Quizzes For Finals 1 Compilation Chap6,7,1,2

CHAPTER 6 QUIZ AND ASSIGNMENT
An example of a process where all of the materials would be added at the beginning of the
process
 A baker where the wet ingredients for a cake are added one-at-a-time after the dry
ingredients have been thoroughly blended.
 None is correct.
 A bakery where the ingredients for bread are combined and left to rise.
 The second process of a snack factory where snack chips coming from the frying
process are cooled and dried for an hour, then bagged.
In a process cost system, the cost attributable to abnormal losses that occur due to
unexpected circumstances such as machine operator error should be assigned to:
 Cost of goods manufactured and ending work in process inventory in the ratio of units
worked on during the period to units remaining in work in process inventory.
 A separate loss account in order to highlight production inefficiencies
 Ending work in process inventory.
 Cost of good manufactured (transferred out)
What losses should not affect the recorded cost of inventories?
Standard losses
Abnormal losses
Normal losses
Seasonal losses
Which of the following is not an acceptable method for accounting for by-products in a joint
manufacturing process?
The value of by-products is included in an account called “By-products Inventory."

Costs before the split-off point are allocated to by-products.
In some instances, the revenue from selling by-products may be treated as “other income”
on the income statement.
The estimated sales value of the by-product reduces the cost of the main product.
If the amount of loss in a manufacturing process is normal, it should be classified as a:
Joint cost.
Period cost.
Product cost.
Deferred charge.
In a process cost system, how is the unit cost affected in a production cost report when
materials are added in a department subsequent to the first department and the added
materials result in additional units?
It causes a decrease in the preceding department's unit cost that necessitates an

adjustment of the transferred-in unit cost.
It causes an increase in the preceding department's unit cost that necessitates an
It causes a decrease in the preceding department's unit cost but does not necessitate an
It causes an increase in the preceding department's unit cost but does not necessitate an
Normal losses that occur in the manufacturing process are properly classified as:
Product costs.
Period costs.
Deferred charges.
Extraordinary items.
Joint costs are commonly allocated based upon relative:
Prime costs.
Conversion costs.
Marketing costs.
Sales value.
Which of the following is most likely to be accounted for as a by-product?
Cream resulting from processing raw milk at a dairy.

Sawdust resulting from processing lumber at a lumber mill.
Heating oil resulting from processing crude oil at a refinery.
Ground beef resulting from processing beef at a meat packer.
In order to compute equivalent units of production using the FIFO method of process costing,
work for the period must be broken down to units:
Processed during the period and units completed during the period.
Completed from beginning inventory, started and completed during the month, and units
in ending inventory.
Completed during the period and units in ending inventory.
Started during the period and units transferred out during the period
Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from the same
process, which last year cost $600,000. Budde produced 10,000 gallons of X15, which sells
for $40 per gallon and 40,000 gallons of Z24, which sells for $20 per gallon. Using the
relative sales method, how much of the joint cost should be allocated to X15?
$200,000
$150,000
$120,000
$400,000
SOLUTION
product Sales Sales per ULTIMATE PERCENT Assignment of
volume X unit SALES OF SALES joint costs
VOLUME
X15 10,000 $40 per 400,000 33.33% 200,000
gal gallon
Z24 40,000 $20 per 800,000 66.67% 400,000
gal gallon
Total 60,000 1,200,000 $600,000
gal
Assignment of joint costs

X15-> $600,000 X 400,000/ 1,200,000 = 200,000
Z24-> $600,000 X 800,000/ 1,200,000 = 400,000
Information concerning Department A of Ali Company for the month of June is as follows:
Materials
Costs
Units
Work in process, beginning of

20,000 $14,550
month
Started in June 85,000 $66,300
Units completed 90,000
Work in process, end of month 15,000
All materials are added at the beginning of the process. Using the average cost method, the
cost (rounded to two places) per equivalent unit for materials for June is:
$0.78
$0.74
$0.90
$0.77
Solution
Units completed during June
90,000
Units in process, June 30 with all materials
15,000
Equivalent production for materials
105,000
Materials cost:
Work in process, beginning of June $14,550
Added during June 66,300
Total materials cost $80,850
$80,850 / 105,000 units = cost per equivalent unit

$ .77
Blanche Corporation adds materials at the end of the process in the injection department,
which is the second of two stages of its production cycle. Information concerning the
materials used in the forming department in April follows:
Materials
Units Costs
Work in process at March 1 30,000 $ 60,000
Units transferred from previous department

