,290 paid in cash
nature, namely, whether it is favorable or unfavorable
2-1-3
$300 favourable
The two factors that would likely have the most direct influence on the company's manufacturing
overhead budget are production volume and management judgment
Choice A
(1 ) = $ 0.50; (2 ) = $ 3,960 .
264,000 units of raw material
III only
Choice B
August Collections: $174,000
August 31 Receivables Balance: $170,000
Not 84U
4.4
22
3000000
20000
150
Brady Industries is deciding whether or not to discontinue its Agave Division. The division’s contribution margin is $48,600
costs charged to the division total $57,600 but $27,000 would be eliminated if the division is discontinued. If the division is
overall operating income would:
The Boot Department at the Omaha Department Store is being considered for closure. The following information relates to
of the fixed operating costs are avoidable, should the Boot Department be closed?
Kingston Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information: If King
managerial accounting practices, how many units of Product X should it produce?
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Fixed manufact
in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per uni
per unit for Super; remaining selling amounts are fixed.
Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs w
because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinu
Haverton Industries is studying whether to drop a product because of ongoing losses. Costs that would be relevant in this
include variable manufacturing costs as well as:
Cheyenne Enterprises manufactures Nuts and Bolts from a joint process (cost = $80,000). Five thousand pounds of Nuts ca
for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes C
joint costs using the relative sales value method. The amount of joint cost allocated to Bolts would be:
The term "opportunity cost" is best defined as:
Two months ago, Air-tite Corporation purchased 4,500 pounds of Hydrol, paying $15,300. The demand for this product ha
since the acquisition, with the market price jumping to $4.05 per pound. (Air-tite can buy or sell Hydrol at this price.) The c
received a special-order inquiry, one that would require the use of 4,200 pounds of Hydrol. Which of the following is (are)
whether to accept the special order?
Boise, a division of Price Enterprises, currently performs computer services for various departments of the firm. One of the
a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceab
operating costs total $80,000 and $25,000, respectively, in addition to $18,000 of corporate administrative overhead alloc
Boise were to use the outside consultant, fixed operating costs would be reduced by 70%. The irrelevant costs in Boise’s o
total:
Cheyenne Enterprises manufactures Nuts and Bolts from a joint process (cost = $80,000). Five thousand pounds of Nuts ca
for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes C
joint costs using the relative sales value method. The amount of joint cost allocated to Nuts would be:
A factory that makes a part has significant idle capacity. The factory's opportunity cost of making this part is equal to
When deciding whether to sell a product at the split-off point or process it further, joint costs are not usually relevant bec
Fairline Skyways has a significant presence at the Charlotte International Airport and therefore operates the Diamond Club
from gate 36 in terminal 1. The Diamond Club provides food and business services for the company's frequent flyers. Cons
selected costs of Club operation: 1 Receptionist and supervisory salaries 2 Catering 3 Terminal depreciation (based on squa
fees (computed as a percentage of club revenue) 5 Allocated Fairline administrative overhead Management is exploring w
club and expand the seating area for gate 36. Which of the preceding expenses would the airline classify as unavoidable?
Flavor Enterprises has been approached about providing a new service to its clients. The company will bill clients $140 per
hourly variable and fixed operating costs will be $75 and $18, respectively. If all employees are currently working at full ca
matters, the per-hour opportunity cost of being unable to provide this new service is:
San Ruiz Interiors provides design services to residential and commercial clients. The residential services produce a contrib
$450,000 and have traceable fixed operating costs of $480,000. Management is studying whether to drop the residential o
the fixed operating costs will fall by $370,000 and San Ruiz’ income will
Forrest Corporation manufactures parts that are used in the production of washers and dryers. The following costs are ass
65: The company received a special-order inquiry from an appliance manufacturer in Brazil for 15,000 units of part no. 65.
costs per unit will amount to only $8. Since Forrest has excess capacity, the minimum price that Forrest should charge the
is:
Kranston Company is considering whether to sell Retox at the split-off point or subject it to further processing and produce
product known as Retox-F. Consider the following items: I. The selling price of Retox-F. II. The joint processing cost of Reto
cost of producing Retox-F. Which of the above items is (are) relevant to Kranston’s decision to process Retox into Retox-F?
Canyon Trails is studying whether to outsource its Human Resources (H/R) activities. Salaried professionals who earn $390
terminated; in contrast, administrative assistants who earn $120,000 would be transferred elsewhere in the organization.
departmental overhead (e.g., supplies, copy charges, overnight delivery) is expected to decrease by $30,000, and $25,000
overhead, previously allocated to Human Resources, would be picked up by other departments. If Canyon Trails can secure
services locally for $410,000, how much would the company benefit by outsourcing?
Homer Enterprises, which produces various goods, has limited processing hours at its manufacturing plant. The following d
no. 607: Management is now studying whether to devote the firm's limited hours to product no. 607 or to other products.
amount should management focus on when determining no. 607's "value" to the firm and deciding the best course of acti
Cornerstone, Inc. has $125,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The compan
"as is" for $45,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $23,000. Th
be sold for $80,000. What alternative is more desirable and what is the relevant cost for that alternative?
Howard Enterprises, which has three departments, recently reported the following results: The company incurred variable
well as $25,000 of fixed operating costs. The $25,000 amount was allocated to A, B, and C on the basis of sales revenue an
cost figures noted above. Which department(s), if any, should be closed if none of the fixed operating costs can be avoided
Which of the following statements regarding costs and decision making is correct?
The City of San Diego is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other op
of the following items, all related to the transaction, would not be considered in the decision?
Consider the following statements about relevant costing and activity-based costing: Which of the above statements is (ar
Elkhorn, Inc., which has excess capacity, received a special order for 4,000 units at a price of $15 per unit. Currently, produ
anticipated to be 10,000 units without considering the special order. Budget information for the current year follows. Cost
includes $30,000 of fixed manufacturing cost. If the special order is accepted, the company's income will:
Forest River produces 3 products, Aspen, Oak, and Pine. The company has accumulated the following information about e
Aspen requires 4 machine hours, Oak requires 2.5 machine hours and Pine requires 1.5 machine hours. The company has 1
available each year. The demand for each product is 500 units. If Forest River schedules its production to maximize its tota
margin, what would be the company’s total contribution margin?
Kingston Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information: If King
managerial accounting practices
Allison is contemplating a job offer with an advertising agency where she will make $54,000 in her first year of employmen
Allison can begin to work in her father's business where she will earn an annual salary of $38,000. If Allison decides to wor
opportunity cost would be:
A factory that makes a part has significant idle capacity. The factory's opportunity cost of making this part is equal to:
The Boot Department at the Omaha Department Store is being considered for closure. The following information relates to
of the fixed operating costs are avoidable, should the Boot Department be closed?
The following costs are relevant to the decision situation cited except:

