Final exam

Question 1

Petrie company manufactures chairs. If raw material used was $100,000 and Raw material inventory at the beginning and end of the period, respectively, was $27,000 and 31,000, what was the amount of raw material was purchased?

100,000+(31,000-27,000)

Answer 1

104,000

Question 2

Refer to Richards company. The cost of raw material purchased during the year was

Answer 2

$336

Question 3

If oversupplied factory overhead is material, the account is closed by a credit to cost of goods sold.

Answer 3

False

Question 4

Predetermined overhead rates are computed based on

Estimated overhead costs

Estimated level of activity

Answer 4

Yes and yes

Question 5

An indirect cost can be easily traced to a cost object

Answer 5

False

Question 6

If actual overhead exceeds applied overhead, factory overhead is said to be under applied.

Answer 6

True

Question 7

A mixed costs has which of the following components?

Variable components

Fixed components

Answer 7

Yes yes

Question 8

Weaknesses of the high low method include all of the following except

Answer 8

The mathematical calculations are relatively complex

Question 9

A variable cost remains constant on a per unit basis as production increases

Answer 9

True

Question 10

If the cost of an additive is $5000 + $0.50 for every unit of solvent produced, the cost is classified as a mixed cost

Answer 10

True

Question 11

A functional classification of costs would classify “depreciation on office equipment” as a

Answer 11

General and administrative expense

Question 12

In a high-low model, which months’ observations would be used to compute the model’s parameters

Answer 12

2 and 5

Question 13

Product costs are deducted from revenue

Answer 13

As goods are sold

Question 14

Another name for absorption costing is

Answer 14

Full costing

Question 15

A credit to the factory overhead account represents actual overhead costs

Answer 15

False

Question 16

The formula to compute cost of goods manufactured is

Answer 16

Beginning work in process inventory plus direct material used plus overhead incurred minus ending Work in process inventory

Question 17

Ryan corporations is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1000 plus 25 cents per mile, what is the expected cost to move 800 miles?

Answer 17

3,600

Question 18

Refer to bridges company, cost of good sold was

Answer 18

$746

Question 19

Which of the following would generally be considered a fixed factory overhead cost?

Straight line depreciation

Factory insurance

Units of production depreciation

Answer 19

Yes yes no

Question 20

The three primary inventory accounts in a manufacturing company are

Answer 20

Raw material inventory, work in process inventory, and finished goods inventory

Question 21

When multiple products are produced and sold, a change in the sales price of one product may cause a change in the sales mix of the firm

Answer 21

True

Question 22

Refer to Stewart company. How many units would Stewart company need to sell to earn a profit before taxes of $10,000

Answer 22

12,000

Question 23

Lewis company has only $25,000 hours of machine time each month to manufacture its two products. Product X has a contribution margin of $50, and product Y has a contribution margin of $64. Product X requires 5 hours of machine time, and product Y requires 8 hours of machine time. If Lewis company wants to dedicate 80% of its machine time to the product that will the most income, the company will have a total distribution margin of

Answer 23

$240,000

Question 24

Refer to Putnam company. Based on the cost and revenue structure on the income statement, what was Putnam’s break even point in dollars?

Answer 24

$400,000

Question 25

Refer to the Parker company, based on the cost and revenue structure on the income statement, what was Parker’s break even point in dollars?

Answer 25

$290,909

Question 26

Assuming that there would be no commission in this potential sale, the lowest price the firm can bid is some price greater than

Answer 26

$17

Question 27

The first stages in the budgeting process is the preparation of a sales budget

Answer 27

True

Question 28

Refer to Parker Company, what was the margin of safety?

Answer 28

$109,091

Question 29

Stone corporation has a policy of maintaining an inventory of finished goods equal to 40% of the next months budgeted sales. If stone corporation plans to produce 6,000 units in June, what are budgeted sales for July?

Answer 29

9,000 units

Beg Inv June 1600 (4,000*.40)
Produced in June 6000
Deduct June (4000)
Ending inv 3600

3,600/0.40 = $9000 units

Question 30

The company has a policy that requires the ending inventory in each period to be 10% of the following periods sales. Assuming that the company follows this policy, what quantity of production should be scheduled for February?

