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CH22
True or False: The third step in preparing a flexible budget is to identify the fixed and variable cost components of the costs being budgeted.
False - Third step is to prepare the budget for each activity level.
true or false
Factory overhead is credited when it is overapplied
answer: true
true or false
You add started and completed to the beginning balance in order to find out the transferred inventory
Answer: true
Chapter 18: Finish the equation
What do activity rates equal?
Answer: Activity rates = budgeted activity cost / (total activity base - base usage)
if break-even sales in units = 7,000 units while the unit contribution margin is $10, then what are fixed costs?
Answer: $70,000
What is the difference between managerial accounting and financial accounting?
Answer - Managerial accounting focuses on the inside works of a business, such as the job orders and process costs. Financial accounting focuses on owners' equity and external users.
ch23
A company has a total variable overhead budget of $7,000 with a total budget of 1,400 hours. If each unit requires .5 hours to be made, then determine the machine hourly rate and the total units produced.
Answer: Units produced = 2,800 Machine rate = $5
If conversion units for started and completed inventory equals 59,420 units and transferred inventory equals 65,920 units, then what is the beginning balance inventory?
Answer: 6,500 units
True or false:
The formula to determine the Activity-Based Factory Overhead Rate is:
Activity Rate = Budgeted Activity Cost / Total Activity-Base Usage
Answer: true
Select each word to its correct definition:
Variable cost
Fixed cost
Mixed cost
- Change
- Both
- Static
Variable Cost = Change
Fixed Cost = Static
Mixed Cost = Both
let us say a company sells a product for $100 and sells 4000 units. Utility expense equals $10,000, selling expense equals $5,000 and Administrative expenses equal $5,000. Cost of goods sold is $40,000 and no new materials are purchased, but the beginning inventory in production is worth $40,000, direct labor and factory overhead both equal $20,000. Determine if this company has a net income or a net loss and by how much.
Answer: Net income: $340,000
Reason: Sales equal 100*4000= $400,000
400,000 - total expenses - cost of goods sold = 400,000 - 10,000 - 5,000 - 5,000 - 40,000 = $340,000
The cost of goods sold is already given, so there is no need to try to find it, so the other given information is to sort of confuse the people in question by making them think the inventory on hand has importance.
During December, Stomper Company accumulated 700 hours of direct labor costs on job 101 and 600 hours job 102. The total direct labor was incurred at a rate of $15 per direct labor hour for job 101 and $13 per direct labor hour for Job 102. Journalize the entry to record the flow of labor costs in production during December.
Job 101 $10,500
Job 102 7,800
Total 18,300
Work in process D 18,300
Wages payable C 18,300
What is the right order of preparing a cost of production report?
Costs should be allocated to units that have been transferred out as well as partially built units.
Calculate equivalent production units.
Calculate the cost per equivalent unit.
Determine the units to which costs will be ascribed.
Determine the units to which costs will be ascribed.
Calculate equivalent production units.
Calculate the cost per equivalent unit.
Costs should be allocated to units that have been transferred out as well as partially built units.
Determine the Multiple department FO Rates
How do you find the FO rates for departments in a business?
Answer: First you need to find the “Production department factory overhead rate = Budgeted department factory overhead / budgeted department allocation base” and then use this rate by multiplying it with the direct labor hours required for each department. budgeted department allocation base can be found by just adding all departments’ required hours, respectively.
If sales equal $1,000,000 and variable costs equal $420,000 and total costs equal 690,000, what are the FIXED costs and the UNIT CONTRIBUTION MARGIN RATIO?
580000/100000 = %58 or .58 = unit contribution margin ratio
fixed = 270,000
CH 23
Determine the direct labor standard hours when the time variance equals 1000 hours unfavorable. Actual direct labor hours equal 400 and the standard rate equals $10/h.
Answer: Standard hours = 300
Reason: 1000 unfavorable = x * 10. Divide 1000 by 10 and you should get 100, so x =100. With this, 100 should equal 400 minus standard hours, and you should be able to find that standard hours equal 300.
Determine total manufacturing cost INCURRED: a single job has 10 direct labor hours at a rate of $15 an hour, requisitioned 100 direct materials for $10 per unit, and the predetermined factory overhead rate is $7.77 with 20 hours
Answer: Total manufacturing costs incurred = 150+1000+155.4 = 1305.4
An explanation: there is a difference between manufacturing costs INCURRED, total manufacturing costs, cost of goods manufactured, cost of goods available to sell, and cost of goods sold. One thing that determines most of these things is the beginning inventories and ending inventories, respectively for work in process and finished goods at the beginning and the end of the month. Costs incurred only include direct labor, factory overhead, and direct materials, so all that is left is to calculate and add.
ch24
Fill out the missing items in Return on Investments Computation. (Round your answers to two decimal places)
Return On Investment = Profit Margin X Investment Turnover
28% = (a) X 2
20% = 5% X (b)
( c) = 16% X 6
12% = (d) X 1.5
a)
b)
c)
d)
14%
4
96%
8%
Determine the present value factor of annuity of $1 using the IRR method (Internal rate of return): A company generates sales of $777,000 over the course of 7 years, and are planning to purchase a new vehicle for $455,100.
answer: 4.1
Ch24
What is the most common approach for budgeting?
A more common approach, called incremental budgeting, is to start with last year’s budget and revise it for actual results and expected changes for the coming year.
Partial balance sheet data for Satellite Company on October 31, Year 1, are as follows:
Finished goods inventory $30,000 Supplies $56,880
Prepaid Insurance 11,000 Materials Inventory 60,000
Accounts receivable 44,000 Cash 79,600
Work in process inventory 132,000
Prepare the Current Assets section of Satellite Companies balance sheet on December 31, Year 1.
SATELLITE COMPANY
Balance Sheet
October 31, Year 1
Current assets
Cash 79,600
Accounts Receivable 44,000
Inventories
Finished goods $30,000
Work in process 132,000
Materials 60,000 222,000
Supplies 56,880
Prepaid Insurance 11,000
Total 289,880
Danish Corp. Produced 4,000 units of production that required 3.2 standard direct labor hours per unit. The standard variable overhead cost per unit is $3.44 per direct labor costs. The actual variable factory overhead was $17,714.
Determine the variable factory overhead controllable variance.
44,032 favorable
26,318 unfavorable
26,318 favorable
44,032 unfavorable
c) 26,318 favorable
Ch 24
Use the DuPont formula: solve for x
ROI = 4
sales $400,000,
Invested assets = x
operating income of $800,000
Answer = x = $200,000
Explanation: with the DuPont formula, profit margin equals operating income/sales while investment turnover equals sales/invested assets. We already can find the profit margin, which is 2. So the equation should look like 2=2 times investment turnover, and with some algebraic manipulation, we can see that investment turnover is also equal to 2. So the investment turnover should look like 2= 400,000/x, which is $200,000
ch 25
Cherry has a unit contribution margin of $28. Product Kiwi has a unit contribution margin of $48. Product Cherry requires four hours of making, while the product Kiwi requires three hours. Determine the most profitable product.
Cherry
Kiwi
Answer: product Kiwi because it has $16 per bottleneck hour, compared to Cherry which only has $7 per bottleneck hour.
CH 26
The average rate of return for an investment that is estimated to yield total income of $360,000 over two years, has a cost of $690,000 and has a $60,000 residual value. Calculate the average rate of return for this investment.
50%
30%
48%
20%
C. %48