McAlister Company is operating at capacity and desires to add a new service to its rapidly expanding business. The service
long as service revenues exceed
Stone Industries produces chemicals used in the production of granite and quartz countertops used in residential homes. I
20,000 gallons of Benzonite is processed into 14,000 gallons of Ultralite and 6,000 gallons of Concentralite. The joint proce
The following information is available: Should Concentralite be processed further, and why or why not?
Brighton Company’s results of operations for its most recent year are shown below. Brighton makes two products, CJ11 an
selling expenses for CJ11 are $3 per unit and $16 per unit for PX22. Cost of goods sold includes $3 per unit of fixed manufa
and $16 per unit for PX22 (remaining selling amounts are fixed). Brighton is considering a proposal to drop CJ11, which wo
company’s fixed manufacturing costs by 25%. What would be the impact on operating income if CJ11 is discontinued?
Boise, a division of Price Enterprises, currently performs computer services for various departments of the firm. One of the
a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceab
operating costs total $80,000 and $25,000, respectively, in addition to $18,000 of corporate administrative overhead alloc
Boise were to use the outside consultant, fixed operating costs would be reduced by 70%. The irrelevant costs in Boise’s o
total:
Newton Manufacturing has 31,000 labor hours available for producing M and N. Consider the following information: If New
managerial accounting practices in terms of setting a production schedule, how much contribution margin would the comp
generate?
An architecture firm currently offers services that appeal to both individuals and commercial clients. If the firm decides to
to individuals because of ongoing losses, which of the following costs could the company likely avoid?
Phillippe Inc. manufactures A and B from a joint process (cost = $80,000). Five thousand pounds of A can be sold at split-off
or processed further at an additional cost of $20,000 and then sold for $25 per pound. If Phillippe decides to process A bey
point, operating income will:
A firm that decides to emphasize those goods with the highest contribution margin per unit may have made an incorrect d
company:
Each unit requires 2 machine hours and the company has 1,440 machine hours available each year. The demand for each p
Which of the following statements is correct regarding Forest River’s production?
Which of the following statements regarding costs and decision making is correct?
Canyon Trails is studying whether to outsource its Human Resources (H/R) activities. Salaried professionals who earn $390
terminated; in contrast, administrative assistants who earn $120,000 would be transferred elsewhere in the organization.
departmental overhead (e.g., supplies, copy charges, overnight delivery) is expected to decrease by $30,000, and $25,000
overhead, previously allocated to Human Resources, would be picked up by other departments. If Canyon Trails can secure
services locally for $410,000, how much would the company benefit by outsourcing?
Deltones, a manufacturer of computer peripherals, has excess capacity. The company's Alabama plant has the following pe
for item no. 89: The traceable fixed administrative cost was incurred at the Alabama plant; in contrast, the allocated admin
represents a "fair share" of Deltones' corporate overhead. Alabama has been presented with a special order of 5,000 units
which no selling cost will be incurred. The proper relevant cost in deciding whether to accept this special order would be:
Brighton Company’s results of operations for its most recent year are shown below. Brighton makes two products, CJ11 an
selling expenses for CJ11 are $3 per unit and $16 per unit for PX22. Cost of goods sold includes $3 per unit of fixed manufa
and $16 per unit for PX22 (remaining selling amounts are fixed). If Brighton eliminates CJ11 and uses the available capacity
an additional 1,200 units of PX22, what would be the impact on operating income?
Consider the following statements about relevant costing and activity-based costing: I. The concept of relevant costs and b
used in conjunction with an activity-based costing system. II. The concept of relevant costs and benefits must be modified
activity-based costing system. III. Generally speaking, the decision maker can better associate relevant costs with the activ
under an activity-based costing system than under a conventional product-costing system. Which of the above statements
Galveston Corporation has $200,000 of joint processing costs and is studying whether to process J and K beyond the split-o
about J and K follows. If Galveston desires to maximize total company income, what should the firm do with regard to Prod
Consider the following costs and decision-making situations:

