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Compute the break-even point in sales dollars
Course:- Accounting Basics
Reference No.:- EM132357005




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Questions -

Q1. Freight costs incurred in shipping products to customers is properly referred to as a product rather than period cost of the selling company.

  • True
  • False

Q2. Period costs include all selling and administrative costs, both variable and fixed.

  • True
  • False

Q3. The salary of a manufacturing quality control inspector would typically be accounted for as manufacturing overhead.

  • True
  • False

Q4. A retail merchandising company's cost of goods sold typically includes part of store utility costs.

  • True
  • False

Q5. A manufacturing company's cost of goods sold includes only product costs.

  • True
  • False

Q6. The basis used to apply manufacturing overhead in a job order cost system based on a predetermined overhead rate should be a measurable activity which correlates with or drives overhead costs.

  • True
  • False

Q7. Managerial accounting is governed by rules issued by the AICPA.

  • True
  • False

Q8. If sales price and fixed costs remain constant while variable costs per unit increase, the number of units needed to be sold to reach the break-even point increases.

  • True
  • False

Q9. Unrecoverable past costs are always irrelevant in evaluating future business decision alternatives.

  • True
  • False

Q10. The manufacturing operation most likely to use job-order costing rather than process costing is:

  • Cereal manufacturing.
  • Candy manufacturing.
  • Crude oil refining.
  • Office building construction.

Q11. In a manufacturing company the proper journal entry (without numbers) to record the purchase of direct materials would be:

Option A

Finished Goods Inventory

xx

 

Raw Materials Inventory

 

xx

Option B

Raw Materials Inventory

xx

 

Work in Process Inventory

 

xx

Option C

Work in Process Inventory

xx

 

Raw Materials Inventory

 

xx

Option D

Raw Materials Inventory

xx

 

Finished Goods Inventory

 

xx

  • Option A
  • Option B
  • Option C
  • Option D
  • None of these

Q12. In a job order cost system, work-in-process inventory is debited when

  • Actual manufacturing overhead is incurred.
  • Raw materials are purchased.
  • Direct labor costs are incurred.
  • Actual manufacturing overhead and direct labor costs are incurred.
  • All of the these.

Q13. In a job-order cost system, direct materials requisitioned and introduced into production are recorded with a debit to

  • Manufacturing Overhead.
  • Finished Goods Inventory.
  • Direct Labor Expense.
  • Work-in-Process Inventory.
  • None of these.

Q14. In a job-order cost system, the application of manufacturing overhead based on a predetermined overhead rate would be recorded as a debit to

  • Cost of Goods Sold.
  • Work-in-Process Inventory.
  • Manufacturing Overhead.
  • Finished Goods Inventory.
  • None of these.

Q15. In a job order cost system, the introduction of indirect materials into production is recorded with a debit to

  • Work-in-Process Inventory.
  • Finished Goods Inventory.
  • Raw Materials Inventory.
  • Cost of Goods Sold
  • None of these.

Q16. In a job order cost system, work-in process inventory is credited when

  • Manufactured goods are sold.
  • Manufactured goods are completed.
  • Raw materials are used in production.
  • None of these.

Q17. If a company uses a predetermined overhead rate to apply overhead cost to production, a debit balance in the Manufacturing Overhead account indicates that to date

  • More overhead cost has been applied to production than has actually been incurred.
  • More overhead cost has actually been incurred during the period than has been applied to production.
  • The amount of overhead cost applied is greater than the estimated overhead cost for the period.
  • The amount of overhead cost applied is less than the estimated overhead cost for the period.

Q18. Johansen Company has the following estimated costs for the next year:

Direct materials - $6,000

Direct labor - $100,000

Rent on factory building - $15,000

Sales salaries - $25,000

Depreciation on factory equipment - $8,000

Indirect manufacturing materials - $12,000

Production supervisor's salary - $15,000

Johansen pays $5 per hour for direct labor. If manufacturing overhead is applied on the basis of direct labor hours, the predetermined overhead rate per direct labor hour will be

  • $2.50.
  • $3.50.
  • $3.75.
  • $5.05.
  • None of these.

Q19. A proper journal entry (without numbers) to record the adjustment of overapplied overhead to Cost of Goods Sold would be:

Option A

Cost of Goods Sold

xx

 

Work in Process

 

xx

Option B

Cost of Goods Sold

xx

 

Manufacturing Overhead

 

xx

Option C

Cost of Goods Sold

xx

 

Finished Goods

 

xx

Option D

Manufacturing Overhead

xx

 

Cost of Goods Sold

 

xx

  • Option A
  • Option B
  • Option C
  • Option D
  • None of these.