125,000 $360,000
during March
Units completed and transferred to next

department
120,000
during March
Using the average cost method, what is the materials cost of the work in process at March
31 (rounded to nearest dollar)?
$0
$126,000
$108,000
$120,000
Explanation: Since
materials are added at the end of the
process, there would be no material cost in ending
work in proces
Braun Company produces two chemical compounds, Herzog and Lomax from a joint process.
Joint costs to produce 500 gallons of Herzog and 300 gallons of Lomax were $80,000. A by-
product, Horst, results from the joint process and has a market value of $1,000. Assuming
Braun accounts for the by-product as a reduction in the costs assigned to the products, what
are the joint costs assigned to Herzog?
$39,500
$50,000
$49,375
$40,000
Solution
$80,000
joint cost
Less: market value of by- 1,000
product
Total 79,000
Portion allocable to Herzog 62.50%
(500 /[500+300]]
joint costs assigned to 49,375
Herzog
During June, Birch Bay Company's Department B equivalent unit product costs computed
under the FIFO method were as follows:
Materials $2
Conversion $3
Transferred-in $5
Materials are introduced at the end of the process in Department B. There were 4,000 units
(70 % complete as to conversion costs) in work in process at June 30. The total costs
assigned to the June 30 work in process inventory should be:
$24,800.
$28,400.
$20,000.
$35,200.
Solution:
Transferred-in costs: 4,000 units x $5 =
$20,000
Conversion costs: 4,000 units x 70% complete x $3
8,400
$28,400
Stanley Company adds materials at the beginning of the process in Department M. Data
concerning the materials used in the March production follows:
Units
Work in process at March 1 16,000
Started during March 38,000
Completed and transferred to department during March
next
37,000
Normal spoilage incurred 2,000
Work in process at March 31 15,000
Using the average cost method, the equivalent units for the materials unit cost calculation
are:
52,000.
37,000.
38,000.
56,000.
Solution
Units completed and transferred 37,000
Ending work in process with all materials 15,000
52,000
The following information is available for the month of August from the First department of
the Twigg Corporation:
Units
Work in process, August 1 (60% complete) 50,000
Started in August 190,000
Materials are added in the beginning of the process in the First department. Using the
average cost method, what are the equivalent units of production for the month of August
for conversion?
240,000
192,000
208,000
240,000
Solution
Units
Total 240,000

Finished and transferred 160,000
conversion
Ending units inventory 40% complete x 80,000 32,000
Equivalent units of production 192,000
The following information is available for the month of October from the First department of
the Vaughn Corporation:
Units
Work in process, October 1 (40% complete) 7,500
Started in October 32,000
Transferred to Second Department in

October 33,000
average cost method, what are the equivalent units of production for the month of October
for materials?
38,500
36,000
43,000
39,500
Solution
Unit output for materials
Ending units inventory 6,500
The following information is available for the month of August from the Second department
of the Twigg Corporation:
Units
Transferred from First Department in August 190,000

Materials are added at the end of the process in the Second department. Using the average
cost method, what are the equivalent units of production for materials for the month of
August?
192,000
160,000
208,000
240,000
Solution
Units
Total 240,000
Unit output for materials

Ending units inventory 0
CPG Company manufactures chemicals. Chemical agent PL62 is refined in the Refining
department and, after it is transferred to the Mixing department, a reactive agent is added
to it. In January, 6,000 gallons of PL62 having a cost of $30,000 were transferred from the
refining to the Mixing department where 4,000 gallons of the reactive agent were added.
When calculating the inventory costs in the Mixing department, what will the cost per unit
relating to gallons transferred in from the Refining department be?
$5.00
$7.50
$3.00
$3.33
Adjusted unit cost= Cost of goods transferred/ total gallons

= $30,000 / [ 6,000 gallons + 4,000 gallons] = $3.00
Quiz chapter 6
Under which of the following conditions will the first-in, first-out method of process costing
produce the same cost of goods manufactured amount as the average cost method?
When there is no beginning inventory

When beginning and ending inventories are each 50 percent complete
When there is no ending inventory
When goods produced are homogeneous in nature
The following losses affect the recorded cost of inventories, except:
Seasonal losses
Abnormal losses
Standard losses
Normal losses
Normal losses that occur in the manufacturing process are properly classified as:
Product costs.
Deferred charges.
Period costs.
Extraordinary items.
Which of the following statements best describes a by-product?

A product that usually produces a small amount of revenue when compared to the main
product revenue.
A product created along with the main product whose sales value does not cover the cost
of its production.
A product that has a greater value than the main product.
A product with a value that can easily and accurately be determined.
An example of a process where all of the materials would be added at the end of the process
would be:
None of the above.

A bakery where the ingredients for bread are combined and left to rise.
The second process of a snack factory where snack chips coming from the frying process
are cooled and dried for an hour, then bagged.
A baker where the wet ingredients for a cake are added one-at-a-time after the dry
ingredients have been thoroughly blended.
If two or more products share a common process before they are separated, the joint costs
should be allocated in a manner that:
Assigns a proportionate amount of the total cost to each product equitably.

Minimizes variations in a unit of production cost.
Maximizes total earnings.
Does not introduce an element of estimation into the process of accumulating costs for
each product.
Which of the following is NOT true of joint costs?
These is allocated to the products made and will be used in decision-making

They are incurred after the point where the joint products split off from each other.
Management can use differential analysis to decide whether to process a joint product
further.
They involve a common raw material or manufacturing process.
Which of the following is not an acceptable method for accounting for by-products in a joint
manufacturing process?
The value of by-products is included in an account called “By-products Inventory."

Costs before the split-off point are allocated to by-products.
The estimated sales value of the by-product reduces the cost of the main product.
In some instances, the revenue from selling by-products may be treated as “other income”
on the income statement.
--------------
What losses should not affect the recorded cost of inventories?
Abnormal losses
Normal losses
Standard losses
Seasonal losses
Each of the following is a method by which to allocate joint costs except:
Relative sales value.