I. The cost of existing inventory, in a keep vs. disposal decision.
II. The cost of special electrical wiring, in an equipment acquisition decision.
III. The salary of a supervisor who will be transferred elsewhere in the organization, in a department-closure decision.
Which of the above costs is (are) relevant to the decision situation noted?
Aspen requires 4 machine hours, Oak requires 2.5 machine hours and Pine requires 1.5 machine hours. The company has 1
available each year. The demand for each product is 500 units. Which of the following statements is correct regarding Fore
production?
The following information is available:
Should Ultralite be processed further, and why or why not?
The following information is available:
Stone Industries allocated the joint processing costs on the basis of gallons of product produced. Using the relative-sales-v
much of the joint processing costs would be allocated to Ultralite?
Decrease by $21,600.
Yes, Omaha would be better off by $23,000.
6,000
$39,600 decrease.
avoidable fixed costs.
48,000
the benefit associated with a rejected alternative when
making a choice.
The $4.05 market price.
$25,500.
32000
the variable manufacturing cost per unit is wrong
such amounts are sunk and do not change with the
decision.
3 iswrong
65
Decrease by 80000
99
I and III
10000
Not 2.4 and 3.4
Clean and ship to outlet center, $23,000.
C
Sunk costs can be misleading in make-or-buy decisions
because these amounts appear to be relevant differential
costs is wrong
Purchase price of the old vehicle.

