Other
Which of the following is NOT an example of an activity?
A) Maintaining equipment
B) Stocking shelves at a store
C) Machine-hours
D) Admitting patients to a hospital
C) Machine-hours
In process costing, how are equivalent units typically used?
A) To calculate the total number of physical units completed during a period
B) To convert partially completed units into a measure of fully completed units for cost allocation
C) To track direct materials and direct labor costs only
D) To assign overhead costs to different jobs or projects
B) To convert partially completed units into a measure of fully completed units for cost allocation
Olya’s Corp. has provided the following data from its activity-based costing accounting system:
Activity Cost Pool Total Cost Total Activity
Designing products $1,372,448 7,798 product design hours
Setting up batches $33,300 740 batch set-ups
Assembling products $126,160 6,640 assembly hours
The activity rate for the “designing products” activity cost pool is closest to:
$176
Designing products activity rate: $1,372,448/7,798 product design hours = $176
Bellatrix Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (6,000 units) $ 230,000
Variable expenses 146,500
Contribution margin 83,500
Fixed expenses 75,200
Net operating income $ 8,300
The number of units that must be sold to achieve a target profit of $35,000 is closest to:
7,917 Units
Unit CM = 83,500/6,000
= $13.92
Unit sales to attain a target profit = (35,000 + 75,200)/(13.92)
= 7,917 Units
Which of the following is a key characteristic of variable costing?
A) Both fixed and variable manufacturing costs are included in the cost of goods sold.
B) Only variable manufacturing costs are included in product costs, while fixed manufacturing costs are treated as period expenses.
C) Fixed manufacturing costs are allocated to each unit produced.
D) It is primarily used for external financial reporting purposes.
B) Only variable manufacturing costs are included in product costs, while fixed manufacturing costs are treated as period expenses.
Which of the following best describes the difference in how overhead costs are assigned in process costing versus activity-based costing (ABC)?
A) Process costing assigns overhead based on specific activities, while ABC uses a single predetermined overhead rate.
B) ABC assigns overhead costs based on multiple cost drivers, while process costing uses a single overhead rate across all processes.
C) In process costing, overhead is assigned based on the number of units produced, while ABC assigns overhead based on the number of batches produced.
D) Both systems assign overhead costs based on direct labor hours only
B) ABC assigns overhead costs based on multiple cost drivers, while process costing uses a single overhead rate across all processes.
Olya’s Delish Jam uses a process costing system to collect costs related to the production of Fruit Jam. The jam is first processed in a cooking department and is then transferred out and finished up in the packaging department. The finished cases of fruit jam are then transferred to the finished goods Inventory. The following information relates to the company's two departments for the month of January:
Cooking Packaging
Cases of Fruit Jam in Work in Process, Jan. 1 8,000 4,000
Cases of Fruit Jam completed & transferred out. 40,000 ?
Cases of Fruit Jam in Work in Process, Jan. 31 10,000. 6,000
What is the total number of cases of Fruit Jam completed and transferred to the Finished Goods Inventory during February?
38,000
Units Transferred Out = 4,000 + 40,000 - 6,000
= 38,000
The first step in activity-based costing is to:
A) Assign overhead costs to products, using overhead rates determined for each cost pool.
B) Compute the activity-based overhead rate per cost driver.
C) Identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.
D) Identify the cost driver that has a strong correlation to the activity cost pool.
C) Identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.
Gringotts Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (4,500 units) $ 340,000
Variable expenses 154,000
Contribution margin 186,000
Fixed expenses 81,000
Net operating income $ 105,000
The break-even point dollar sales is closest to:
$147,272.73
CM Ratio = 186,000/340,000
= 0.55
Dollar sales to break even = 81,000/0.55
= $147,272.73
Which of the following is true about income statements prepared under variable costing?
A) Fixed manufacturing overhead is included in the cost of goods sold.
B) Variable selling and administrative expenses are treated as product costs.
C) Operating income can change based on the number of units sold, but not on the number of units produced.
D) It results in higher net income when production exceeds sales.
C) Operating income can change based on the number of units sold, but not on the number of units produced.
In CVP analysis, if the fixed costs increase while everything else remains constant, how will this affect the break-even point?
A) The break-even point will decrease.
B) The break-even point will increase.
C) The break-even point will remain the same.
