What is the best way to handle manufacturing overhead costs in order to get the most timely job cost information?
A. The company should determine an allocation rate as soon as the actual costs are known, and then apply manufacturing overhead to jobs.
B. The company should apply overhead using an estimated rate throughout the year.
C. The company should add actual manufacturing overhead costs to jobs as soon as the overhead costs are incurred.
D. The company should account for only the direct production costs.
Which of the following is an element of manufacturing overhead?
A. Flour used in manufactured cake mixes
B. Components used in calculators during production
C. Plant manager’s salary
D. Factory workers wages
An activity that has a direct cause-effect relationship with the resources consumed is a(n)
A. product activity
B. overhead rate
C. cost pool
D. cost driver
Which of the following is a value-added activity?
A. Inspections
B. Machinery repair
C. Inventory storage
D. Engineering design
Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Maxi B using traditional costing using direct labor hours is
A. $2,000,000
B. $1,280,000
C. $1,670,000
D. $1,536,000
Max Company uses 10,000 units of Part A in producing its products. A supplier offers to make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the opportunity cost of buying Part A from the supplier is
A. $80,000
B. $0
C. $70,000
D. $10,000
20) Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12 per unit; however, $5 per unit is avoidable. Should Truckel make or buy the wickets?
A. Make; savings = $10,000
B. Buy; savings = $25,000
C. Make; savings = $20,000
D. Buy; savings = $10,000
21) Ace Company sells office chairs with a selling price of $25 and a contribution margin per unit of $15. It takes 3 machine hours to produce one chair. How much is the contribution margin per unit of limited resource?
A. $10
B. $5
C. $45
D. $3.33
22) Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartley’s contribution margin ratio?
A. 266.6%
B. 62.5%.
C. 150%.
D. 37.5%
Which cost is charged to the product under variable costing?
A. Fixed administrative expenses
B. Variable manufacturing overhead
C. Variable administrative expenses
D. Fixed manufacturing overhead
If standard costs are incorporated into the accounting system,
A. approval of the stockholders is required
B. it may simplify the costing of inventories and reduce clerical costs
C. the accounting system will produce information which is less relevant than the historical cost accounting system
D. it can eliminate the need for the budgeting process
The total variance is $10,000. The total materials variance is $4,000. The total labor variance is twice the total overhead variance. What is the total overhead variance?
A. $4,000
B. $3,000
C. $1,000
D. $2,000
The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor hours worked, the total direct labor variance is
A. $6,400 unfavorable
B. $4,000 unfavorable
C. $1,920 unfavorable
D. $6,400 favorable
34) If the standard hours allowed are less than the standard hours at normal capacity, the volume variance
A. will be greater than the controllable variance
B. will be unfavorable
C. cannot be calculated
D. will be favorable
35) Which of the following statements is FALSE?
A. The overhead volume variance is favorable if standard hours allowed for output is greater than the standard hours at normal capacity.
B. The overhead volume variance relates solely to fixed costs.
C. The overhead volume variance indicates whether plant facilities were used efficiently during the period.
D. The costs that cause the overhead volume variance are usually controllable costs.
During December, the capital budget indicates a $280,000 purchase of equipment. The ending November cash balance is budgeted to be $40,000. Cash receipts are $840,000, and cash disbursements are $610,000 during December. The company wants to maintain a minimum cash balance of $20,000. What is the minimum cash loan that must be planned to be borrowed from the bank during December?
A. $0
B. $50,000
C. $30,000
D. $10,000
38) At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates it will sell 35,000 units during the first quarter of 2004 with a 10% increase in sales each quarter. Barry’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each widget costs $1 and is sold for $1.50. How much is budgeted sales revenue for the third quarter of 2004?
A. $42,350
B. $63,525
C. $57,525
D. $63,000
39) Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April. Each mug requires 2 pounds of resin and a half hour of direct labor. Resin costs $1 per pound and employees of the company are paid $12.50 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor costs. Gottberg has 2,000 pounds of resin in beginning inventory and wants to have 2,400 pounds in ending inventory. How much is the total amount of budgeted direct labor for April?
A. $27,500
B. $25,000
C. $12,500
D. $13,750
A company must price its product to cover its costs and earn a reasonable profit in
A. the short run
B. the long run
C. all cases
D. its early years