Not II and III
increase by $14,000.
2083.2
how many units of Product X should it produce? 6000 how
many units of Product y should it produce? 5000
54000
the fixed manufacturing cost per unit.
Yes, Omaha would be better off by $23,000

the cost to enhance an airline's beverage service, in a
decision to expand existing airline service to either Salt
Lake City or Phoenix
the sum of variable costs and any related opportunity
costs.
No, Concentralite should not be processed further because
the net loss is ($18,000).
not 23360
25500
66700
Variable operating costs.
inc by 5000
has capacity constraints in the form of limited resources.
Forest River should produce 500 units of Aspen and 220 of

Oak.
Per-unit fixed costs can be misleading because such
amounts appear to behave as variable costs when, in
actuality, the amounts are related to fixed expenditures.
10000
40
36000 Inc
III only
J beyond Split off and K at split off
I only.
Forest River should produce 500 units of Pine and 276 of

Oak
Yes Ultralite should be processed further because the net

benefit is $12,400.
$23,309.
1
2
3
5
6
7
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
Question
Cachet is a division of Estate Industries. Estate has a required rate of return on capital of 8 percent. Cachet’s income is $320,000, its sales ma
its capital turnover is 1. What is Cachet’s residual income?
Summit Co. reported sales revenue of $15,000,000 and a 4% sales margin. Summit’s return on investment was 15%. What is Summit’s incom
Summit Co. reported sales revenue of $15,000,000 and a 4% sales margin. Summit’s return on investment was 15%.
What is Summit’s invested capital?
Summit Co. reported sales revenue of $15,000,000 and a 4% sales margin. Summit’s return on investment was 15%. Summit’s manager rece
ROI is 20% or greater. In which of the following circumstances would the manager receive a bonus?
Foxmoor Corporation uses an imputed interest rate of 13% in the calculation of residual income. Division X, which is part of Foxmoor, had inv
$1,200,000 and an ROI of 16%. On the basis of this information, X's residual income was:
A division's return on investment may be improved by increasing
The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:
The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions
In addition, the company incurred common fixed costs of $18,000. Which of the following amounts should be used to evaluate
Restin, Inc., should continue to invest company resources in the Los Angeles division?
The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions
In addition, the company incurred common fixed costs of $18,000. Bay Area's segment profit margin is:
Gulf Coast Enterprises (GCE) operates 87 stores and has three divisions: Florida, Georgia, and Alabama. Which of the following costs would
Georgia’s portion of GCE's segmented income statement?
Management of Wee Ones (WO), an operator of day-care facilities, wants the company's profit to be subdivided by center. The firm's account
the following data:
WO's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $60,000. Assume that manag
allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising
allocated to the Irvine center?
Stargazer Services Co. is organized in three segments: Sky Mountain, Diamond View, and Star Party. Data for the company and for these seg
What are Diamond View’s controllable profit margin and segment profit margin?
The following data relate to Department no. 3 of Winslett Corporation:
On the basis of this information, Department no. 3's variable operating expenses are:
Which of the following measures would reflect the fixed costs controllable by a segment manager?
A profit center manager:
What are Star Party’s segment contribution margin and noncontrollable fixed costs?
The basic idea behind residual income is to have a division maximize its:
Vello, Inc. reported a return on investment of 12%, a capital turnover of 5, and income of $180,000. On the basis of this information, the comp
capital was:
For the period just ended, Trek Corporation's Trailer Division reported profit of $54 million and invested capital of $450 million. Assuming an im
rate of 10%, which of the following choices correctly denotes Trailer’s return on investment (ROI) and residual income?
The following information pertains to Travis Concrete:
The company's imputed interest rate is 8%. The ROI is:
The Holder Division of Extraordinary Enterprises has a negative residual income of $540,000. Holder’s management is contemplating an inve
that will reduce this negative amount to $400,000. The investment:
The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions:
In addition, the company incurred common fixed costs of $18,000. Bay Area's segment profit margin is:
In addition, the company incurred common fixed costs of $18,000. Assume that the Los Angeles division increases its promotion expense, a c
cost, by $10,000. As a result, revenues increased by $50,000. If variable expenses are tied directly to revenues, the new Los Angeles segmen
Thurmon Retail has three stores in West Virginia. Which of the following costs would likely be included when computing the profit margin cont
no. 3's manager?
Sandy Shores Corporation operates two stores: J and K. The following information relates to J:
J's segment contribution margin is:

