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1.Question :(TCO A) Wages paid to an assembly line worker in a factory are a:

Student Answer:Prime Cost YES.....Conversion Cost NO

Prime Cost YES.....Conversion Cost YES

Prime Cost NO....Conversion Cost NO

Prime Cost NO.....Conversion Cost YES

Instructor Explanation:Chapter 2

Points Received:6 of 6

Comments:

2.Question :(TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n):

Student Answer:period cost.

incremental cost.

opportunity cost.

none of the above.



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3.Question :(TCO A) Property taxes on a company's factory building would be classified as a(n):

Student Answer:sunk cost

opportunity cost

period cost

variable cost

manufacturing cost



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4.Question :(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?Fixed Cost Per Unit Variable Cost Per Unit

Student Answer:Increase No Change

Increase Increase

decrease No Change

No Change Increase



Comments:

5.Question :(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.

Student Answer: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



Comments:

6.Question :(TCO F) Which of the following statements about process costing system isincorrect?

Student Answer: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



Comments:

7.Question :(TCO F) Equivalent units for a process costing system using the FIFO method would be equal to:

Student Answer: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



Comments:

8.Question :(TCO B) The contribution margin ratio always increases when the:

Student Answer:break-even point increases

break-even point decreases

variable expenses as a percentage of net sales decreases

variable expenses as a percentage of net sales increases



Comments:

9.Question :(TCO B) Which of the following would not affect the break-even point?

Student Answer:number of units sold

variable expense per unit

total fixed expenses

selling price per unit



Comments:

10.Question :(TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would:

Student Answer:be used in the computation of the contribution margin

be used in the computation of net operating income but not in the computation of the contribution margin

be treated differently from variable manufacturing expenses

not be used



1.Question :(TCO A) The following data (in thousands of dollars) have been taken from the accounting records ofLarden Corporationfor the just completed year.Sales$950

Purchases of raw materials$170

Direct labor$210

Manufacturing overhead$220

Administrative expenses$180

Selling expenses$140

Raw materials inventory, beginning$70

Raw materials inventory, ending$80

Work in process inventory, beginning$30

Work in process inventory, ending$20

Finished goods inventory, beginning$100

Finished goods inventory, ending$70

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

Student Answer:Raw materials, inventory, beginning $70.00 add Purchases of Raw Materials 170.00 -------- Total goods available to manufacture 240.00 Less Raw Materials invty, end 80.00 -------- Raw materials used in production 160.00 Direct Labor 210.00 Manufacturing Overhead 220.00 ------- Total manufacturing cost 590.00 Add Work in Process invty. Beg 30.00 --------- 620.00 Less Work in process invty end 20.00 ------ Cost of goods manufactured 600.00

Instructor Explanation:Schedule of Cost of Goods Manufactured for the Larden Corp.Direct Materials:Beginning raw materials inventory $70Add: purchases raw material 170Raw materials available for use 240Deduct ending raw materials 80Raw materials used in production 160Direct Labor 210Manufacturing Overhead: 220Total Manufacturing Costs 590Add beginning work in process inventory 30620Deduct ending work in process inventory 20Cost Of Goods Manufactured 600


Comments:

2.Question :(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 completedUnits Materials ConversionWork 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.

Student Answer:Percent Complete Units Materials Conversion Beginning work in process 150000 0.75 0.55 Units started into production 475000 "Units completed during June and transferred to the next department" 325000 Ending work in process 145000 0.85 0.75 Materials Conversion Units transferred to the next dept 325000 325000 Ending work in process Materials 145000x85% complete 123250 Conversion 145000x75% complete 108750 Equivalent units of production 448250 433750

Instructor Explanation:Equivalent UnitsMaterials ConversionUnits transferred to the next department 480,000 480,000Ending Work in process:Materials 145000 x 85% 123,250Conversion 145000 x 75% 108,750Equivalent units of production 603,250 588,750


Comments:

3.Question :(TCO B) Drake Company's income statement for the most recent year appears below:Sales (45,000 units) $1,350,000Less: Variable expenses750,000Contribution margin 600,000Less: Fixed expenses375,000Net operating income $225,000Required:a. calculate the unit contribution marginb. calculate the break-even point in dollars

Student Answer:The Unit Contribution Margin (C) is Unit Revenue (Price, P) minus Unit Variable Cost (V): C = P V Price: $1350000 divided by 45,000 units =- $30 price per unit Variable cost per unit $750,000/45000= 16.67 Unit contribution margin: $13.33 b. Break even point in dollars Break-even Point in Sales $ = Total Fixed Expenses Contribution Margin Ratio Total Fixed Expenses:$375000 Contribution Margin Ratio = $600,000/$1350000=.44 Break even point in dollars =$843,750

Instructor Explanation:a. Total CM / total units = $600,000 /45,000 units = $1.33 per unitb. Breakeven = FC / CM per unit = $375,000 /$1.33 = 281,955 units x $30 per unit* = $8,458,650* Sales at $1,350,000 /45,000units = $30 per unit


Comments:

4.Question :(TCO E) The Dean Company produces and sells a single product. The following data refer to the year just completed:Selling Price$450

Units in beginning Inventory0

Units Produced25000

Units sold22000

Variable Costs per unit:

Direct materials$ 200

Direct labor$ 50

Variable manufacturing overhead$ 30

Variable selling and admin$ 15

Fixed Costs:

Fixed manufacturing overhead$ 275,000

Fixed selling and admin$ 230,000

Assume that direct labor is a variable cost.Required:a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

Student Answer:DM 200 DL 50 Var OH 30 Variable cost per unit 280 Direct Materials 200 Direct Labor 50 Variable Manufacturing Overhead 30 Fixed manufacturing overhead $275000/25000 11 Cost of single unit of product using absorption costing 291

Instructor Explanation:a and b:

Variable costing:


Direct labor$ 50


$ 280

Absorption costing:


Direct labor$ 50


Fixed manufacturing overhead$ 11(275,000 / 25,000)

$ 291

c:

Absorption costing income statement:

Sales$ 9,900,000

Less cost of goods sold (22,000 x $291.00)$ 6,402,000

Gross margin$ 3,498,000

Selling and administrative expenses:

Variable selling and admin$ 330,000

Fixed selling and admin$ 230,000$ 560,000

$ 2,938,000

d:

Variable costing income statement:

Sales$ 9,900,000

Less variable expenses:

Product costs (22,000 x $280)$ 6,160,000

Variable selling and admin$ 330,000$ 6,490,000

Contribution margin$ 3,410,000

Less fixed expenses:

Fixed manufacturing overhead$ 275,000

Fixed selling and admin$ 230,000$ 505,000

$ 2,905,000


Comments:

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