Solved by verified expert :(TCO 1) The goal of managerial accounting is to provide
information that managers need for

decision making.
All of the above

Question 2. Question
(TCO 1) Which of the following statements regarding fixed
costs is true?

When production increases, fixed cost per unit increases.
When production decreases, total fixed costs
When production increases, fixed cost per unit
When production decreases, total fixed costs

Question 3. Question
(TCO 1) You own a car and are trying to decide whether or
not to trade it in and buy a new car. Which of the following costs is an
opportunity cost in this situation?

: The trip to Cancun that you
will not be able to take if you buy the car
The cost of the car you are trading in
The cost of your books for this term
The cost of your car insurance last year

Question 4. Question
(TCO 1) Shula’s 347 Grill has budgeted the following costs
for a month in which 1,600 steak dinners will be produced and sold: materials,
$4,080; hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation,
$800; and other fixed costs, $600. Each steak dinner sells for $14.00 each.
Which is the budgeted fixed cost per unit?


Question 5. Question
(TCO 1) Which of the following is an example of a
manufacturing overhead cost?

: Security at the manufacturing
Fabric used to produce shirts
Cost of shipping product to customers
The salary of the president of the company

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Question 6. Question
(TCO 1) Which of the following is a period cost?

Rent on a factory building
Depreciation on production equipment
Raw materials cost
Commissions paid on each unit sold


Question 7. Question
(TCO 1) At December 31, 2010, WDT Inc. has a balance in the
Work in Process Inventory account of $62,000. At January 1, 2010, the balance
was $55,000. Current manufacturing costs for the year are $292,000, and cost of
goods sold is $284,000. How much is cost of goods manufactured?


Question 8. Question
(TCO 2) BCS Company applies manufacturing overhead based on
direct labor hours. Information concerning manufacturing overhead and labor for
August follows.

Overhead cost $174,000
Direct labor hours 5,800
Direct labor cost $87,000

How much overhead should be applied in total during August?

: 177,000


Question 9. Question
(TCO 2) Citrus Company incurred manufacturing overhead costs
of $300,000. Total overhead applied to jobs was $306,000. What was the amount
of overapplied or underapplied overhead?

$7,000 overapplied
$6,000 overapplied
$6,000 underapplied
$13,000 underapplied

Question 10. Question
(TCO 3) Companies in which of the following industries would
not be likely to use process costing?

Auto body repairs
Instructor Explanation: See Chapter 5.
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Question 11. Question
(TCO 3) The blending department began the period with 20,000
units. During the period, the department received another 80,000 units from the
prior department, and at the end of the period, 30,000 units remained, which
were 40% complete. How much are equivalent units in the blending department’s
Work In Process Inventory at the end of the period?

: 12,000

Question 12. Question
(TCO 3) Ranger Glass Company manufactures glass for French
doors. At the start of May, 2,000 units were in process. During May, 11,000
units were completed and 3,000 units were in process at the end of May. These
in-process units were 90% complete with respect to material and 50% complete
with respect to conversion costs. Other information is as follows.

Work in process, May 1:
Direct material $36,000
Conversion costs $45,000

Costs incurred during May:
Direct material $186,000
Conversion costs $255,000

Calculate the cost per equivalent unit for conversion costs.

: $24.00

Question 13. Question
(TCO 4) Total costs were $75,800 when 30,000 units were
produced and $95,800 when 40,000 units were produced. Use the high-low method
to find the estimated total costs for a production level of 32,000 units.

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Question 14. Question
(TCO 4) The margin of safety is the difference between

total revenue and total fixed costs.
expected level of sales and the break-even
budgeted fixed costs and actual fixed costs.
selling price and variable cost per unit.
Instructor Explanation: See Chapter 6.
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Question 15. Question
(TCO 4) Allen Company sells homework machines for $100 each.
Variable costs per unit are $75 and total fixed costs are $62,000. Allen is
considering the purchase of new equipment that would increase fixed costs to
$84,000 but decrease the variable costs per unit to $60. At that level, Allen
Company expects to sell 3,000 units next year. Which is Allen’s break-even
point in units if it purchases the new equipment?

2,480 units
36,000 units
2,100 units
3,650 units

Question 16. Question
(TCO 4) Paula Corporation sells a single product at a price
of $275 per unit. Variable cost per unit is $135 and fixed costs total
$356,860. If sales are expected to be $825,000, which is Paula’s margin of


Question 17. Question
(TCO 5) Which of the following is treated differently in
full costing than in variable costing?