Bumble Company has two divisions, Grumble and Humble. Bumble’s required rate of return on capital is 11 percent. Grumble has a 25% sale
ROI, and income of $200,000. What is Grumble’s residual income?
The company's imputed interest rate is 8%. The The residual income is:
The Markham Division of World Corporation, which has income of $250,000 and an asset investment of $1,562,500, is studying an investmen
will cost $450,000 and yield a profit of $67,500. Assuming that World uses an imputed interest charge of 14%, would the investment be attrac
The following information relates to the Corner Division of Hometown Enterprises:
Income for the period just ended: $1,500,000. Invested capital: $12,000,000. If the company has an imputed interest rate of 11%, Corner’s res
would be:
Crimson Industries is in the process of evaluating allocation bases so that selected costs can be charged to responsibility centers. Would the
employees likely be a good base for allocating the costs of Human Resources, Building and Grounds, and Repairs and Maintenance to user c
Which of the following measures would reflect the fixed costs controllable by a segment manager?
The following data relate to Department no. 2 of Velma Corporation:
On the basis of this information, fixed costs traceable to Department no. 2 but controllable by others are
Pride Company is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing). Which of th
choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents)?
The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:
The market value of Galleon’s debt and equity capital totals $180 million, 80% of which is equity related. An analysis conducted by the compa
department revealed a 7% after-tax cost of debt capital and a 10% cost of equity capital. On the basis of this information, Galleon’s weighted-
capital:
The company's imputed interest rate is 8%. The sales margin is:
Which of the following statements is incorrect regarding an investment center?
Which of the following would be the best measure on which to base a segment manager's performance evaluation for purposes of granting a
For a company that uses responsibility accounting, which of the following costs is least likely to appear on a performance report of an assemb
supervisor?
Halpern Corporation is in the process of overhauling the performance evaluation system for its San Diego manufacturing division, which produ
parts that are popular in the aerospace industry. Which of the following classifications is least likely to be chosen to evaluate the overall opera
Diego division?
For the period just ended, Global Industries’ Western Division reported profit of $31.9 million and invested capital of $220 million. Assuming an
rate of 12%, which of the following choices correctly denotes Western’s return on investment (ROI) and residual income?
Beach Corporation has a return on investment of 15%. A Beach division, which currently has a 13% ROI and $750,000 of residual income, is
massive new investment that will (1) reduce divisional ROI and (2) produce $120,000 of residual income. If Beach strives for goal congruence
Tempest Enterprises had a sales margin of 5%, sales of $4,000,000, and invested capital of $5,000,000. The company's ROI was:
Concert Division reported a residual income of $200,000 for the year just ended. The division had $8,000,000 of invested capital and $1,000,0
the basis of this information, the imputed interest rate was:
In addition, the company incurred common fixed costs of $18,000. Assuming use of a responsibility accounting system, which of the following
be used to evaluate the performance of the Los Angeles division manager?
Management of Wee Ones (WO), an operator of day-care facilities, wants the company's profit to be subdivided by center. The firm's account
the following data:
WO's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $60,000.
If advertising expense were allocated to centers based on actual center profitability, the amount of advertising expense allocated to the Irvine
closest to:
A division's return on investment may be improved by increasing:
Summit Co. reported sales revenue of $15,000,000 and a 4% sales margin. Summit’s return on investment was 15%. What is Summit’s capita
Cost pools should be charged to responsibility centers by using:
Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centers?
Endotrope Corporation has an after-tax operating income of $3,200,000 and a 9% weighted-average cost of capital. Assets total $7,000,000 a
liabilities total $1,800,000. On the basis of this information, Endotrope’s economic value added is:
The Nashville Division of Country Classics currently reports a profit of $3.6 million. Divisional invested capital totals $9.5 million; the imputed in
12%. On the basis of this information, Nashville’s residual income is:
What are Sky Mountain’s variable costs and noncontrollable fixed costs?
The information that follows relates to Khan Corporation:
On the basis of this information, the company's sales revenue is:

