BEC - Cost Accounting _ 6.21.2016 Flashcards
Which of the following theoretical aggregate supply curves has a “kink” at the level of output at which there is full employment?
A Keynesian supply curve is horizontal up to the assumed level of output at full employment, at which point it “kinks,” or slopes, sharply upward, which reflects the point at which output is associated with higher prices.
In Year 1, a department’s three-variance overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity.
If 100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume variances have been affected?
Unchanged Increased
The spending variance is unaffected by the volume used for allocating the fixed overhead.
However, the volume variance an increase in the denominator of the predetermined fixed overhead rate from 80% to 100% of capacity would cause the predetermined OHR and fixed OH to decline due to increase in capacity, along with the allocated fixed overhead. This would increase the volume variance because the master budgeted fixed overhead would remain unchanged.
The presence of risk for a portfolio of projects means:
More than one outcome is possible for any project.
Aka, an unfavorable occurrence.
Which of the following are characteristic of Book’s activity-based costing approach?
I. Cost drivers are used as a basis for cost allocation.
II. Costs are accumulated by department or function for the purposes of product costing.
III. Activities that do not add value to the product are identified and reduced to the extent possible
I and III.
The forming department is the first of a two-stage production process. Spoilage is identified when the units have completed the forming process.
The costs of spoiled units are assigned to units completed and transferred to the second department in the period when spoilage is identified.
The following information concerns forming’s conversion costs in May Year 1:
Units Conversion costs
Beginning work-in-process (50% complete) 2,000 $10,000
Units started in May 8,000 75,500
Spoilage-normal 500
Units completed and transferred 7,000
Ending work-in-process (80% complete) 2,500
Using the weighted average method, what was forming’s conversion cost transferred to the second production department?
Part A) Units completed and transferred out, including normal spoilage 7,500
Ending inventory (.80)2,500 2,000
Equals total equivalent units of work for conversion cost through the end of the current period 9,500
Part B) total conversion cost/equivalent unit for conversion cost = ($10,000 + $75,500)/9,500 = $9
Conversion cost of goods transferred out: $9($7,500) = $67,500.
Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment’s estimated useful life is 10 years, with no residual value, and it would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322.
In estimating the internal rate of return, the factors in the table of present values of an annuity should be taken from the columns closest to
5.00
The IRR is the rate of return = Present value of inflows using IRR = present value of outflows using IRR.
The calculation for the facts given would be:
$20,000 x (PV of annuity factor for 10 years at IRR percent) = $100,000
Rearranged: (PV of annuity factor for 10 years at IRR percent) =Cost of Equipment(PV of Outflows) $100,000/ Savings (PV on Inflows)$20,000 = 5.00
Using the present value of an annuity table, for n = 10, the factors nearest to 5.00 would be used to determine the IRR.
uring the current year, the following manufacturing activity took place for a company’s products:
Beginning work in process: 10,000 units, 70% complete
Units started into production during the year: 150,000 units
Units completed during the year: 140,000 units
Ending work in process: 20,000 units, 25% complete
What was the number of equivalent units produced using the first-in, first-out method?
The FIFO method lets the costs and EUs associated with beginning WIP flow on to Finished Goods and bases the unit cost of production for the current period on the EUs started (and completed) during the period.
Nominal Units % Complete Equivalent Units
Beginning WIP 10,000 30% 3,000
Units started and finished 130,000 100% 130,000
Ending WIP 20,000 25% 5,000
Units to account for or Equivalent units 160,000 138,000
Data patterns that reflect an upward movement over a long period of time would describe which one of the following patterns?
Trend patterns reflect an upward (or downward) movement over a long period of time.