D) The break-even point will only change if variable costs also change.
B) The break-even point will increase.
For the current period, Jones Corp. started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did Jones have for the period?
11,500
Equivalent Units of Production = 10,000 + (5,000 * .3)
= 11,500
Olya’s Enterprise makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning overhead costs to products and customers. Details concerning the ABC system are listed below:
Activity Cost Pool Activity Measure Activity Rate
Supporting assembly Direct labor-hours (DLHs) $ 3.55 per DLH
Processing batches Number of batches $ 189.35 per batch
Processing orders Number of orders $ 59.35 per order
Serving customers Number of customers $ 1,159.00 per customer
The cost of serving customers, $1,159.00 per customer, is the cost of serving a customer for one year.
Mary Corporation buys only one of the company's products which Digerolamo Enterprises sells for $18.85 per unit. Last year Mary Corporation ordered a total of 1,500 units of this product in 4 orders. To fill the orders, 9 batches were required. The direct materials cost is $8.15 per unit and the direct labor cost is $2.60 per unit. Each unit requires 0.15 DLHs.
According to the ABC system, the total cost of the activity "Processing batches" for this customer this past year was closest to:
$1,704.15
Cost of processing batches = $189.35 per batch × 9 batches = $1,704.15
Olya’s Corporation produces a product which sells for $50. Variable manufacturing costs are $20 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 20% of the selling price is paid on each unit sold. The contribution margin per unit is:
$20
Variable Cost/Unit = $20 + (0.2 * $50)
= $30/Unit
Unit CM = $50 - $30
= $20
Silicon Corporation has provided the following data for its most recent year of operation:
Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials $ 13
Direct labor $ 9
Variable manufacturing overhead $ 7
Fixed manufacturing overhead per year $ 310,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold $ 4
Fixed selling and administrative expense per year $ 92,000
Units in beginning inventory 0
Units produced during the year 5,000
Units sold during the year 4,000
Units in ending inventory 3,000
Which of the following statements is true when Simila uses absorption costing?
A) The amount of fixed manufacturing overhead released from inventories is $186,000
B) The amount of fixed manufacturing overhead deferred in inventories is $76,000
C) The amount of fixed manufacturing overhead released from inventories is $76,000
D) The amount of fixed manufacturing overhead deferred in inventories is $186,000
D) The amount of fixed manufacturing overhead deferred in inventories is $186,000
Fixed MOH/Unit = $310,000/5,000
= $62
Fixed MOH deferred in (released from) inventories = (3,000 * $62)
= $186,000
Which of the following is a primary advantage of using variable costing over absorption costing for internal decision-making?
A) It provides a more accurate representation of total production costs for external reporting.
B) It allows for easier analysis of the impact of fixed costs on overall profitability.
C) It facilitates better decision-making regarding pricing and production levels by focusing on contribution margin.
D) It eliminates the need to allocate fixed manufacturing overhead to individual units produced.
C) It facilitates better decision-making regarding pricing and production levels by focusing on contribution margin.
Boutiquin Corporation uses the weighted-average method in its process costing system. The Fitting Department is the second department in its production process. The data below summarizes the department's operations in March.
Units Percent Complete (Conversion Costs)
Beginning WIP Inventory 3,700 20%
Transferred in 59,000
Ending WIP Inventory 7,200 60%
The Fitting Department's cost per equivalent unit for conversion cost for March was $5.99. How much conversion cost was assigned to the units transferred out of the Fitting Department during March?
$332,445
Units Transferred Out = 3,700 + 59,000 - 7,200
= 55,500
Cost of Units Transferred Out = 55,500 * 5.99
= $332,445
Olya’s Bubble Tea Co. uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its overhead costs:
Overhead Costs:
Wages and salaries $ 360,000
Depreciation 100,000
Utilities 120,000
Total $ 580,000
The distribution of resource consumption across the three activity cost pools is given below:
Activity Cost Pools
Assembly Setting Up Machining Total
Wages & Salaries 50% 40% 10% 100%
Depreciation 10% 45% 45% 100%
Utilities 5% 60% 35% 100%
How much overhead cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?