Jamison Company had sales revenue and operating expenses of $5,000,000 and $4,200,000, respectively, for the year just ended. If invested
amounted to $6,000,000, the firm's ROI was:
The capital turnover is:
Distinguishing between controllable and noncontrollable costs on a performance report may result in:
In addition, the company incurred common fixed costs of $18,000. The profit margin controllable by the Central Valley segment manager is:
The following information relates to Attor, Inc.:
If the company has a 10% weighted-average cost of capital, its economic value added would be:
A revenue center manager:
The following information relates to the Falcon Division of Xenon Enterprises
On the basis of this information, Falcon’s weighted-average cost of capital is closest to:
Decentralized firms can delegate authority by structuring an organization into responsibility centers. Which of the following orga
segments is most like a totally independent, standalone business where managers are expected to "make it on their own"?
Swift Software operates stores within five regions. Regional managers are held accountable for marketing, advertising, and sale
and all costs incurred within their region. In addition, regional managers decide whether new stores will open, where the stores
and whether the stores will lease or purchase the facilities. Store managers, in contrast, are accountable for marketing, advertis
decisions, and costs incurred within their stores. Ideally, on the basis of this information, what type of responsibility center shou
company use to evaluate its regions and stores?
Which of the following measures would reflect the variable costs incurred by a business segment
Which of the following statements is incorrect regarding an investment center?
Horner Division has been stagnant over the past five years, neither growing nor contracting in size and profitability. Investments
property, plant, and equipment have been minimal. Would the division's use of total assets (valued at net book value) when me
result in (1) using numbers that are consistent with those on the balance sheet and (2) a rising ROI over time?
Republic Resorts owns numerous hotels on each of the Hawaiian Islands. The company's performance reporting system is stru
the firm's organizational structure, with information flowing from operating departments at a particular property and later respec
by individual hotel, island operation (i.e., division), and the company as a whole. Which of the following best depicts the detail le
information given to a department manager versus that reported to a company vice-president?
Tranquil Beaches owns six hotels in Hawaii, collectively known as the Hawaiian Division. The various hotels, including the Surf
operating departments (such as Maintenance, Housekeeping, and Food and Beverage) that are evaluated as either cost cente
centers. The Food and Beverage Department, for example, is a profit center, with activities divided into three segments: Banqu
Catering, Restaurants, and Kitchen. If Tranquil Beaches uses a performance-reporting system that is based on responsibility ac
of the following disclosures is likely to occur?
The profit margin controllable by the segment manager would not include
Which of the following would have a low likelihood of being organized as a profit center?
All of the following actions are likely to increase ROI except:

Miracle Green Corporation operates two garden supply stores: A and B. The following information relates to store A:
A's segment profit margin is:

A division's return on investment may be improved by increasing:
Answer
192,000
$600,000
$4,000,000
Invested capital is $3,000,000.
$36,000
Fixed expenses traceable to the segment but controllable by others.
$10,000
$20,000
Georgia’s allocated share of general GCE corporate overhead.
$21,000
$52
Not determinable

Profit margin controllable by the segment manager and the segment profit margin are measures
that reflect fixed costs controllable by a segment manager
May be the manager who oversees the operations of a retail store
Segment contribution margin = $120

noncontrollable fixed costs = $36.
income in excess of a corporate imputed interest charge.

$15,00,000
Choice A
12% & $9 Mn
20%
Should be pursued because it is attractive from both the divisional and corporate perspectives.
$22,500
Hourly labor costs incurred by personnel at store no. 3.
$700,000
$90,000
$54,000
Choice D
$180,000
Choice C
Human Resources: Yes
Buildings & Grounds: No
Repairs & Maintenance: No.