Direct materials
Fixed manufacturing overhead
Direct labor
Variable manufacturing overhead
Instructor Explanation: See Chapter 7.
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Question 18. Question
(TCO 5) Variable costing income is a function of

: units sold only.
units produced only.
both units sold and units produced.
neither units sold nor units produced.
Instructor Explanation: See Chapter 7.
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Question 19. Question
(TCO 5) Peak Manufacturing produces snow blowers. The
selling price per snow blower is $100. Costs involved in production are as

Direct material per unit: $20
Direct labor per unit: 12
Variable manufacturing overhead per unit: 10
Fixed manufacturing overhead per year: $148,500

In addition, the company has fixed selling and
administrative costs of $150,000 per year.

During the year, Peak produces 45,000 snow blowers and sells
30,000 snow blowers. How much fixed manufacturing overhead is in ending
inventory under full costing?

: $0

Question 20. Question
(TCO 6) Which of the following is not a reason why companies
allocate costs?

To calculate the full cost of products for financial reporting purposes
To discourage managers from using external
To reduce the frivolous use of company
To provide information needed by managers to
make appropriate decisions
Instructor Explanation: See Chapter 4.
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Question 21. Question
(TCO 5) An allocation base

is the minimum amount to be allocated to a cost object.
coordinates the manufacturing overhead costs
as they are incurred.
will always be less than the variable costs
for a product.
relates the cost pool to the cost objectives.
Instructor Explanation: See Chapter 4.
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Question 22. Question
(TCO 6) The building maintenance department for Jones
Manufacturing Company budgets annual costs of $4,200,000 based on the expected
operating level for the coming year. The costs are allocated to two production
departments. The following data relate to the potential allocation bases.

Dept. 1 Production Dept. 2
Square footage 15,000
Direct labor hours 25,000

If Jones assigns costs to departments based on square
footage, how much total costs will be allocated to Production Department 1?


Question 23. Question
(TCO 7) A company is trying to decide whether to keep or
drop the sporting goods department in its department store. If the segment is
dropped, the manager will be fired. The manager’s salary, in relation to the
decision to keep or drop the sporting goods department, is

: avoidable and therefore
not avoidable and therefore relevant.
sunk and therefore not relevant.
the same for all alternatives and therefore
not relevant.
Instructor Explanation: See Chapter 8.
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Question 24. Question
(TCO 7) BigByte Company has 20 obsolete computers that are
carried in inventory at a cost of $15,000. If these computers are upgraded at a
cost of $8,000, they could be sold for $17,700. Alternatively, the computers
could be sold as is for $8,500. Which is the net advantage or disadvantage of
reworking the computers?

: $1,200 advantage
$1,200 disadvantage
$9,200 disadvantage
$9,700 advantage

Question 25. Question
(TCO 7) YXZ Company’s market for the Model 55 has changed
significantly, and YXZ has had to drop the price per unit from $275 to $135.
There are some units in the Work In Process Inventory that have costs of $160
per unit associated with them. YXZ could sell these units in their current
state for $100 each. It will cost YXZ $10 per unit to complete these units so
that they can be sold for $135 each.

When the incremental revenues and expenses are analyzed,
which is the financial impact?

: $25 per-unit profit if the
units are completed
$125 per-unit profit if the units are
$65 per-unit loss if the units are completed
$150 per-unit loss if the units are completed

Question 26. Question
(TCO 3) Describe a process costing system, including the
types of companies that commonly use this system. How can process costing
information be used in incremental analysis?

Question 27. Question
(TCO 7) Each year, ACE Engines surveys 7,600 former and
prospective customers regarding satisfaction and brand awareness. For the
current year, the company is considering outsourcing the survey to RBG
Associates, who have offered to conduct the survey and summarize results for
$50,000. Robert Ace, the president of ACE Engines, believes that RBG will do a
higher quality job than his company has been doing but is unwilling to spend
more than $12,000 above current costs. The head of bookkeeping for ACE has
prepared the following summary of costs related to the survey in the prior

Printing (done by Lester Print Shop)
Salary of Pat Fisher, part-time employee who stuffed
envelopes and summarized data when surveys were returned (130 × $16)
Share of depreciation of computer and software used to track
survey responses and summarize results
Share of electricity, phone, and so forth based on square
feet of space occupied by Pat Fisher versus entire company

Prepare an incremental analysis in good form to determine the
impact on profit of going outside versus conducting the survey as in the past.
Will ACE accept the RBG offer? Why or why not?



Question 28. Question
(TCO 4) The following monthly data are available for RedEx,
which produces only one product that it sells for $84 each. Its unit variable
costs are $28, and its total fixed expenses are $64,960. Sales during April
totaled 1,600 units.
(a) How much is the break-even point in sales dollars for
(b) How many units must RedEx sell in order to earn a profit
of $24,640?
(c) A new employee suggests that RedEx sponsor a company softball
team as a form of advertising. The cost to sponsor the team is $1,792. How many
more units must be sold to cover this cost?

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