Relative advertising costs.
Relative weight, volume, or linear measure.
Chemical or engineering analysis
Plemmon Company adds materials at the beginning of the process in the forming
department, which is the first of two stages of its production cycle. Information concerning
the materials used in the forming department in April follows:
Units Materials Costs
Work in process at April 1 15,000 $ 8,000
Units started during April 60,000 $ 38,500
Units completed and 65,000

transferred to next
department during April
Using the average cost method, what is the materials cost of the work in process at April 30
(rounded to nearest dollar)?
$6,200
$6,417
$7,154
$7,750
Solution
Work in process at April 1 15,000
Units started during April 60,000
Total 75,000
Finished units 65,000
Ending units 10,000
UNIT OUTPUT FOR MONTH

Ending inventory 10,000
Equivalent units of 75,000
production
UNIT COST
MATERIALS $0.62
[8,000+38500] / 75,000
ENDING UNITS 6,200

MATERIALS
[10,000 x 0.62]
The following information is available for the month of April from the Second department of
the Armque Corporation:
Units
Work in process, April 1 (50% complete) 90,000
Transferred from First Department in April 250,000
Transferred out of Second Department in 290,000

April
Solution
Materials are added at the end of the
process in the Second department. UNIT OUTPUT FOR MONTH
Using the average cost method, what are Finished units 290,000
the equivalent units of production for
materials for the month of April? Ending inventory 0
290,000 Equivalent units of 290,000
280,000 production
340,000
304,000
Klug Industries adds materials at the beginning of the process in the molding department,
which is the first of two stages of its production cycle. Information concerning the materials
used in the molding department in August follows:
Units Materials Costs
Work in process at 8,000 $11,550

August 1
Units started during 20,000

August $72,450
Units completed and

transferred to next 21,000
department during
August
Using the FIFO method, what is the materials cost of the work in process at August 31
(rounded to nearest
dollar)? SOLUTION
Work in process at August 1 8,000
$28,000
$29,400 Units started during August 20,000
$29,639
$25,358 Total 28,000
Ending units 7,000
UNIT OUTPUT FOR MONTH

Started and finished 13,000
Ending units 7,000
production
UNIT COST
MATERIALS $3.6225
72,450/ 20,000
ENDING UNITS $25,358

MATERIALS
[7,000 x $3.6225]
Regina Manufacturing uses the FIFO method of process costing. The production report for
the Curing Department, where the materials are added at the beginning of the period, for
September was as follows:
In process, beginning of the period 3,000 units
Stage of completion 30 %
Transferred to stockroom during period 12,000 units
In process, end of the period 6,000 units
Stage of completion 40 %
The number of units started and completed during the period was:
6,000
12,000
9,000
15,000
Solution
units started and completed = Finished - Beginning units in process
= 12,000 units - 3,000 units = 9,000
During June, Birch Bay Company's Department B equivalent unit product costs computed
under the average cost method were as follows:
Materials $2
Conversion $3
Transferred-in $5
Materials are introduced at the end of the process in Department B. There were 4,000 units
(50 % complete as to conversion costs) in work in process at June 30. The total costs
assigned to the June 30 work in process inventory should be:
Correct!
$26,000 Ending inventory
$32,000 Transferred in costs [ 5 x 20,000
$20,000 4,000]
$35,200 Materials 0
Solution Conversion costs 6,000
[ 3 x 50% x 4,000]
Total ending inventory 26,000
Boron Refiners had 50,000 gallons started in its process in June. At June 30, 35,000 gallons
were completed and transferred to finished goods and 10,000 gallons were still in process,
one-fourth completed as to materials, labor and overhead. The remaining 5,000 units were
lost to evaporation, a normal result of the process. Costs of production during the month
were $75,000, $50,000, and $25,000 for material, labor and overhead, respectively. What is
the cost per equivalent unit in June?
$4.00 solution
$3.75 UNIT OUTPUT FOR MONTH
$3.33 Finished units 35,000
$3.53 Ending inventory [10, 000 x 2,500
1/4]
production
UNIT COST
MATERIALS $2
75,000 / 37,500
Labor 50,000 / 37,500 1.33
Overhead 25,000 / 37,500 0.67
Total 4.00
The following information is available for the month of October from the First department of
the Vaughn Corporation:
Units
Started in October 32,000
Transferred to Second Department in

October 31,000
average cost method, what are the equivalent units of production for the month of October
for conversion?
Solution
39,500 Unit output for conversion costs
34,300 Finished and transferred 31,000
36,250 Ending units inventory
38,200 [7,500 x 70%] 5,250
Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from the same
process, which last year cost $800,000. Budde produced 10,000 gallons of X15, which sells
for $40 per gallon and 40,000 gallons of Z24, which sells for $10 per gallon. Using the
relative sales method, how much of the joint cost should be allocated to X15?
$400,000
$150,000
$200,000
$120,000
SOLUTION
product Sales Sales per ULTIMATE PERCENT Assignment of
volume X unit SALES OF SALES joint costs
VOLUME
X15 10,000 $40 per 400,000 50% 400,000
gal gallon
Z24 40,000 $10 per 400,000 50% 400,000
gal gallon
Total 60,000 800,000 $400,000
gal
Assignment of joint costs

