1. (TCO A) The variable portion of advertising costs is a: (Points : 6) Conversi

ID: 2384752 • Letter: 1

Question

1. (TCO A) The variable portion of advertising costs is a: (Points : 6)
Conversion YES... Period NO
Conversion YES .... Period YES
Conversion NO.... Period YES
Conversion NO.... Period NO

2. (TCO A) The costs of staffing and operating the accounting department at Central Hospital would be considered by the Department of Surgery to be: (Points : 6)
direct costs.
sunk costs.
incremental costs.
None of the above.

3. (TCO A) Property taxes on a company's factory building would be classified as a(n): (Points : 6)
sunk cost
opportunity cost
period cost
variable cost
manufacturing cost

4. (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 Costs per Unit Increase and Variable Costs per Unit Increase
Fixed Costs per Unit Decrease and Variable Costs per Unit do not change
Fixed Costs per Unit do not change and Variable Costs per Unit do not change
Fixed Costs per Unit do not change and Variable Costs per Unit Increase

5. (TCO F) Which of the following statements is true?
I. Overhead application may be made slowly as a job is worked on.

II. Overhead application may be made in a single application at the time of completion of the job.

III. Overhead application should be made to any job not completed at year-end in order to properly value the work in process inventory.

(Points : 6)
Only statement I is true
Only statement II is true
Both statements I and II are true
Statements I, II, and III are all true

6. (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 account
In a process costing system, equivalent units are separately computed for materials and for conversion costs
In a process costing system, overhead can be under- or overapplied just as in job-order costing
In a process costing system, materials costs are traced to units of products

7. (TCO F) Equivalent units for a process costing system using the FIFO method would be equal to: (Points : 6)
units completed during the period, plus equivalent units in the ending work in process inventory
units started and completed during the period, plus equivalent units in the ending work in process inventory
units completed during the period and transferred out
units started and completed during the period, plus equivalent units in the ending work in process inventory, plus work needed to complete units in the beginning work in process inventory

8. (TCO B) The contribution margin equals: (Points : 6)
Sales - expenses
Sales- cost of goods sold
Sales - variable costs
Sales - fixed costs

9. (TCO B) Which of the following would not affect the break-even point? (Points : 6)
number of units sold
variable expense per unit
total fixed expenses
selling price per unit

10. (TCO E) Under variable costing: (Points : 6)
net operating income will tend to move up and down in response to changes in levels of production
inventory costs will be lower than under absorption costing
net operating income will tend to vary inversely with production changes
net operating income will always be higher than under absorption costing

1. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just completed year:

Sales.................................................................................

$910

Purchases of raw materials................................................

$225

Direct labor.......................................................................

$245

Manufacturing overhead....................................................

$265

Administrative expenses....................................................

$150

Selling expenses................................................................

$140

Raw materials inventory, beginning.....................................

$15

Raw materials inventory, ending.........................................

$45

Work in process inventory, beginning.................................

$20

Work in process inventory, ending.....................................

$55

Finished goods inventory, beginning...................................

$100

Finished goods inventory, ending.......................................

$135

Required: Prepare a Schedule of Cost of Goods Manufactured in the text box below.

(Points : 15)

2. (TCO F) The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below:
Percent completed
Units Materials Conversion
Work in process, June 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%

The department started 475,000 units into production during the month and transferred 480,000 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 625,000

Sales revenue $2,975,000

Variable manufacturing expense $1,720,000

Fixed manufacturing expense $790,000

Variable selling and admin expense $152,000

Fixed selling and admin expense $133,000

Net operating income $180,000

Required:

a. Calculate the company's unit contribution margin

b. Calculate the company's unit contribution ratio

c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

Explanation / Answer

1. (TCO A) The variable portion of advertising costs is a: (Points : 6)
Conversion YES... Period NO
Conversion YES .... Period YES
Conversion NO.... Period YES
Conversion NO.... Period NO

Answer: Conversion NO, Period YES

2. (TCO A) The costs of staffing and operating the accounting department at Central Hospital would be considered by the Department of Surgery to be: (Points : 6)
direct costs.
sunk costs.
incremental costs.
None of the above.

Answer: None of the above.

3. (TCO A) Property taxes on a company's factory building would be classified as a(n): (Points : 6)
sunk cost
opportunity cost
period cost
variable cost
manufacturing cost

Answer: Manufacturing cost.