Q20. A "pro-forma" financial statement means the financial statement is

  • In proper GAAP format.
  • Used primarily by outside investors and creditors.
  • A projected financial statement.
  • Based on historical information.
  • Prepared by professional CPA's in correct format.

Q21. Within the relevant range

  • Variable cost per unit decreases as the volume of sales decreases.
  • Fixed cost per unit increases as the volume of sales decreases.
  • Fixed costs per unit decreases as the volume of sales decreases.
  • Variable cost per unit increases as the volume of sales decreases.

Q22. Within the relevant range, as the number of units sold increases, variable costs per unit sold are assumed to

  • Increase.
  • Decrease.
  • Remain the same.

Q23. When using the scattergraph method to analyze mixed costs, the slope of the resulting line represents the

  • Variable cost per unit.
  • Fixed cost.
  • Opportunity cost per unit.
  • Total variable cost.
  • None of these.

Q24. If total sales are $100,000, total variable costs are $30,000, and total fixed costs are $40,000, the contribution margin is

  • $100,000.
  • $40,000.
  • $60,000.
  • $70,000.
  • None of these.

Q25. Which of the following is NOT commonly found on a functional income statement prepared in accordance with GAAP?

  • Cost of Goods Sold
  • Selling Expenses
  • Contribution Margin
  • Administrative Expenses
  • Gross Margin

Q26. The following cost data are available for Miner Company:

Month

Total Utility Costs

Number of Units Sold

January

$28,000

4,000 units

February

$22,000

3,000 units

March

$25,000

3,500 units

April

$39,000

6,500 units

May

$41,000

7,000 units

June

$42,000

8,000 units

Given this data and using the high-low method of mixed cost analysis, the monthly fixed cost portion of utility costs amounts to

  • $13,000.
  • $10,000.
  • $ 7,000.
  • $ 4,000.
  • None of these.

Q27. Smith Company sells a single product at a selling price of $30 per unit. Variable costs are $12 per unit and fixed costs are $14,000. Smith's break-even point in either units or sales dollars is

  • 1,380 units.
  • $69,000.
  • 3,450 units.
  • $207,000.
  • None of these.

Q28. Last year Easton Company reported sales revenues of $720,000, a contribution margin as a percentage of sales revenue of 30% and fixed costs of $240,000. Based on this information, the break-even point in sales dollars was

  • $640,000.
  • $880,000.
  • $744,000.
  • $800,000.
  • None of these.

Q29. If variable costs are $15 per unit, sales revenues are $20 per unit, and the break-even point is 2,500 units, fixed costs are

  • $500.
  • $2,500.
  • $12,500.
  • $37,500.
  • None of these.

Q30. Grate Corporation's product has a selling price per unit of $15 and a per-unit variable cost of $8. Its fixed costs are $14,000. How many units must the company sell to earn a profit of $35,000?

  • 2,334 units
  • 3,000 units
  • 6,000 units
  • 6,125 units
  • None of these

Q31. When other factors remain constant, a decrease in fixed costs

  • Increases the breakeven units.
  • Decreases the breakeven units.
  • Has no effect on the breakeven units.

Q32. Star of the Sea School has annual fixed costs of $150,000 and variable costs of $550 per student. Star of the Sea expects 345 students for the upcoming year. If the school wishes to earn a profit of $10,000, what should tuition per student be (round answer to nearest $)?

  • $957
  • $1,014
  • $1,233
  • $1,346
  • None of these

Q33. The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $200,000. If Grain Company desires net income of $60,000, sales revenues would have to be

  • $260,000.
  • $440,000.
  • $280,000.
  • $240,000.
  • None of these.

Q34. The following cost information is for Rocky Company.

Actual results:

  • Total cost of purchasing material - $15,000
  • Number of labor hours worked - 450 hours
  • Number of material pounds used in production - 2,000 pounds
  • Number of units produced - 200 units
  • Number of material pounds purchased - 1,500 pounds
  • Total labor cost - $12,500

 Leslie Company has established the following standards:

  • Price per pound of materials - $8.00 per pound
  • Standard labor rate - $30.00 per hour

During the year , Rocky Company DEBITED Work-in-Process Inventory for a total of $12,000 of direct labor cost. Given these data, which ONE of the following PAIRS would be included in the summary journal entry needed to record the information related to DIRECT LABOR?

Note: Assume that the wages have not yet been paid in cash.

