Reference no: EM131810370

Assignment

1. Inventoriable costs are:

a) only purchased goods for resale
b) a category of costs used only for manufacturing companies
c) recorded as expenses when incurred and later reclassified as assets
d) recorded as assets when incurred

2. Morton Graphics successfully bid on a job printing standard notebook covers during the year using last year's price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked to discover that the company had suffered a loss. "How could this be?" she exclaimed. "We had no increases in cost and our price was the same as last year. Last year we had a healthy income."

What could explain the company's loss in income this current year?

a) Their costs were all variable costs and the amount produced and sold increased.
b) Their costs were mostly fixed costs and the amount produced this year was less than last year.
c) They used a different cost object this year than the previous year.
d) Their costs last year were actual costs but they used budgeted costs to make their bids.

3. Data from the duplicating department of Fastcopy Ltd for the 5 months are as follow:

What are the expected duplicating department costs for June if 19,000 copies are expected to be made?

a) $15,858
b) $15,980
c) $16,216
d) $18,580

4. A manufacturing company makes mobile phones. Materials that became part of the finished products cost $869,000. Insurance at the manufacturing plant cost $56,000. Plant management were paid $202,000. Rent on corporate headquarters was $48,000. Salespeople were paid $250,000 in salary and $62,000 in commissions. The screws used in the phone (that are hard to keep track of) cost $7,500. The workers on the production line were paid $1,250,000. Depreciation on manufacturing equipment cost $155,000. Utilities at the manufacturing plant cost $132,000. Advertising of the products cost $37,000. Supplies for the corporate office cost $12,000. Glue used to put the front and back of the phone together cost $3,900. Warehousing cost for finished units was $35,000.

The manufacturing overhead costs for the period totalled:

a) $409,000
b) $ 591,400
c) $ 556,400
d) $965,400

5. If total manufacturing costs are equal to the cost of goods manufactured and greater than cost of goods sold:

a) The inventory of WIP increases
b) The inventory of WIP decreases
c) The inventory of FG increases
d) The inventory of FG decreases

6. The cost of an accounting lecturer on campus would be a direct cost to the Business School but would need to be allocated as an indirect cost to the:

(a) university
(b) course/subject
(c) individual student
(d) faculty

7. Tee Times Pty Ltd produces and sells the finest quality golf clubs in Australia. The company expects the following revenues and costs in 2014 for its Elite golf club set:

Revenues (400 sets) $ 240,000
Variable costs 160,000
Fixed costs 50,000

What sales revenue does Tee Times need to earn an after tax net income of $63,000 (tax rate = 30%)?

a) $489,000
b) $429,000
c) $420,000
d) $300,000

8. What effect would an increase in building insurance have on the break-even point and the contribution margin?

    Break-even Point      Contribution Margin
a) Increase                    Increase
b) Increase                    Decrease
c) Increase                    No effect
d) Decrease                   Decrease

9. The JIB Corporation produces and sells two products A and B with the following information:

JIB has budgeted fixed manufacturing costs of $100,000 and budgeted fixed selling and administrative expenses of $20,000. The tax rate is 40%.

How many units of B would be needed to generate an after tax income of $24,000?

a) 21,333
b) 19,200
c) 16,000
d) 12,800

10. Which of the following is (are) a benefit of normal costing?

a) Normal costing enable companies to smooth out, or normalize, seasonal production fluctuations
b) Under normal costing, a firm can quickly calculate the cost of items manufactured
c) Under normal costing, a firm uses a predetermined overhead rate in applying overhead to each unit as the firm produces it throughout the year, rather than wait for the actual overhead rate to be determined at the end of the year
d) All of the answers are correct

11. Hogan's Ltd uses a job order cost system and allocates manufacturing overhead to orders on the basis of direct labour cost. The predetermined overhead rates for the year are 200% for Department A and 50% for Department B. Job# 23, started and completed during the year, had the following costs (note: some of the data below is incomplete):

The total cost of Job# 23 is:

a) $100,000
b) $135,000
c) $180,000
d) $195,000

12. Assume that a company has a constant sales level of 10,000 units per period. Under absorption costing, net income will be maximized by:

a) Producing 10,000 units per period
b) Producing 10,000 units per period less any beginning inventory
c) Producing 10,000 units per period plus any beginning inventory
d) Producing as much inventory as possible given the capacity constraints

13. Wood Co. Ltd has total budgeted overhead of $40,000 at 10,000 machine hours. During the most recent period, 10,500 machine hours were used in the manufacture of all jobs. The actual cost totaled $40,500. The Company uses a normal job cost system with any over or under-allocated overhead closed to COGS at the end of the period.

The amount closed to COGS and the direction of the change (i.e., debit or credit) would be:

a) Debit of $500
b) Credit of $500
c) Debit of $1,500
d) Credit of $1,500

14. Sam's Toy Factory produces a small toy wagon. Sam's results for the year are as follow:

Wagons sold = 36,000
Wagons produced = 44,000 Sales Price per wagon = $20 Beginning Inventory = 0
Variable Manufacturing cost per wagon = $8
Variable selling and admin cost per wagon = $2
Total fixed costs per year = $120,000

Fixed manufacturing costs per wagon = $2 (based on an annual capacity of 48,000 wagons)

Any over or under-allocation of fixed overhead is closed to COGS.

Sam's accountants have calculated the net income (before tax) on the basis of absorption costing and variable costing. What was the difference in reported net income?

a) AC>VC by $24,000
b) AC>VC by $16,000
c) No difference
d) VC>AC by $8,000

15. Use of capacity levels based on demand:

a) Hides the amount of unused capacity
b) Highlights the cost of capacity acquired but not used
c) Yields an allocation rate that does not include a charge for unused capacity
d) Results in a price that covers the cost of capacity customers expect to pay

16. Assume the Spring Company produces two Products A and B. Both products are mixed in Department P1 and canned in Department P2. Most of the overhead costs are related to direct materials (DM) in P1, while most of the overhead costs in P2 are related to machine time. Data for a recent month follows:

If Spring uses a plant-wide rate based on machine hours, the total overhead allocated to A and B would be:

      A          ;      B
a) $390,000 ; $660,000
b) $520,000 ; $530,000
c) $480,000 ; $570,000
d) $462,000 ; $588,000

17. Refer to the data in Question 16. above. If the company uses departmental rates based on machine hours then the total overhead allocated to A and B would be:

      A          ;      B
a) $390,000 ; $660,000
b) $520,000 ; $530,000
c) $480,000 ; $570,000
d) $462,000 ; $588,000