$196,000
Wages and salaries (50% × $360,000) $ 180,000
Depreciation (10% × $100,000) 10,000
Occupancy (5% × $120,000) 6,000
_______
Total $ 196,000
Sales $400,000
Variable Expenses $280,000
Contribution Margin (CM) $120,000
Fixed Expenses $100,000
Net Operating Income $20,000
What is the total contribution margin if sales volume decreases by 22%? Assume the information is within the relevant range.
$93,600
CM Ratio = 120,000/400,000
= 0.3
CM = 0.3 * (.78 * 400,000)
= $93,600
A company produces a single product. Variable production costs are $13 per unit and variable selling and administrative expenses are $15 per unit. Fixed manufacturing overhead totals $42,000 and fixed selling and administration expenses total $32,000. Assuming a beginning inventory of zero, production of 14,500 units and sales of 12,200 units, the dollar value of the ending inventory under variable costing would be:
$29,900
Units in ending inventory = 0 units + 14,500 units – 12,200 units
= 2,300 units
Value of ending inventory under variable costing = 2,300 * $13
= $29,900
In a process costing system, if a company experiences a significant increase in the percentage of completion of its ending work in process inventory from one period to the next, which of the following effects is most likely to occur?
A) The cost per equivalent unit for direct materials will increase, but the cost per equivalent unit for conversion costs will decrease.
B) The total costs assigned to finished goods will decrease, leading to lower operating income.
C) The allocation of costs to ending work in process inventory will increase, affecting the overall cost of goods manufactured.
D) The company will report a higher total cost for direct materials compared to conversion costs.
C) The allocation of costs to ending work in process inventory will increase, affecting the overall cost of goods manufactured.
Quartz Dynamics operates a weighted-average process costing system. The first processing department's operating data for the month of August are provided below:
Beginning work in process inventory: 18,000 units
Started into production during August: 82,000 units
Finished and transferred out during August: 78,000 units
Ending work in process inventory: 22,000 units
Additionally, the units in ending work in process inventory were 40% complete with respect to conversion. According to the company's records, the conversion cost in beginning work in process inventory was $120,000 at the start of August. Throughout the month, additional conversion costs of $650,000 were incurred in the department.
What was the cost per equivalent unit for conversion costs for the month of August? Round to 2 decimal places.
$8.87
Equivalent Units of Production = 78,000 + (22,000 * .4)
= 86,800
Total Conversion Costs = $120,000 + $650,000
= $770,000
Cost per Equivalent Unit = $770,000/86,800
= $8.87
ABC Company produces smartphones that sell for $500 each. The company incurs direct material costs of $200 and direct labor costs of $50 per smartphone. Additionally, ABC has two activities: Assembly, which is applied at the rate of $10 per labor hour, and Testing, which is applied at the rate of $30 per batch. Last month, ABC produced 800 smartphones, using 2,000 labor hours in 50 batches.
What is the manufacturing cost for one smartphone? Round to 2 decimals.
$276.88
Assembly: 2,000 labor hours * $10 = $20,000
Testing: 50 batches * $30 = $1,500
Total Manufacturing Cost = $1,500 + $20,000 + $200(800) + $50(800)
= $221,500
Unit Manufacturing Cost = $221,500/800
= $276.88
Olivander Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price $ 120
Units in beginning inventory 0
Units produced 8,900
Units sold 8,400
Units in ending inventory 500
Variable costs per unit:
Direct materials $ 38
Direct labor $ 36
Variable manufacturing overhead $ 6
Variable selling and administrative expense $ 9
Fixed costs:
Fixed manufacturing overhead $ 151,300
Fixed selling and administrative expense $ 109,200
Prepare a contribution format income statement for the month using variable costing and determine the Net Operating Income.
Sales ($120 * 8,400) $1,008,000
Variable Expenses:
Variable COGS ($80 * 8,400) 672,000
Variable Selling & Administrative ($9 * 8,400) 75,600
______________________________________________
Contribution Margin 260,400
Fixed Expenses:
Fixed MOH 151,300
Fixed Selling & Administrative 109,200
______________________________________________
Net Operating Income $(100)
Last year, Ocular Corporation's variable costing net operating income was $110,000 and its inventory increased by 4,400 units. Fixed manufacturing overhead cost was $8 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year?
$145,200
MOH deferred in inventory = $8 * 4,400
= $35,200
Variable costing NOI $110,000
Add Fixed MOH Costs deferred in
inventory under absorption costing 35,200
Absorption costing NOI $145,200