Quiz 4

Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is
$10, unit variable costs are $7, and total fixed costs are $3,300. What is the breakeven point in sales
dollars?

Answer: $11,000

Fixed Company produces a single product selling for $30 per unit. Variable costs are $12 per unit and
total fixed costs are $4,000. What is the contribution margin ratio?

Answer: 0.60

The breakeven point represents the minimum number of units a company must sell before it earns a
profit.

Answer: True

Fairfield Company management has budgeted the following amounts for its next fiscal year: Total fixed
expenses- $832,500; sale price per unit- $40; variable expenses per unit- $25. What will happen to the
breakeven point in units if Fairfield can reduce fixed expenses by $22,500?

Answer: The breakeven point will decrease by 1,500 units

If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60.

Answer: True

Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is
$10, unit variable costs are $7, and total fixed costs are $3,300. How many dog treats must Canine
Company sell to breakeven?

Answer: 1,100

A 15% increase in production will result in a 15% increase in:

Answer: total variable costs

The variable cost per unit is assumed to be constant within a particular relevant range of activity.

Answer: True

Quiz 3

Traditional costing systems can distort unit manufacturing costs and product profitability when many
products are produced and the various products have significantly different production processes.

Answer: True
An activity- based system improves the allocation of which of the following manufacturing costs?

Answer: indirect manufacturing costs

Activity-based costing minimizes cost distortions because:

Answer: activity-based costing allocates costs based on cause and effect

Business managers can use activity-based costing data to assist them in pricing and product mix
decisions and in cost management.

Answer: True

A traditional cost allocations system tends to misallocate manufacturing costs because:

Answer: indirect manufacturing costs are misallocated

Activity-based costing focuses on the activities that cause costs to be incurred.

Answer: True

With increased competition, managers need more accurate estimates of product costs to set prices and
to identify the most profitable products.

Answer: True

Activity-based costing systems and traditional costing systems tend to always identify the same products
as being the most profitable.

Answer: False

Crump Manufacturing has provided the following info regarding its activity-based costing system:

Purchasing department costs are allocated based on purchase orders and the cost allocation
rate is $52 per purchase order.

Assembly department costs are allocated based on the number of machine hours and the cost
allocation rate is $27 per machine hour.

Inspection department costs are allocated based on the number of inspection hours and the
allocation rate is $39 per inspection hour.

Each unit produced has a direct materials cost of $70 and a direct labor cost of $65. Crump has an order
for 500 units which will require 40 purchase orders, 750 machine hours and 50 inspection hours. What is
Crump’s operating income from the order if the units are sold for $225 each?

Answer: $20,720
Quiz 2

The entry to record the purchase of materials on account using a job order costing system would include
a:

Answer: debit to materials inventory

Which of the following companies would NOT use job order costing? (a lawn maintenance company, a
legal firm, an auto repair shop, a beverage manufacturer)

Answer: a beverage manufacturer

Accounting firms, building contractors, and healthcare providers are companies that use job order
costing.

Answer: True

Over allocated overhead occurs when the manufacturing overhead allocated to work in process
inventory is less than the amount actually incurred.

Answer: False

Wall Corporation’s selected cost data for July is shown below:

Cost of goods manufactured: $420,000

Work in process inventory, July 1: $100,000

Work in process inventory, July 31: $120,00

Direct materials used: $50,000

Manufacturing overhead is allocated at 50% of direct labor cost. What are the total manufacturing costs
for July?

Answer: $440,000

The records at Smith and Jones Company show Job. No. 110 charged with $11,000 of directs materials
and $12,500 of direct labor. Smith and Jones Company allocated manufacturing overhead at 85% of
direct labor cost. What is the total cost of Job No. 110?

Answer: $34,125

When materials are requisitioned for a job, the materials inventory account is debited.

Answer: False

Marion Company used a job order costing system. The work in process inventory on December 31, 2009,
consisted of Job No. 175 with a balance of $53,400. Job No. 175 has been charged with manufacturing
overhead of $16,000. Marion allocates manufacturing overhead at a rate of 80% of direct labor cost.
What was the amount of direct materials charged to Job No. 175?

Answer: $17,400

Actual manufacturing overhead for 2009 amounts to $102, 500, allocated manufacturing overhead for
2009 amounts to $98,700. By how much is manufacturing overhead over/under allocated?

Answer: 3,800 under allocated

Quiz 1

Period Costs do NOT include which of the following

Factory janitorial costs

Which of the following is an example of direct labor

Wages of assembly line personnel

The following information pertain to Bright Toy Company’s operating activities for 2009. The company
sells light box toys and sold 10,000 units in 2009.

 Purchases-$126,000
 Selling and Administrative Expenses 90,000
 Merchandise inventory 1/1/2009-14,000
 Merchandise inventory 12/31/2009-10,000
 Sales Revenue- 250,000
What is the cost of goods sold for 2009?

130,000

The following information pertains to bright toy Company’s operating activities for 2009. The company
sells light box toys and sold 10,000 units in 2009.

 Purchases-$126,000
 Selling and Administrative Expenses 90,000
 Merchandise inventory 1/1/2009-14,000
 Merchandise inventory 12/31/2009-10,000
 Sales Revenue- 250,000
What is the cost of goods available for sale for 2009?
 140,000

Which of the following statements about managerial accounting is correct?

Managerial accounting reports provide detailed information on parts of a company

The following information pertains to Bright Toy Company’s operating activities for 2009. The company
sells light box toys and sold 10,000 units in 2009.

 Purchases-$126,000
 Selling and Administrative Expenses 90,000
 Merchandise inventory 1/1/2009-14,000
 Merchandise inventory 12/31/2009-10,000
 Sales Revenue- 250,000
What is the gross profit for 2009?

120,000

Which of the following is NOT an objective of management accounting?

To provide information to shareholders to assist them with their investment decisions

The following information pertains to Bright Toy Company’s operating activities for 2009. The Company
sells light box toys and sold 10,000 units in 2009.

 Purchases-$126,000
 Selling and Administrative Expenses 90,000
 Merchandise inventory 1/1/2009-14,000
 Merchandise inventory 12/31/2009-10,000
 Sales Revenue- 250,000
What is the operating income for 2009?

30,000

A philosophy of delighting customers by providing them with superior products and services. Requires
improving quality and eliminating defects and waste: total quality management
Use of the internet for such business functions as sales and customer service. Enables companies to
reach thousands of customers around the world: E-Commerce

Software systems that integrate all of a company’s world wide functions, departments, and data into a
single system: ERP

A system in which a company produces just in time to satisfy needs. Suppliers deliver materials just in
time to begin production, and finished units are completed just in time for delivery to customers: Just-
in-time (JIT)