X15-> $800,000 X 400,000/800,000 = 400,000
Z24-> $800,000 X400,000/ 800,000 = 400,000
Materials are added at the end of the process in a company's curing department, the second
stage of the production cycle. The following information is available for the month of July:
Units
Work in process, JULY 1 (50% complete) 50,000
Transferred from previous department 200,000
Transferred to the next department 195,000
Lost in production 10,000
Work in process, July 31 (60% complete as to 45,000

conversion costs)
Under the cost accounting system, the costs incurred on the lost units are absorbed by the
remaining good units. Using the average cost method, what are the equivalent units for the
materials unit cost calculation?
Solution
235,000 Unit output for MATERIALS
210,000 Finished and transferred 195,000
250,000 Ending units inventory
195,000 0
Van Pelt Company uses the average cost method of process costing. The production report
for the Mixing department follows:
In process, beginning of period 1,000 units

800 units - materials 50% complete; conversion costs 40% complete
Placed in process during period 5,000 units
Transferred to packing department 4,800 units
In process, end of period 1,200 units

Compute the equivalent units for materials.

5,400
5,650
Correct!
5,450
5,275
Solution
Unit output for MATERIALS
Ending units inventory
700 units - materials 75% complete 525
500 units - materials 25% complete 125
Equivalent Units for production 5,450
5TH QUIZ
CHAPTER 7 MASTER BUDGET AND FLEXIBLE BUDGETING
VANDERBECK
Question 1
1 / 1 pts
Participative budgeting:
 Describes the budget meetings in which managers participate.

 Leaves room to blame top management in the event budget numbers are not met.
 Results in managers being less apt to meet or beat their budget projections.
 Motivates managers to meet budget numbers because they set them.
Question 2
1 / 1 pts
Which of the following is not an operating budget?
Sales budget
Sales and administrative budget
Cost of goods sold budget
Capital projects budget
Question 3
1 / 1 pts
A budget prepared for a single level of volume based on management’s best estimate of the level of
production and sales for the coming period is a:
Continuous budget.
Flexible budget.
Capital budget.
Static budget.
Question 4
1 / 1 pts
Budgeting provides the framework for:
Delegating authority to managers.

Planning and control.
Process costing.
Breaking semivariable costs into their fixed and variable components.
Question 5
1 / 1 pts
The budget that is used as a basis for preparing all other budgets is the:
sales budget.
production budget.
cost of goods sold budget.
budget balance sheet.
Question 6
1 / 1 pts
The process of setting unrealistically low budgeting goals in an effort to make only average
performance look good is:
budget cushion
budget slack
normal budget
safe budget
Question 7
1 / 1 pts
A plan for timing acquisitions of buildings, equipment or other significant assets is a(n):
asset budget.
cash budget.
budget balance sheet.
capital expenditures budget.
Question 8
1 / 1 pts
The budget should use historical data:
And add a 5% growth factor for each year.

Only as a stepping-off point for aiding projections into the future.
Because things don’t really change.
Because management is satisfied with historical results.
Question 9
1 / 1 pts
Which of the following represents the correct relationship between budgets and inventories?
 The direct materials budget includes the budgeted number of units in the direct materials
inventory at the beginning and end of the budget period.
 The direct materials budget includes the budgeted dollar value of the direct materials inventory
at the beginning and end of the budget period.
 The production budget includes the budgeted number of units in the work in process inventory
 The direct labor budget includes the budgeted number of units in the work in process inventory
Question 10
1 / 1 pts
Producing goods evenly throughout the year despite having a seasonal sales pattern could lead to:
Relatively stable inventory levels.

