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Accounting-Quiz #4

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a:
a.
control center
b.
budgetary area
c.
responsibility center
d.
managerial department
 

 2. 

Budgeting supports the planning process by encouraging all of the following activities except:
a.
requiring all organizational units to establish their goals for the upcoming period
b.
increasing the motivation of managers and employees by providing agreed-upon expectations
c.
directing and coordinating operations during the period
d.
improving overall decision making by considering all viewpoints, options, and cost reduction possibilities
 

 3. 

Christiansen and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, utilities of $5,000, and supervisor salaries of $15,000.  A flexible budget for 12,000 units of production would show:
a.
the same cost structure in total
b.
direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $18,000
c.
total variable costs of $136,800
d.
direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $15,000
 

 4. 

A disadvantage of static budgets is that they:
a.
start with a clean slate
b.
cannot be used by service companies
c.
do not show possible changes in underlying activity levels
d.
show the expected results of a responsibility center for several levels of activity
 

 5. 

A series of budgets for varying rates of activity is termed a(n):
a.
flexible budget
b.
variable budget
c.
master budget
d.
activity budget
 

 6. 

Below is budgeted production and sales information for Fleming Company for the month of December:

 
Product XXX
Product ZZZ
Estimated beginning inventory
  30,000 units
  18,000 units
Desired ending inventory
  32,000 units
  15,000 units
Region I, anticipated sales
320,000 units
260,000 units
Region II, anticipated sales
190,000 units
130,000 units

The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted production for product XXX during the month is:
a.
510,000 units
b.
512,000 units
c.
542,000 units
d.
572,000 units
 

 7. 

Mancini Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below.

Material A  .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound

The amount of direct material B purchased during the year is:
a.
$1,057,400
b.
$1,193,400
c.
$1,026,800
d.
$1,224,000
 

 8. 

If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 200 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is:
a.
7,000
b.
6,900
c.
7,100
d.
7,200
 

 9. 

Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?
a.
Direct materials purchases budget
b.
Cash budget
c.
Production budget
d.
Sales budget
 

 10. 

Kidder Company began its operations on March 31 of the current year. Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month. The cash payments for manufacturing in the month of April are:
a.
$128,000
b.
$96,000
c.
$156,800
d.
$117,000
 

 11. 

Standards that represent levels of operation that can be attained with reasonable effort are called:
a.
theoretical standards
b.
ideal standards
c.
practical standards
d.
normal standards
 

 12. 

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$4.00
Actual kilograms of material used
31,000
Actual hourly labor rate
$18.10
Actual hours of production
4,900 labor hrs.
Standard price per kilogram
$2.80
Standard kilograms per completed unit
6 kilograms
Standard hourly labor rate
$18.00
Standard time per completed unit
1.5 hr.
Actual total factory overhead
$34,900
Fixed factory overhead
$18,000
Standard fixed factory overhead rate
$1.20 per labor hour
Standard variable factory overhead rate
$3.80 per labor hour
Maximum plant capacity
15,000 hours
Plant operated during the period
10,000 hours
Units completed during the period
5,000

The direct materials quantity variance is:
a.
$6,200 favorable
b.
$2,800 favorable
c.
$2,800 unfavorable
d.
$6,200 unfavorable
 

 13. 

The following data relate to direct labor costs for February:

Actual costs
7,700 hours at $13
Standard costs
7,000 hours at $9

What is the direct labor rate variance?
a.
$28,000 favorable
b.
$28,000 unfavorable
c.
$30,800 favorable
d.
$30,800 unfavorable
 

 14. 

Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$1.76
Actual kilograms of material used
61,500
Actual hourly labor rate
$20.60
Actual hours of production
8,850
Standard price per kilogram
$1.80
Standard kilograms per completed unit
5 kilograms
Standard hourly labor rate
$20.00
Standard time per completed unit
3/4 hr.
Actual total factory overhead
$64,500
Fixed factory overhead
$30,000
Standard fixed factory overhead rate
$3.00 per labor hour
Standard variable factory overhead rate
$5.00 per labor hour
Maximum plant capacity
10,000 hours
Plant operated during the period
9,000 hours
Units completed during the period
12,000

The direct labor time variance is:
a.
$3,000 favorable
b.
$5,310 favorable
c.
$5,310 unfavorable
d.
$3,000 unfavorable
 

 15. 

Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$1.76
Actual kilograms of material used
61,500
Actual hourly labor rate
$20.60
Actual hours of production
8,850
Standard price per kilogram
$1.80
Standard kilograms per completed unit
5 kilograms
Standard hourly labor rate
$20.00
Standard time per completed unit
3/4 hr.
Actual total factory overhead
$64,500
Fixed factory overhead
$30,000
Standard fixed factory overhead rate
$3.00 per labor hour
Standard variable factory overhead rate
$5.00 per labor hour
Maximum plant capacity
10,000 hours
Plant operated during the period
9,000 hours
Units completed during the period
12,000

The direct labor cost variance is:
a.
$8,310 favorable
b.
$2,310 favorable
c.
$2,310 unfavorable
d.
$5,310 unfavorable
 

 16. 

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours.  The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:

Standard:
25,000 hours at $10
$250,000
Actual:
Variable factory overhead
202,500
 
Fixed factory overhead
60,000

What is the amount of the factory overhead volume variance?
a.
$12,500 favorable
b.
$10,000 unfavorable
c.
$12,500 unfavorable
d.
$10,000 favorable
 

 17. 

The unfavorable volume variance may be due to all but the following factors:
a.
failure to maintain an even flow of work
b.
machine breakdowns
c.
unexpected increases in the cost of utilities
d.
failure to obtain enough sales orders
 

 18. 

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$3.00
Actual kilograms of material used
31,000
Actual hourly labor rate
$18.10
Actual hours of production
4,900 labor hours
Standard price per kilogram
$2.80
Standard kilograms per completed unit
6 kilograms
Standard hourly labor rate
$18.00
Standard time per completed unit
1 hr.
Actual total factory overhead
$34,900
Fixed factory overhead
$18,000
Standard fixed factory overhead rate
$1.20 per labor hour
Standard variable factory overhead rate
$3.80 per labor hour
100% of normal capacity
15,000 hours
Plant operated during the period
10,000 hours
Units completed during the period
5,000

The factory overhead volume variance is:
a.
$2,100 favorable
b.
$6,000 favorable
c.
$12,000 unfavorable
d.
$2,100 unfavorable
 

 19. 

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$3.00
Actual kilograms of material used
31,000
Actual hourly labor rate
$18.10
Actual hours of production
4,900 labor hours
Standard price per kilogram
$2.80
Standard kilograms per completed unit
6 kilograms
Standard hourly labor rate
$18.00
Standard time per completed unit
1 hr.
Actual total factory overhead
$34,900
Fixed factory overhead
$18,000
Standard fixed factory overhead rate
$1.20 per labor hour
Standard variable factory overhead rate
$3.80 per labor hour
100% of normal capacity
15,000 hours
Plant operated during the period
10,000 hours
Units completed during the period
5,000

The factory overhead controllable variance is:
a.
$6,000 favorable
b.
$2,100 favorable
c.
$2,100 unfavorable
d.
$6,000 unfavorable
 

 20. 

At the end of the fiscal year, variances from standard costs are usually transferred to the:
a.
direct labor account
b.
factory overhead account
c.
cost of goods sold account
d.
direct materials account
 

 21. 

A business is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit.  The unit cost for the business to make the part is $36, including fixed costs, and $28, not including fixed costs.  If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
a.
$60,000 cost decrease
b.
$180,000 cost increase
c.
$60,000 cost increase
d.
$180,000 cost decrease
 

 22. 

A business is considering a cash outlay of $200,000 for the purchase of land, which it intends to lease for $35,000 per year.  If alternative investments are available which yield an 18% return, the opportunity cost of the purchase of the land is:
a.
$35,000
b.
$36,000
c.
$ 1,000
d.
$37,000
 

 23. 