4. (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 Costs per Unit Increase and Variable Costs per Unit Increase
Fixed Costs per Unit Decrease and Variable Costs per Unit do not change
Fixed Costs per Unit do not change and Variable Costs per Unit do not change
Fixed Costs per Unit do not change and Variable Costs per Unit Increase

Answer: Fixed Costs per Unit Decrease and Variable Costs per Unit do not change

5. (TCO F) Which of the following statements is true?
I. Overhead application may be made slowly as a job is worked on.

II. Overhead application may be made in a single application at the time of completion of the job.

III. Overhead application should be made to any job not completed at year-end in order to properly value the work in process inventory.

(Points : 6)
Only statement I is true
Only statement II is true
Both statements I and II are true
Statements I, II, and III are all true

Answer: Statements I, II, and III are all true

6. (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 account
In a process costing system, equivalent units are separately computed for materials and for conversion costs
In a process costing system, overhead can be under- or overapplied just as in job-order costing
In a process costing system, materials costs are traced to units of products

Answer: In a process costing system, materials costs are traced to units of products

7. (TCO F) Equivalent units for a process costing system using the FIFO method would be equal to: (Points : 6)
units completed during the period, plus equivalent units in the ending work in process inventory
units started and completed during the period, plus equivalent units in the ending work in process inventory
units completed during the period and transferred out
units started and completed during the period, plus equivalent units in the ending work in process inventory, plus work needed to complete units in the beginning work in process inventory

Answer: units started and completed during the period, plus equivalent units in the ending work in process inventory, plus work needed to complete units in the beginning work in process inventory

8. (TCO B) The contribution margin equals: (Points : 6)
Sales - expenses
Sales- cost of goods sold
Sales - variable costs
Sales - fixed costs

Answer: Sales – variable costs

9. (TCO B) Which of the following would not affect the break-even point? (Points : 6)
number of units sold
variable expense per unit
total fixed expenses
selling price per unit

Answer: Number of units sold

10. (TCO E) Under variable costing: (Points : 6)
net operating income will tend to move up and down in response to changes in levels of production
inventory costs will be lower than under absorption costing
net operating income will tend to vary inversely with production changes
net operating income will always be higher than under absorption costing

Answer: Inventory costs will be lower than under absorption costing

1. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just completed year:

Sales....................................................$910
Purchases of raw materials.................$225
Direct labor..........................................$245
Manufacturing overhead......................$265
Administrative expenses......................$150
Selling expenses..................................$140
Raw materials inventory, beginning....$15
Raw materials inventory, ending..........$45
Work in process inventory, beginning......$20
Work in process inventory, ending...........$55
Finished goods inventory, beginning.......$100
Finished goods inventory, ending.............$135

Schedule of Cost of Goods Manufactured in the text box below.

Beg. Raw Materials

Purchases

225

Raw mat. Avail for use

240

Less End, raw materials

Materials used in production

195

Direct labor

245

Overhead

265

Manufacturing costs incurred

705

Add Beg. Wip

Deduct Ending wip

Cost of goods manufactured

670

2. (TCO F) The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below:
Percent completed
Units Materials Conversion
Work in process, June 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%

The department started 475,000 units into production during the month and transferred 480,000 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.

Equivalent units for materials = 480,000 + 145,000*0.85 = 603,250

Equivalent units for conversion costs = 480,000 + 145,000*0.75 = 588,750

3. (TCO B) A tile manufacturer has supplied the following data:
Boxes of tile produced and sold 625,000

Sales revenue $2,975,000
Variable manufacturing expense $1,720,000
Fixed manufacturing expense $790,000
Variable selling and admin expense $152,000
Fixed selling and admin expense $133,000
Net operating income $180,000

Required:

a. Calculate the company's unit contribution margin

Contribution margin = sales– variable costs = 2,975,000 – 1,720,000 – 152,000 = 1,103,000. Per unit = 1,103,000/625,000 = $1.76 per unit

Answer: $1.76 per unit

b. Calculate the company's unit contribution ratio

= contribution margin/sales = 1,103,000/2,975,000 = 37.08%

Answer: 37.08%

c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

2,975,000*0.05*0.3708 + 180,000 = 235,156.50

Answer: 235,156.50