  • Credit Labor Efficiency Variance for $1,000; Debit Labor Rate Variance for $1,500.
  • Debit Labor Efficiency Variance for $1,000; Credit Labor Rate Variance for $1,500.
  • Credit Labor Efficiency Variance for $1,500; Debit Labor Rate Variance for $1,000.
  • Credit Labor Efficiency Variance for $500; Debit Labor Rate Variance for $1,000.
  • Debit Labor Efficiency Variance for $500; Credit Labor Rate Variance for $1,000.
  • Debit Labor Efficiency Variance for $1,500; Credit Labor Rate Variance for $1,000.
  • Debit Labor Efficiency Variance for $1,000; Credit Labor Rate Variance for $500.
  • Credit Labor Efficiency Variance for $1,000; Debit Labor Rate Variance for $500.

Q35. The following information is available for Aina Company Estimated for Year 1:

Estimated total manufacturing overhead - $100,000

Estimated direct labor hours - 40,000 hours

Actual data for Year 1 are as follows:

Actual total manufacturing overhead - $90,000

Variable overhead spending variance - $22,500 favorable

The number of units produced during Year 1 was 1,000. The standard number of direct labor hours to be worked to produce each unit is 50. Given this information, the variable manufacturing overhead efficiency variance is

  • $10,000 unfavorable
  • $10,000 favorable
  • $25,000 unfavorable
  • $25,000 favorable
  • $12,500 unfavorable
  • $12,500 favorable
  • $32,500 unfavorable
  • $32,500 favorable

Q36. Solar Salt Company has two divisions. Sales, direct materials cost, and direct labor cost data for Solar Salt's two divisions are not available. However, manufacturing overhead and gross profit data for the two divisions are available, as follows.

 

Agricultural Products

Retail Products

Manufacturing overhead*

$450,000

$250,000

Gross profit

150,000

100,000

*Manufacturing overhead is allocated to production based on the amount of direct labor cost. Solar Salt has determined that its total manufacturing overhead cost of $700,000 is a mixture of unit-level costs, batch-level costs, and product line costs. Solar Salt has assembled the following information concerning the manufacturing overhead costs, the annual number of units produced, production batches, and number of product lines in each division.

 

Total Manufacturing Overhead Costs

Agricultural Products

Retail Products

Unit-level overhead

$210,000

7,500 units

13,500 units

Batch-level overhead

280,000

50 batches

90 batches

Product line overhead

210,000

10 lines

18 lines

 

$700,000

 

 

How much will GROSS PROFIT in each of the divisions be if Solar Salt adopts an activity-based costing system?

  • Agricultural, $50,000; Retail, $200,000
  • Agricultural, loss of $50,000; Retail, $300,000
  • Agricultural, $350,000; Retail, loss of$100,000
  • Agricultural, $350,000; Retail, $100,000
  • Agricultural, $350,000; Retail, $300,000
  • Agricultural, $250,000; Retail, $450,000
  • Agricultural, loss of $50,000; Retail, loss of $100,000
  • Agricultural, $150,000; Retail, $100,000

Q37. The following information is for Harold Company. The "percent completed" numbers are for conversion costs; all direct materials are added at the beginning of the production process. For the beginning inventory, the percentage given is the percentage that was already completed as of the beginning of the period. For the ending inventory, the percentage given is the percentage that was completed as of the end of the period.

 

Units

Percent Completed

Direct Materials Costs

Conversion Costs

Beginning work in process

6,000 units

20%

$10,000

$5,000

Costs added this period

 

 

$52,800

$43,600

Ending work in process

10,000 units

30%

 

 

Units completed and transferred during the period

20,000 units

 

 

 

Compute the TOTAL COST TRANSFERRED OUT DURING THE PERIOD THAT WAS ASSOCIATED WITH THE 6,000 BEGINNING WIP INVENTORY UNITS. Assume a FIFO flow of costs.

  • $24,600
  • $27,100
  • $25,200
  • $20,160

Q38. The following information is for Stahc Company. The "percent completed" numbers are for conversion costs; all direct materials are added at the beginning of the production process. For the beginning inventory, the percentage given is the percentage that was already completed as of the beginning of the period. For the ending inventory, the percentage given is the percentage that was completed as of the end of the period.

 

Units

Percent Completed

Direct Materials Costs

Conversion Costs

Beginning work in process

12,000 units

70%

$10,000

$5,000

Costs added this period

 

 

$56,000

$49,200

Ending work in process

6,000 units

80%

 

 

Units completed and transferred during the period

20,000 units

 

 

 

Compute the total cost of goods STARTED AND COMPLETED during the period. Assume a FIFO flow of costs.

  • $56,000
  • $64,200
  • $101,600
  • $41,000



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