Sorrentino Inc. is considering disposing of a machine with a book value of $22,500 and an estimated remaining life of three years. The old machine can be sold for $6,250. A new machine with a purchase price of $68,750 is being considered as a replacement. It will have a useful life of three years and no residual value. It is estimated that variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased. The net differential increase or decrease in cost for the entire three years for the new equipment is:
a.
$8,750 increase
b.
$31,250 decrease
c.
$8,750 decrease
d.
$2,925 decrease
 

 24. 

What cost concept used in applying the cost-plus approach to product pricing includes only total manufacturing costs in the "cost" amount to which the markup is added?
a.
Variable cost concept
b.
Total cost concept
c.
Product cost concept
d.
Opportunity cost concept
 

 25. 

Managers who often make special pricing decisions are more likely to use which of the following cost concepts in their work?
a.
Total cost
b.
Product cost
c.
Variable cost
d.
Fixed cost
 

 26. 

McClelland Corporation uses the total cost concept of product pricing.  Below is cost information for the production and sale of 60,000 units of its sole product.  McClelland desires a profit equal to a 21% rate of return on invested assets of $600,000.

Fixed factory overhead cost
$37,500
Fixed selling and administrative costs
7,500
Variable direct materials cost per unit
4.50
Variable direct labor cost per unit
1.88
Variable factory overhead cost per unit
1.13
Variable selling and administrative cost per unit
4.50

The markup percentage for the company's product is:
a.
21%
b.
22.5%
c.
16.46%
d.
26.25%
 

 27. 

Mendoza Corporation uses the product cost concept of product pricing.  Below is cost information for the production and sale of 45,000 units of its sole product.  Mendoza desires a profit equal to a 10.8% rate of return on invested assets of $900,000.

Fixed factory overhead cost
$72,000.00
Fixed selling and administrative costs
45,000.00
Variable direct materials cost per unit
4.50
Variable direct labor cost per unit
7.65
Variable factory overhead cost per unit
2.25
Variable selling and administrative cost per unit
.90

The cost per unit for the production and sale of the company's product is:
a.
$14.40
b.
$16.00
c.
$15.30
d.
$15.75
 

 28. 

Mendoza Corporation uses the product cost concept of product pricing.  Below is cost information for the production and sale of 45,000 units of its sole product.  Mendoza desires a profit equal to a 10.8% rate of return on invested assets of $900,000.

Fixed factory overhead cost
$72,000.00
Fixed selling and administrative costs
45,000.00
Variable direct materials cost per unit
4.50
Variable direct labor cost per unit
7.65
Variable factory overhead cost per unit
2.25
Variable selling and administrative cost per unit
.90

The unit selling price for the company's product is:
a.
$17.73
b.
$15.75
c.
$22.05
d.
$20.06
 

 29. 

Elfrink Corporation uses the variable cost concept of product pricing.  Below is cost information for the production and sale of 35,000 units of its sole product.  Elfrink desires a profit equal to a 11.2% rate of return on invested assets of $350,000.

Fixed factory overhead cost
$105,000
Fixed selling and administrative costs
35,000
Variable direct materials cost per unit
4.34
Variable direct labor cost per unit
5.18
Variable factory overhead cost per unit
.98
Variable selling and administrative cost per unit
.70

The unit selling price for the company's product is:
a.
$16.32
b.
$13.44
c.
$12.10
d.
$13.72
 

 30. 

Soap Company manufactures Soap X and Soap Y and can sell all it can make of either.  Based on the following data, which statement is true?

 
X
Y
Sales Price
$32
$40
Variable Cost
 22
 24
   
Hours needed to process
  5
  8
a.
There would be no difference in the contribution margin per hour before and after the processing time reduction.
b.
It would take 270 minutes to process one unit of X.
c.
The contribution margin per hour for X would be $2.
d.
Soap Y would still be the most profitable.
 



 
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