The potential for inventory obsolescence.
Employee morale issues.
High costs for recruiting and training new employees.
Question 11
2 / 2 pts
Budgeted inventories for the Remle Company follow:
JANUARY DECEMBER
Direct materials $24,800 $26,700
Work in process 57,600 55,200
Finished goods 81,300 87,400
Additional budget information follows:
Total manufacturing costs $354,500
Cost of goods manufactured 356,900
Calculate the budgeted cost of goods sold.
$359,300
$350,800
$361,000
$350,400
SOLUTION
STATEMENT OF COGS
FINISHED GOODS JANUARY 81,300
ADD Cost of goods manufactured 356,900
COST OF GOODS AVAILABLE FOR SALE 438,200
LESS FINISHED GOODS DECEMBER 87,400
COST OF GOODS SOLD $350,800
Denny Door Company has budgeted door sales as follows:
Month Number of Units Budgeted Sales Dollars
March 50,000 $1,000,000
April 60,000 $1,200,000
Finished goods inventory at February 28 will be 7,000 units, but the company is making an effort to
reduce inventory and its new policy is that inventory at the end of the month should be 10% of the
budgeted sales for the following month. How many units should Denny Door Company produce in
March?
63,000
53,000
56,000
49,000
SOLUTION:
PRODUCTION BUDGET
MARCH SALES 50,000
ADD DESIRED END APRIL [ 60,000 X 10%] 6,000
[* inventory at the end
of the month should be
10% of the budgeted
sales for the following month]
TOTAL 56,000
LESS ESTIMATED BEG FEBRUARY 7,000
TOTAL PRODUCTION 49,000
Question 13
2 / 2 pts
Allen Company’s master budget called for 50,000 units of production. Budgeted direct material costs
at this level were $450,000 or $9 per unit. Allen actually produced 54,000 units and incurred direct
material costs of $496,000.
What is Allen’s direct material variance using flexible budgeting?
$10,000 U
$36,000 U
$46,000 U
$10,000 F
SOLUTION
BUDGETED= 54,000UNITS X $9 per unit = 486,0000
VARIANCE= ACTUAL COST- BUDGETED COST
=$496,000 ACTUAL - $486,000 BDG = $10,000 U
Question 14
2 / 2 pts
A summary of Jacob Company’s flexible budget of manufacturing costs follows:
20,000 Units
Direct materials $ 60,000
Direct labor 70,000
Variable factory overhead 30,000
Fixed factory overhead 32,000
Total $192,000
What would the flexible budget of manufacturing costs be at a production volume of 14,000 units?
$144,000
$172,800
$176,000
$192,000
SOLUTION
*FIXED COST IS STILL THE SAME
UNIT VARIABLE COST = [$ 60,000 +70,000 +30,000] / 20,000 UNITS
=160,000/ 20,000 UNITS = $8 VARIABLE UNIT COST
@ 14,000 UNITS
Variable cost = $8 VARIABLE UNIT COST x 14,000 UNITS
= 112,000 + 32,000fixed cost = $144,000
Question 15
2 / 2 pts
Shaw Corporation has developed the following flexible budget formula for annual indirect labor cost:
Total costs = $9,600 + $0.50 per machine hour
Operating budgets for the current month are based upon 30,000 hours of planned machine time.
Indirect labor costs included in this planning budget are:
$15,000.
$2,460.
$24,600.
$15,800.
Solution
Total cost $9,600 / 12 mos 800
30,000 hours of planned machine time x $0.50 per machine hour 15,000
$15,800.
Question 16
2 / 2 pts
Information from the operating budgets of Roswell Fabricators follows:
Selling and administrative expenses $ 140,000

Factory overhead 200,000
Sales 1,000,000
Cost of goods sold 450,000
Capital expenditures 100,000
If Northwest’s income tax rate is 30%, what is the budgeted net income?
$287,000
$126,000
$410,000
$186,000
Solution
budgeted net income
Sales 1,000,000
450,000
Cost of goods sold
Gross profit 550,000
Selling and administrative expenses 140,000
Operating income 410,000

Income tax [410,000 x 30%] 123,000
Net Income $287,000
Comfy Inc. uses five yards of wool in each blanket it produces. Comfy’s production budget next year
is 30,000 blankets. The anticipated wool inventory at January 1 is 30,000 yards, but the company
desires to reduce the inventory to 20,000 yards by the end of the year. Each yard of wool costs $10.
How many yards of wool should Comfy purchase?
170,000 yards
200,000 yards
140,000 yards
1,400,000 yards
Solution
Qty required for production
[ budgeted production of blankets in units 30,000 x 5 yards of wool in each blanket] 150,000
Plus desired ending inventory 20,000
170,000
Less beginning inventory 30,000
TOTAL QTY TO BE PURCHASED 140,000 yards
Chase Company’s production budget is as follows:
Budgeted sales in units 300,000
Desired units in inventory, December 31 70,000
370,000
Estimated units in inventory, January 1 50,000
Budgeted units of production 320,000
Each unit takes 30 minutes to produce and the standard labor rate is $18 per labor hour. What is
Chase’s direct labor budget?
$2,880,000
$2,700,000
$10,800,000
$5,760,000
Solution
Hours required for production
[ 320,000 x [ 30 minutes / 60 min] 160,000
Hourly rate x $18 per labor hour
direct labor budget $2,880,000
Question 19
2 / 2 pts
The normal capacity of Noel Company is 4,000 units per month. At this volume, budgeted fixed and
variable factory overhead are $16,000 and $20,000, respectively. In May, actual production was
4,200 units and actual overhead incurred was $37,900.
What was the amount of factory overhead allowed for the actual level of production in May?
$36,000
$37,800
$37,000
$36,800
Solution
@ 4,000 units @ 4,200 units
fixed $16,000 $16,000

Variable $20,000/ 4,000 units = $5 per unit $20,000 21,000
Total 36,000 $37,000
Question 20
2 / 2 pts
Kerry Kola Company sells Kerry Kola in two sizes: 12 ounce and 32 ounce bottles, at a price of $1.00
and $2.25, respectively. Projected unit sale volumes by region follow:
East Region:
12 ounce bottles 200,000
West Region:
What is Kerry Kola’s budgeted sales?
$1,425,000
$1,581,250
$1,643,750
$1,362,500
Total
East Region: Cost per unit
12 ounce bottles 200,000 $1.00 200,000
32 ounce bottles 150,000 $2.25 337,500
West Region:
12 ounce bottles 325,000 $1.00 325,000
32 ounce bottles 250,000 $2.25 562,500
TOTAL $1,425,000
7th QUIZ
STRATEGIC COST ACCOUNTING
CHAPTER 1 CVP ANALYSIS
CHAPTER 2 PRICING AND PROFITABILITY ANALYSIS
Question 1
1 / 1 pts
The margin of safety is the amount:
that the contribution margin exceeds fixed cost.

