ACCT344 Cost Accounting: Week 8 Finals Guide (July 2014 Version)

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ACCT344 Cost Accounting
Week 8 Finals Guide (July 2014 Version)

Multiple Choice:
1. (TCO 2) Which cost is NOT a period cost? (Points : 5)
Lumber for furniture
Executive administrative assistant salary
Depreciation on sales staff's cars
Sales commission

2. (TCO 2) Which product would use job-order costing? (Points : 5)
Ink pens
Custom boot maker
Soda pop
Horse saddles

3. (TCO 3) As production occurs, materials, direct labor, and applied manufacturing overhead are recorded in (Points : 5)
cost of goods sold.
work-in-process.
materials.
finished goods.

4. (TCO 8) A company keeps 60 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 30 days of inventory on hand, and the competitor's carrying costs average $2,000 per day. The value-added costs are (Points : 5)
$300,000.
$150,000.
$60,000.
$0.

5. (TCO 8) Which is a value-added activity? (Points : 5)
Moving
Inspection
Processing
Waiting

6. (TCO 1) The break-even point is (Points : 5)
the volume of activity where all fixed costs are recovered.
where fixed costs equal total variable costs.
where total revenues equal total costs.
where total costs equal total contribution margin.

7. (TCO 1) The Kringel Company provides the following information.
Sales (200,000 units) $500,000
Manufacturing costs
Variable $170,000
Fixed $30,000
Selling and administrative costs
Variable $80,000
Fixed $20,000

Which is the break-even point in units for Kringel? (Points : 5)
33,334 units
100,000 units
40,000 units
200,000 units

8. (TCO 7) Which would be the most appropriate base for allocating the costs of the maintenance department? (Points : 5)
Machine hours
Direct labor hours
Number of employees
Square feet

9. (TCO 7) Yo Department Store incurred $8,000 of indirect advertising costs for its operations. The following data have been collected for 2013 for its three departments.
Shoes Cosmetics Crafts
Sales $120,000 $100,000 $100,000
Direct advertising costs $9,000 $7,000 $4,000
Newspaper ad space 60% 20% 20%

How much of the indirect advertising costs will be allocated to the Cosmetics Department if newspaper ad space is the activity driver?(Points : 5)
$8,000
$1,600
$1,400
$6,400

10. (TCO 5) Which best describes zero-base budgeting? (Points : 5)
A budget that is developed for a single level of activity
A budget that analyzes existing activities (and continuation of that activity must be justified and resources needed must be justified by each manager)
A budget that is based solely on prior period information, adjusted for inflation
A budget that is continuous or rolling

11. (TCO 5) Bug Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next 2 months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next 2 months, and the steel inventory is expected to increase 5 units in each of the next 2 months.

How many units of wood are expected to be used in production during the second month? (Points : 5)
12,500 units
10,000 units
15,000 units
12,000 units

12. (TCO 4) Which statement is true? (Points : 5)
Absorption costing net income exceeds variable costing net income when units produced and sold are equal.
Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
Absorption costing net income exceeds variable costing net income when units produced are greater than units sold.

13. (TCO 6) Using more highly skilled direct laborers might affect which variance? (Points : 5)
Direct materials usage variance
Direct labor efficiency variance
Variable manufacturing overhead efficiency variance
All of the above

14. (TCO 6) Which equation measures the total budget variance? (Points : 5)
AQ x (AP - SP).
SP x (AQ - SQ).
SQ x (AP - SP).
(AQ x AP) - (SQ x SP).


Essay/Problems:
1. (TCO 1) George Corporation has an estimated monthly sale of 12,000 units for $80 per unit. Variable costs include manufacturing costs of $50 and distribution costs of $20. Fixed costs are $60,000 per month.

Required:
Determine each of the following values.
a. Unit contribution margin
b. Monthly break-even unit sales volume
c. Create a contribution margin-based income statement. (Points : 30)

2. (TCO 7) Darling Manufacturing Inc. manufactures two products, A and B, from a joint process. A single production costs $5,000 and results in 200 units of A and 800 units of B. To be ready for sale, both products must be processed further, incurring separable costs of $3 per unit for A and $4 per unit for B. The market price for Product A is $15 and for Product B is $10.

Required: Allocate joint production costs to each product using the net realizable value method. (Points : 30)

3. (TCO 6) Santa Inc. manufactures toys based on the following information.
Standard costs
Materials (4 ounces at $4) $16
Direct labor (1 hour per unit) $7
Variable overhead (based on direct labor hours) $3.50
Fixed overhead budget $16,000

Actual results and costs
Materials purchased
Units 10,000
Cost $38,500
Materials used in production
Finished product units 2,200
Raw material (ounces) 9,500
Direct labor hours 2,200
Direct labor cost $18,000
Variable overhead costs $8,400
Fixed overhead costs $16,200

Required:
Compute the following variances (show calculations).
a. Materials usage variance
b. Labor rate variance
c. Fixed overhead budget variance
(Points : 30)

4. (TCO 4) Toshi Company incurred the following costs in manufacturing desk calculators.
Direct materials $14
Indirect materials (variable) 4
Direct labor 8
Indirect labor (variable) 6
Other variable factory overhead 10
Fixed factory overhead 28
Variable selling expenses 20
Fixed selling expenses 14

During the period, the company produced and sold 1,000 units.
a. What is the inventory cost per unit using absorption costing?
b. What is the inventory cost per unit using variable costing? (Points : 30)

5. (TCO 8) Musical Instruments Company manufactures two products (trumpets and trombones). Overhead costs ($175,000) have been divided into three cost pools that use the following activity drivers.
Product Number of setups Machine hours Packing orders
Trumpets 50 1,500 150
Trombones 50 4,500 250
Cost per pool $60,000 $90,000 $25,000

Required (show all calculations)
a. What is the allocation rate for trumpets per setup using activity-based costing?
b. What is the allocation rate for trumpets per machine hours using activity-based costing?
c. What is the allocation rate for trumpets per packing order using activity-based costing?
(Points : 30)

6. (TCO 5) The Baxter Corporation has the following budgeted and actual results.
Budgeted data Actual results
Unit sales 35,000 Unit sales 36,000
Unit production 35,000 Unit production 37,000
Fixed overhead Fixed overhead
Supervision $25,000 Supervision $23,500
Depreciation $40,000 Depreciation $40,000
Rent $20,000 Rent $20,000
Variable costs per unit Variable costs
Direct materials $25.00 Direct materials $900,000
Direct labor $26.00 Direct labor $950,000
Supplies $0.25 Supplies $9,000
Indirect labor $1.30 Indirect labor $50,000
Electricity $0.20 Electricity $7,500

Required:
Prepare a performance report for all costs, showing flexible budget variances (indicate F or U).
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