Answer 30

25,700

Ending inv Feb 3200
Feb sales. 25000
Requirements 28200
Less BI Feb. (2500)

Production sche. 25700

Question 31

Refer to Brazosport Pipe Corporation. If the company buys the new machine and disposes of the existing machine, corporate profit over five-year life of the news machine will be _____ that the profit that would have been generated had the existing machine been retained for five years.

Answer 31

$150,000 lower

Question 32

Blue mountain company manufactures a single product. In the prior year, the company had sales of $90,000, variable costs of $50,000, and fixed costs of $30,000. Blue mountain expects its cost structure and sales price per unit to remain the same in the current year, however total sales are expected to increase by 20%. If current year projections are realized, net income should exceed the prior years net income by:

Answer 32

80%

Question 33

Refer to Parker company. Assuming that the fixed costs are expected to remain at $200,00 for the coming year and the sales price per unit and variable cost per unit are also expected to remain constant. How much profit before taxes will be produced if the company anticipates sales for the coming year rising 130% of the current years level?

Answer 33

$157,500

Question 34

For the month of November, whetzel corporation, predict total cash collections to be $1 million. Also for November Whetzel corporation estimates that it’s beginning cash balance will be $50,000 and that it will borrow cash in the amount of $70,000. If Whetzel Corp, estimates an ending cash balance of $30,000 for November, what must its projected cash disbursement be?

Answer 34

$1,090,000

Question 35

Refer to Priceless memories company. What amount of budgeted labor cost would appear in the July selling, general, and administrative expense budget?

Answer 35

$19,800

Question 36

Cost of goods sold is 75% variable and 25% fixed. Of the fixed costs, 60% are avoidable if the division is closed. All of the selling expenses relate to the division and would be eliminated if Division X were eliminated. Of the administrative expenses, 90% are applied from corporate costs. If Division X were eliminated, Phipps income would

Answer 36

Decrease by $155,000

Question 37

Refer to Lindburg company. What is Lindbergh’s budgeted factory labor cost for July?

Answer 37

$9,600

Question 38

Refer to Boston Bakers. The $10,000 cost of the original machine represents a

Answer 38

Sunk cost

Question 39

Variable cost per unit vary directly with level of production

Answer 39

False

Question 40

Refer to Real Products company. Assume real product company produces and sold 5,000 units. At this level of activity, it produces a profit of $18,000. What was real products company’s sales price per unit?

Answer 40

$15.00

Question 41

In a special order decision, the sales price should be sufficient to cover a jobs variable costs, incremental fixed costs, and generate a profit

Answer 41

True

Question 42

The amount of raw materials that must be purchased can be computed by the following formula. Beginning inventory + material required - ending inventory

Answer 42

False

Question 43

Mercy has a policy of maintaining a minimum cash balance of $20,000 and borrows only in $1000 increments. How much will mercy borrow in April?

Answer 43

$100,000

Question 44

Fixed costs per unit vary inversely with levels of production

Answer 44

True

Question 45

Buxton company is currently operating at a loss of $15,000. The sales manager has received a special order for 5000 units of product, which normally sells for $35 per unit. Cost associated with the product are: direct material, $6; direct labor, $10; variable overhead,$3; applied fixed overhead, $4; and variable selling expenses, $2. The special order would allow the use of a slightly lower grade of direct material, thereby lowering the price per unit by $1.50 and selling expenses would be decreased by $1. If Buxton wants this special order to increase the total net income for the firm to $10,000 what sales price must be quoted for each of the $5000 units.

Answer 45

$23.50

Question 46

Collins company uses $12,000 units of part in its production process. The cost to make a part are: direct material $15; direct labor $27; variable overhead $15; and applied fixed overhead $32. Eicholtz has received a quote of $60 from a potential supplier for this part. If Collins buys the part 75% of the applied fixed overhead would continue. Collins company would be better off by

Answer 46

$60,000 to buy the part

Question 47

Production of Product B has been budgeted at 200,000 units for November. One unit of product B requires 2 lbs of raw material. The projected beginning and ending inventory materials inventory for November are:

Beg Inv 2,000 lbs
End Inv 10,000 lbs

How many lbs of material should be purchased during November?

