Acc505 Managerial Accounting Week 4 : ABC and Budgeting (10 MCQs and 4 Problems)

Acc505 Managerial AccountingWeek 4 : ABC and Budgeting – MidtermPage 11. (TCO A) Direct material cost is a part of:(Points : 6)Conversion Cost YES…. Prime Cost NOConversion Cost NO…. Prime Cost YESConversion Cost YES…. Prime Cost YESConversion Cost NO…. Prime Cost NO2. (TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n): (Points : 6)period cost.incremental cost.opportunity cost.none of the above.3. (TCO A) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): (Points : 6)period costdirect material costindirect manufacturing costdirect labor costnone of the above4. (TCO A) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? (Points : 6)Fixed Cost Per Unit Variable Cost Per UnitIncrease No ChangeIncrease Increasedecrease No ChangeNo Change Increase5. (TCO F) Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company included in direct labor cost a portion of indirect labor. The effect of this misclassification will be to: (Points : 6)understate the predetermined overhead rateoverstate the predetermined overhead ratehave no effect on the predetermined overhead ratecannot be determined from the information given6. (TCO F) Which of the following statements about process costing system is incorrect?(Points : 6)In a process costing system, each processing department has a work in process accountIn a process costing system, equivalent units are separately computed for materials and for conversion costsIn a process costing system, overhead can be under- or overapplied just as in job-order costingIn a process costing system, materials costs are traced to units of products7. (TCO F) The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: (Points : 6)can be used under any cost flow assumptiondoes not require the use of predetermined overhead rateskeeps costs in the beginning inventory separate from current period costsdoes not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production8. (TCO B) The contribution margin ratio always increases when the:(Points : 6)break-even point increasesbreak-even point decreasesvariable expenses as a percentage of net sales decreasesvariable expenses as a percentage of net sales increases9. (TCO B) The unit sales needed to attain the target profit is found by: (Points : 6)dividing fixed costs by the contribution margin.adding variable expenses to fixed expenses and dividing the total by the contribution margin.adding target profit to the fixed expenses and then dividing the total by the unit contribution margin.adding target profit to the fixed expenses and then dividing the total by the contribution margin.10. (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would: (Points : 6)be used in the computation of the contribution marginbe used in the computation of net operating income but not in the computation of the contribution marginbe treated differently from variable manufacturing expensesnot be usedPage 21. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larklin Corporation for the just completed year.Sales $820Purchases of raw materials $195Direct labor $170Manufacturing overhead $250Administrative expenses $180Selling expenses $140Raw materials inventory, beginning $80Raw materials inventory, ending $35Work in process inventory, beginning $65Work in process inventory, ending $30Finished goods inventory, beginning $130Finished goods inventory, ending $165Required:Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.(Points : 15)2. (TCO F) The Indiana Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completedUnits Materials ConversionWork in process, June 1 70,000 65% 45%Work in process, Jun 30 60,000 75% 65%The department started 290,000 units into production during the month and transferred 300,000 completed units to the next department.REQUIRED: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.(Points : 20)3. (TCO B) A tile manufacturer has supplied the following data:Boxes of tile produced and sold 625,000Sales revenue $2,975,000Variable manufacturing expense $1,720,000Fixed manufacturing expense $790,000Variable selling and admin expense $152,000Fixed selling and admin expense $133,000Net operating income $180,000Required:a. Calculate the company’s unit contribution marginb. Calculate the company’s unit contribution ratioc. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company’s net operating income be? (Points : 25)4. (TCO E) Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations:Selling Price $ 125Units in beginning Inventory 600Units Produced 3000Units sold 3500Units in ending Inventory 100Variable Costs per unit:Direct materials $ 15Direct labor $ 50Variable manufacturing overhead $ 8Variable selling and admin $ 12Fixed Costs:Fixed manufacturing overhead $ 75,000Fixed selling and admin $ 20,000The company produces the same number of units every month, although the sales in units vary from month to month. The company’s variable costs per unit and total fixed costs have been constant from month to month. (Points : 30)Required:a. What is the unit product cost for the month under variable costing?b. What is the unit product cost for the month under absorption costing?c. Prepare an income statement for the month using the variable costing method.d. Prepare an income statement for the month using the absorption costing method.