by which the sales price per unit exceeds the variable cost per unit.
that sales can decrease before the company will suffer a loss.
by which the profit calculated under absorption costing exceeds the profit calculated under variable
costing.
Question 2
1 / 1 pts
The term relevant range, as used in cost accounting, means the range
of probable production
over which cost relationships are valid
over which production has occurred in the past ten years.
over which costs may fluctuate
Question 3
1 / 1 pts
Which of the following is involved in studying cost-volume-profit relationship?
all of the given choices

fixed costs
variable costs
product mix
Question 4
1 / 1 pts
The rate or amount that sales may decline before losses are incurred is called
residual income rates

operating leverage
Variable sales ratio
Margin of Safety
Question 5
1 / 1 pts
Each of the following would affect the break-even point except a change in the:
Number of units sold.

Sales price per unit.
Variable cost per unit.
Total fixed costs.
Question 6
1 / 1 pts
Following are the uses of CVP analysis, except:
Analyze cash flows

deciding on selling price for a product
estimating future profit
analyzing margin of safety in budget
Question 7
1 / 1 pts
Which of the following assumptions does not pertain to cost-volume-profit analysis?
sales mix may vary during the related period

the units produced will equal the units sold
total revenue function is linear
inventories are constant
Question 8
1 / 1 pts
The indicator that results in total revenues being equal to total cost is called the?
marginal cost
sales mix
marfinal volume
break-even point
Question 9
1 / 1 pts
CVP is a key factor in many decisions, including choice of product lines, pricing of products, marketing
stategy, and utilization of product facilities. A calculation used in CVP Analysis is the break-even point.
Once the break-even point has been reached, operating income will increase by the:
contribution margin per unit for each additional unit sold

Gross margin per unit for each additional unit sold.
sales price per unit for each additional unit sold
Fixed cost per unit for each additional unit sold
Question 10
1 / 1 pts
A technique that uses the degrees of cost variability to measure the effect of changes in volume on
resulting profits is:
Standard costing.
Cost-volume-profit analysis.
Segment profitability analysis.
Variance analysis.
Question 11
1 / 1 pts
The excess of revenue over variable costs, including manufacturing, selling and administrative costs, is
called:
Segment margin.
Gross margin.
Manufacturing margin.
Contribution margin.
Question 12
1 / 1 pts
Under variable costing, fixed manufacturing overhead is:
expensed immediately when incurred

applied directly to Finished-Goods inventory
treated in the same manner as variable manufacturing overhead
an inventoriable cost
Question 13
1 / 1 pts
What is the pricing method that focuses on eliminating non-value-added costs?
Skimming
Predatory pricing
Target costing
Cost-plus pricing
Question 14
1 / 1 pts
What costs are treated as product costs under direct costing?
Only variable manufacturing costs

All variable and fixed manufacturing costs
Only direct costs
All variable costs
Question 15
1 / 1 pts
Which of the following is true about absorption costing?
Income is higher if the production is greater than the sales.

Income is higher if the production is less than the sales.
The term used to designate the difference between sales and cost of goods sold is the
“manufacturing margin.”
No fixed factory overhead is charged to production.
Question 16
1 / 1 pts
What is the difference between perfect competition and monopolistic competition?
In perfect competition, firms produce identical goods, while in monopolistic competition, firms
produce slightly different goods.
Perfect competition has barriers to entry while monopolistic competition does not.
Perfect competition has a large number of small firms while monopolistic competition does not.
Perfect competition has no barriers to entry, while monopolistic competition does.
Question 17
1 / 1 pts
Net income reported under variable costing will exceed net income reported under absorption
costing for a given period if:
Sales exceed production for that period.

Production equals sales for that period.
The variable overhead exceeds the fixed overhead.
Production exceeds sales for that period.
Question 18
1 / 1 pts
If the selling price and the variable cost per unit both increase 10 percent and fixed costs do not
change, what is the effect on the contribution margin per unit?
Contribution margin per unit increases

Contribution margin per unit decreases
Contribution margin per unit is unchanged.
No effect at all.
Question 19
1 / 1 pts
The contribution margin format income statement is organized by
functional classifications
sales territories
cost behavior classifications
responsibility centers
Question 20
1 / 1 pts
What factor related to manufacturing costs causes the difference in net earnings computed using
absorption costing and net earnings computed using variable costing?
Absorption costing considers all costs in the determination of net earnings, whereas variable costing
considers only direct costs.
Absorption costing "inventories" all fixed manufacturing costs for the period in ending finished goods
inventory, but variable costing expenses all fixed costs.
Absorption costing "inventories" all direct costs, but variable costing considers direct costs to be
period costs.
Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories,
and variable costing considers all fixed costs to be period costs.
SHORT PROBLEMS
Question 21
2 / 2 pts
Bialy Company had the following information:
Total Sales $120,000
Total variable costs 48,000
What is the break-even sales revenue?
$72,000
$108,000
$60,000
$100,000
Solution:
Total Sales $120,000
Total variable costs 48,000