Answer 47

408,000

Question 48

In a manufacturing organization, the production budget is prepared immediately after the sales budget

Answer 48

True

Question 49

A company’s break even point is the level where total revenues equals total costs

Answer 49

True

Question 50

In a special order decision, unavoidable current fixed costs are taken into consideration in setting a sales price

Answer 50

False

Question 51

Tax deferral is the most desirable form of tax treatment for employee compensation elements.

Answer 51

False

Question 52

A responsibility accounting system should include the revenues and costs under a division managers control

Answer 52

True

Question 53

Texas company has established a target rate of return of 16% for all divisions. For the most recent years, San Marcos division generated sales of $10,000,000 and expenses of $7,500,000. Total assets at the beginning of the year were $5,000,000 and total assets at the end of the year were $7,000,000. Refer to Texas Company. For the recent year, what was San Marcos Division return of investment?

Answer 53

41.67%

Question 54

In computing a transfer price, maximum price should be no higher than the lowest market price at which the buying segment can obtain the good or service externally

Answer 54

True

Question 55

Triumph Division of Traveling Fantasies, is evaluated based on residual income generated. In the most recent year, the triumph division generated a residual income of $2,000,000 and net income of $5,000,000. The target rate of return for all divisions of Traveling Fantasies is 20%. What was the return on investment for the Triumph Division?

Answer 55

33%

Question 56

Decentralization is a transfer of authority from the top to the lower level of organization.

Answer 56

True

Question 57

Non financial measures are generally less timely than are financial performance measures

Answer 57

False

Question 58

The return on investment (ROI) ratio measures

Answer 58

Both asset turnover and earnings as a percent of sales

Question 59

Refer to Magnificent Motor Corporation. What is the maximum of the transfer price range for a transfer between 2 divisions?

Answer 59

$100

Question 60

Refer to Michigan Company. If Michigan company evaluates it’s manager on the basis of return on investment, the manager of Ann Arbor Division would invest in a project costing $100,000 only if it increased net segment income by at least

Answer 60

$15,000

Question 61

Refer to Michigan Company. What is the target rate of return in Michigan Company?

Answer 61

15%

Question 62

Presently, the computer division purchases no chips from the Computer chips Division, but instead pays $45 to an external supplier for the 4000 chips it needs each month. Refer to office systems corporation. Assume that next months costs and levels of operations in the computer and computer chip division are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?

Answer 62

$20

Question 63

Presently, the computer division purchases no chips from the Computer chips Division, but instead pays $45 to an external supplier for the 4000 chips it needs each month. Refer to office systems corporation. Assume that next months costs and levels of operations in the computer and computer chip division are similar to this month. What is the maximum of the transfer price range for a possible transfer of the super chip from one division to the other?

Answer 63

$45

Question 64

Corporate taxes and tariffs are particular transfer pricing concerns of

Answer 64

Multinational corporations

Question 65

Return on investment is computed by dividing income by

Answer 65

Asset invested

Question 66

The minimum potential transfer price is determined by

Answer 66

Incremental costs in the selling division

Question 67

The segment margin of a profit or investment center includes allocated common costs.

Answer 67

False

Question 68

In a decentralized company in which divisions may buy goods from one Another; the transfer pricing system should be designed primarily to

Answer 68

Aid in the appraisal and motivation of managerial performance

Question 69

Texas company has established a target rate of return of 16% for all divisions. For the most recent years, San Marcos division generated sales of $10,000,000 and expenses of $7,500,000. Total assets at the beginning of the year were $5,000,000 and total assets at the end of the year were $7,000,000. Refer to Texas Company. In the most recent year, what was San Marcos Division residual income?

Answer 69

$1,540,000

Question 70

In a responsibility accounting system, costs are classified into categories on the basis of

Answer 70

Controllable and uncontrollable costs