Profit margin controllable by the segment manager and the segment profit margin are measures
that reflect fixed costs controllable by a segment manager.
$260,000
The cost is not charged to the departments because it is neither easily traceable to the departments
nor controllable by the departments.
Fixed expenses traceable to the segment but controllable by others.
9.4%
6%
An investment center manager does not have the ability to produce revenue.
Profit margin controllable by the segment manager.
Assembly-line facilities depreciation.
Cost centre
Choice D
'ROI: 14.5%
RI: $5.5 Mn
Should be acquired because it produces $120,000 of residual income for the division.
4%
10%
25,000
$40,543
Capital turnover or sales margin

3.75
Budgeted amounts of allocation bases because the behavior of one responsibility center should not
influence the allocations to other responsibility centers.
Square feet occupied by the responsibility centers.
$2,732,000
$2,460,000
$92
$40,000,000
13.33%
3.33
An increase in the effectiveness of a cost management system and an increase in the quality of
performance information.
$75,000
$680,000
may be involved with the sale of a new marketing program to a client.
9.5%
A standalone would be an investment center.
Choice D
Choice D
An investment center manager does not have the ability to produce revenue
Choice A
Choice B
The profit of the Surf & Sun hotel will appear on the Hawaiian Division's performance report
disclosure would likely occur.
a share of the company’s common fixed expenses and income tax expense.
Both the billing department of an Internet Services Provider (ISP) and the mayor's office in a large
city have a low likelihood of being profit centers
A decrease in the number of units sold would not increase ROI.
$105,000
A division’s return on investment may be improved by increasing capital turnover or sales margin.
4.4
22
3000000
20000
150

Process Costing Example for Lakeland Chemical

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Process Costing Example for Lakeland Chemical

Uploaded by

Copyright:

Available Formats

https://clicktime.symantec.com/3Ai2CoKfZZUH6oDafEeaS1F7Vc?u=https%3A%2F%2Fconnect.mheducation.

Use the following labor budget data for Roy &

Use the following labor budget data for Roy &

Dubois Decors is an interior decorator in St.

What is the total cost of the firm’s contract to

Osgood Company, which applies overhead at

8 If the amount of effort and attention to

Morgan Manufacturing recently sold goods

Barnacle Industries incurred and applied the

Douglas, Inc., employs a normal costing

Douglas, Inc., employs a normal costing

Douglas, Inc., employs a normal costing

Norwood Corporation uses a predetermined

Blakely charges manufacturing overhead to

Metalica Company applies overhead based on

Farrina Manufacturing uses a predetermined

32 When selecting a volume-based cost driver,

33 When using normal costing, the total

37 Which of the following statements about the

Using the weighted-average method of

Lakeland Chemical manufactures a product

: Using the weighted-average method of

Lakeland Chemical manufactures a product

Total conversion costs ÷ Equivalent units for

Using the weighted-average method of

Lakeland Chemical manufactures a product

Using the weighted-average method of

Lakeland Chemical manufactures a product

Cost of good completed and transferred out =

The equivalent units of conversion are equal

Lakeland Chemical manufactures a product

Total costs in Ending WIP = (Ending WIP

Which of the following are needed under

Which of the above are needed to calculate

Which of the following data are needed to

Gambino Construction adds materials at the

Conversion cost in the beginning work-in-

Which of the following is true concerning cost

Agee Company uses a process-costing system

Which of the following correctly expresses

Peach Company uses a weighted-average

If conversion is incurred uniformly throughout

Bratton Corporation had 6,500 units of work

How many units were started during April?

When computing the conversion cost per

Forte Co., had 3,000 units of work in process

How many units were completed during

Claremore Industries uses a weighted-

The cost of goods completed is:

Claremore Industries uses a weighted-

The cost of the ending work in process is:

Xin Co., had 3,000 units of work in process on

How many units were started during April?

Universal's equivalent-unit cost for materials

Forrest Corporation, a new company, adds

The cost of Forrest’s completed production is:

Forrest Corporation, a new company, adds

The cost of the company's ending work-in-

When calculating unit costs under the

Barton Corporation, which adds materials at

The company's cost per equivalent unit for

On the basis of this information, the ending