Contribution margin 72,000

Fixed cost 60,000
Breakeven sales= 60,000/ [72,000/120,000] = 100,000
Consider the following information for the Dehning Company:
Sales price per unit $ 130
Variable cost per unit 80
Total fixed costs 840,000
What are Dehning's variable costs at the break-even point?
$490,000
$840,000
$588,000
$1,344,000
Solution:
Breakeven units= 840,000/[130-80]=16,800
Variable cost= 16,800 [breakeven units] x $80[variable cost] = $1,344,000
The Blue Saints Band is holding a concert in Toronto. Fixed costs relating to staging a concert are
$350,000. Variable costs per patron are $10.00. The selling price for a tickets $30.00. The Blue Saints
Band has sold 23,000 tickets so far.
How many tickets does the Blue Saints Band need to sell to break even?
14,000
20,000
17,500
23,000
Solution
Breakeven units= $350,000 / [ $30.00 - $30.00] = 17,500
A company has fixed costs of $700,000. The selling price and variable cost per unit are $50.00, and
$10.00, respectively.
How many units does the company need to sell to achieve net income of $100,000 after income tax,
assuming the income tax rate is 50%?
17,500
2,500
25,000
22,500
Solution
Before Tax= $100,000 after income tax / [ 1- 50% tax rate ] = 200,000
Units of Target Income = [ $700,000 fixed costs + 200,000 Before Tax ] / [$50 - $10] = 22,500
Franklin Company is a medium-sized manufacturer of bicycles. During the year a new line called
"Radical" was made available to Franklin's customers. The break-even point for sales of Radical is
$200,000 with a contribution margin ratio of 40 percent. Assuming that the profit for the Radical line
during the year amounted to $80,000, total sales during the year would have amounted to:
$400,000.
$420,000
$450,000.
$475,000.
Solution:
Breakeven sales= Fixed / CM ratio
$200,000 = fixed / 40%
Fixed =$200,000 x 40%
Fixed = 80,000
Profit $80,000
Fixed $80,000
CM 160,000
SALES= 160,000 TOTAL CM / 40% CM ratio = $400,000.

Queen, Ltd. has one product. Its sales price and variable cost per unit are $25 and $20, respectively.
Last year, Queen sold 25,000 units, which was 5,000 more than the break-even point. What were
Queen’s fixed expenses?
$125,000
There is not enough information to answer the question.
$100,000
$300,000
SOLUTION
BREAKEVEN UNITS= 25,000 -5,000= 20,000
Breakeven UNITS = Fixed / CM UNITS

20,000= FIXED / [ $25 -$20]
FIXED = 20,000 X 5 = $100,000
Consider the income statement for Pickbury Farm:
Sales $500,000
Variable costs 350,000
Contribution margin 150,000
Fixed costs 80,000
Net income $ 70,000
What is the margin of safety ratio (to the nearest percentage point)?
70%
88%
47%
30%
SOLUTION
MARGIN OF SAFETY RATIO = SALES - BREAKEVEN SALES / SALES
= [ $500,000 -* 266,667 ] / $500,000= 47%
* BREAKEVEN SALES= FIXED / CM RATIO

= 80,000 / [150,000/ $500,000]
= 80,000/ 30%
=266,667
Ayo Corporation has sales of $200,000, a contribution margin of 20%, and a margin of safety of
$80,000. What is Ayo's fixed cost?
$96,000
$24,000
$80,000
$16,000
SOLUTION: MARGIN OF SAFETYDOLLAR= SALES- [FIXED/ CM RATIO]

$80,000= $200,000- [FIXED/ 20%]
-$200,000+ $80,000 = - FIXED/ 20%
-120,000 = - FIXED/ 20%
FIXED= 120,000 X 20%
FIXED= $24,000
Kehler Corporation wished to market a new product for $2.00 a unit. Fixed costs to manufacture this
product are $100,000. The contribution margin is 40 percent. How many units must be sold to realize
net income of $140,000 from this product?
450,000
250,000
600,000
300,000
SOLUTION=
UNITS OF TARGET PROFIT= FIXED +TARGET PROFIT / CM UNIT
= $100,000 + $140,000 / [ $2.00 PRICE X 40% CM ]
= $240,000 / 80%
= 300,000
The following production data come from the records of Olympic Enterprises for the year ended
December 31, 2019.

Direct labor 260,000
During the year, 40,000 units were manufactured but only 35,000 units were sold. How much is the
inventoriable cost of the 35,000 units sold using variable costing.
$102,500
$98,000
$686,000
$717,500
SOLUTION
UNIT COST VARIABLE COSTING = $ 480,000 + 260,000 + 44,000 / 40,000 units manufactured
= $19.6
inventoriable cosT= 35,000 units sold X $19.6 = $686,000
Banwood Company has the following for 2019:
Selling price $150 per unit

Variable production costs $40 per unit produced
Variable selling and admin expenses $16 per unit sold
Fixed production costs $200,000
Fixed selling and admin expenses $140,000
Units produced 10,000 units
Units sold 8,000 units
What is the mark up based on cost of goods sold?
50%
150%
100%
250%
SOLUTION:
COGS PER UNIT COST = $40 VARIABLE COST +[ $200,000FIXED COST / 10,000 units Units produced
=$40 VARIABLE COST + $20 FIXED COST
= $60
SALES [ $150 per unit X8,000 units Units sold] 1,200,000

COGS [ $60 per unit X8,000 units Units sold] 480,000
GROSS PROFIT 720,000
MARKUP ON COST OF GOODS SOLD= GROSS PROFIT/ COGS

= 720,000 /480,000
= 150%
The following production data come from the records of Olympic Enterprises for the year ended
December 31, 2019.

Fixed selling expense 35,000
During the year, 40,000 units were manufactured but only 35,000 units were sold for $25 each. How
much is the gross profit?
$156,800
$189,000
$117,200
$121,800
SOLUTION
ABSORPTION COSTING
COGS PER UNIT COST= 480,000 Direct materials + 260,000Direct labor + 44,000 Variable factory
overhead + 36,800Fixed factory overhead / 40,000 units manufactured
= 820,800/ 40,000
= 20.52
Sales [ 35,000 units sold X $25] 875,000

COGS [ 35,000 units sold X $20.52] 718,200
Gross profit $156,800
Mobile, Inc., manufactured 700 units of Product A, a new product, during the year. Product A's
variable and fixed manufacturing costs per unit were $6.00 and $2.00, respectively. The inventory of
Product A on December 31 of the year consisted of 100 units. There was no inventory of Product A
on January 1 of the year. What would be the change in the dollar amount of inventory on December
31 if variable costing were used instead of absorption costing?
$600 decrease
$200 decrease
$200 increase
$800 decrease
SOLUTION
ABSORPTION COSTING UNIT COST = 100 units X [ $6.00variable + $2.00 fixed ] 800
VARIABLE COSTING UNIT COST = 100 units X $6.00variable 600
$200 decrease
Using the following data as follows:

Fixed marketing and administrative expense180,000
The factory produced 80,000 units during the period and 70,000 units were sold for $700,000. How
much is the contribution margin?
$430,000
$463,750
$332,500
$380,000
SOLUTION
COST PER UNIT= 90,000Direct materials + 120,000Direct labor +
60,000Variable factory overhead / 80,000 units PRODUCED
=$ 3.375
SALES $700,000
COGS [ $3.375 X 70,000 units sold] 236,250
CONTRIBUTION MARGIN $463,750
A company had income of $50,000 using variable costing for a given period. Beginning and ending
inventories for the period were 18,000 units and 13,000 units, respectively. If the fixed overhead
application rate was $2 per unit, what was the net income, using absorption costing?
$55,000
$40,000
$45,000
$60,000
SOLUTION
BEGINNING 18,000 units X $2 fixed overhead 36,000
ENDING 13,000 units X $2 fixed overhead 26,000
DECREASED BY 10,000 ABSORPTION
$50,000 INCOME - 10,000 = $40,000

Quizzes For Finals 1 Compilation Chap6,7,1,2

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Quizzes For Finals 1 Compilation Chap6,7,1,2

Uploaded by

Copyright:

Available Formats

CHAPTER 6 QUIZ AND ASSIGNMENT

What losses should not affect the recorded cost of inventories?

The value of by-products is included in an account called “By-products Inventory."

If the amount of loss in a manufacturing process is normal, it should be classified as a:

It causes a decrease in the preceding department's unit cost that necessitates an

Joint costs are commonly allocated based upon relative:

Which of the following is most likely to be accounted for as a by-product?

Cream resulting from processing raw milk at a dairy.

Assignment of joint costs

Work in process, beginning of

Started in June 85,000 $66,300

Units completed 90,000

Work in process, end of month 15,000

$80,850 / 105,000 units = cost per equivalent unit

Work in process at March 1 30,000 $ 60,000

Units transferred from previous department

Units completed and transferred to next

Work in process, August 1 (60% complete) 50,000

Started in August 190,000

Work in process, August 30 (40% complete) 80,000

Work in process, August 1 (60% complete) 50,000

Started in August 190,000

Work in process, August 30 (40% complete) 80,000

Work in process, October 1 (40% complete) 7,500

Started in October 32,000

Transferred to Second Department in

Work in process, October 31 (80% complete) 6,500

Work in process, August 1 (60% complete) 50,000

Transferred from First Department in August 190,000

Work in process, August 30 (40% complete) 80,000

Work in process, August 1 (60% complete) 50,000

Started in August 190,000

Work in process, August 30 (40% complete) 80,000

Finished and transferred 160,000

Unit output for materials

Adjusted unit cost= Cost of goods transferred/ total gallons

When there is no beginning inventory

The following losses affect the recorded cost of inventories, except:

Which of the following statements best describes a by-product?

None of the above.

Assigns a proportionate amount of the total cost to each product equitably.

These is allocated to the products made and will be used in decision-making

The value of by-products is included in an account called “By-products Inventory."

Each of the following is a method by which to allocate joint costs except:

Relative sales value.

Units Materials Costs

Work in process at April 1 15,000 $ 8,000

Units started during April 60,000 $ 38,500

Units completed and 65,000

Work in process at April 1 15,000

Units started during April 60,000

UNIT OUTPUT FOR MONTH

ENDING UNITS 6,200

Work in process, April 1 (50% complete) 90,000

Transferred from First Department in April 250,000

Transferred out of Second Department in 290,000

Work in process, April 30 (40% complete) 50,000

Units Materials Costs

Work in process at 8,000 $11,550

Units started during 20,000

Units completed and

UNIT OUTPUT FOR MONTH