Cost Midterm 1&2 RVW Flashcards by Sydney Hanna

Which of the following statements is true regarding indirect costs?

What is determined an indirect cost is often based on a cost-benefit analysis.

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Indirect costs are not traced to cost objects for one of two reasons. One reason is that a company may not have

the technical ability to trace indirect costs to cost objects.

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Which of the following is the process of tracing direct costs to a cost object or allocating indirect costs to a cost object?

Cost Assignment

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Which of the following is an example of a variable cost?

Sales Commission

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Which of the following is an example of a mixed cost?

Utilities

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Product costs are often called which of the following?

Inventoriable Costs

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When inventory is sold, then product costs are expensed as which of the following?

Cost of Goods Sold

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Which of the following is a system that integrates applications from throughout the functional areas of the business (such as manufacturing, accounting, finance, and human resources) into one system?

Enterprise resource management

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Structured datasets that can be accessed by authorized users via a computer system or network is a(n)

Database

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What are examples of data-analysis software tools?

Excel, Power BI, and Tableau

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Based on Lab 2.2 Linking Tables in Excel Using VLOOKUP Command and Pivot Tables, you learned about two different types of functions in the VLOOKUP, True or False. Which of the following describes the accurate difference between a True and a False VLOOKUP?

FALSE requires an exact match

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Based on Lab 2.3 Linking Tables in Excel Using an Internal Data Model, given the figure below, how do you compute the profitability of each job?

Sum of Revenue Total − Sum of DL Charged − Sum of DM Charged − Sum of OH Charged = Profitability by Job

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Classify each of the following costs of services as direct, indirect, selling or general and administrative for a consulting company, where the cost object is the consulting engagement:
A:Marketing or Bidding on new consulting jobs
B: Wages paid to consultants performing consulting work
C: Human resources department to manage existing and hire new consultants
D: Office maintenance manager salary
E: Supplies used by consultants on consulting job
F: Wages paid for administrative staff to directly support consulting work

A: Selling Cost
B: Direct Cost
C: Indirect Cost
D: General and Administrative Cost
E: Direct Cost
F: Direct Cost

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A company has two departments: Department A and Department B. Expected manufacturing overhead in Department A is $770,000, and management has decided to allocate overhead for this department using an application base of 33,000 direct labor hours. Expected manufacturing overhead in Department B is $630,000, and management has decided to allocate overhead for this department using an application base of 65,000 direct labor hours. What are the predetermined overhead rates for each department?

Depart A = $23.33; Department B = $9.69

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A company has two departments: Department A and Department B. The predetermined overhead rates for each department are $18.00 and $32.20, respectively. The company has a job that requires 19 direct labor hours in Department A and 6 direct labor hours in Department B. How much manufacturing overhead will be applied to this job?

$535.20

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A company uses a normal costing system and applies overhead at a rate of $5 per direct labor hour. During the year, the company had the following data for costs of Job A:

Cost of raw material $570
Direct labor cost per hour
$38 per hour
Hours used in production 33 hours
Predetermined overhead rate $ 5 per direct labor hour

What is the total product cost of Job A?

$1,989

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Which of the following involves a company charging customers a certain percentage above their costs for goods and services?

Cost-plus pricing

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Which of the following would be most suitable for a job-costing system?

Medical Procedure

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What are the three major components of a product or service cost?

Direct materials, Direct Labor, and Applied MOH

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What term represents the effort of the workers who are involved with the production process of a product or job but who don’t provide touch labor?

Indirect Labor

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A good rule of thumb is that if the cost occurs in the factory, it is generally a(n)

Product Cost

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Which of the following is a temporary account to record the cost of jobs as they are being completed?

Work-in-process

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Costs are calculated by summing actual direct materials, actual direct labor, and actual manufacturing overhead using which approach?

Actual Costing

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One way that underapplied or overapplied overhead can be reconciled at the end of reporting period is to adjust the differences directly to which account?

Cost of Goods Sold

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Manufacturing overhead is overapplied when which of the following is true?

When a company has applied more overhead to inventory than is accurate.

Solar Nexus underapplied overhead by $43,250 in May. The following information was compiled from Solar Nexus’s accounting information system: - Overhead application base: Machine hours - Estimated machine hours: 40,000 - Actual overhead: $432,500 - Estimated overhead: $346,000 What was the actual hours of production?

45,000 1. Actual Overhead - Amount Underapplied 2. Applied overhead / (Estimated overhead /Estimated Hours)

Quest API applies manufacturing overhead at a rate of $2.75 per machine hour. Total production costs per Quest API’s normal costing system were $194,000 for November. Direct materials and direct labor costs were $65,000 and $85,000, respectively. What was the # of machine hours?

16,000 2.75(x) +150,000 = 194,000 x= 16,000

Andromics determined that it must make an adjusting entry to correct a $16,000 underapplication of manufacturing overhead. Andromics had the following ending balances: -Raw materials inventory $6,500 -Work-in-process inventory $175,000 -Finished goods inventory $135,000 -Cost of goods sold $490,000 Assuming that Andromics has determined that the amount of the correction is material and cannot all be written off to cost of goods sold, what journal adjusting entry must be made to correct the underapplication?

Dr. Work-In-Process 3,500 Finished Goods Inventory 2,700 Cost of Goods Sold 9,800 Cr. Manufacturing Overhead 16,000

Accounting, human resources, custodial services, and employee cafeterias are all included under which departments?

Support departments

Which of the following is true regarding allocating support department costs to production departments?

Allocating support department costs to production departments allows companies to identify and understand the full cost of providing goods and services.

Which of the following distinguishes between the fixed and variable costs of the support department, and allocates fixed and variable costs separately?

Dual-rate method

In the single-rate method, while allocation rates are determined using budgeted costs and allocation bases, the cost allocation is

a function of the actual usage of resources.

Under which method of allocating support-department costs to production departments are support departments ranked?

Step-down method

Which method of allocating support-department costs to production departments is theoretically the most accurate?

Reciprocal method

A company has two support departments, machine maintenance (MM) and information technology (IT). Machine maintenance costs for the year total $350,000 and are allocated according to the number of budgeted machine hours expected for each department. The molding department uses 10,000 hours and the finishing department uses 1,000. Using the direct method, what amount of machine maintenance costs will be allocated to the Finishing department?

$360,000×(1,000 machine hours/11,000 total hours)=$32,727.27

A company has two support departments, machine maintenance (MM) and information technology (IT). Machine maintenance costs for the year total $350,000 and are allocated according to the number of budgeted machine hours expected for each department.The molding department uses 10,000 hours and the finishing department uses 1,000. Using the step-down method, what amount of machine maintenance costs will be allocated to the Molding department if machine maintenance allocates prior to information technology?

$350,000×(10,000 machine hours/11,000 total hours)=$318,181.82

A company has two support departments, machine maintenance (MM) and information technology (IT). Machine maintenance costs for the year total $1,120,000 and are allocated according to the number of budgeted machine hours expected for each department. IT costs for the year total $56,000 and are allocated based on employee head count. Costs to allocate to IT are $56,000, 10 employees were used in MM out 160 total. 20,000 hours were used in the molding department out of the 50,000 total. Using the step-down method, what amount of machine maintenance costs will be allocated to the Molding department if information technology allocates prior to machine maintenance?

Total costs to allocate from machine maintenance: $1,120,000 MM costs + $3,500 allocated from Information Technology to MM $56,000 × (10 MM employees/160 total employees) = $1,123,500 Allocation to Molding: $1,123,500×(20,000 machine hours/50,000 total hours) = $449,400

Which of the following is true regarding why a company may choose to use the direct method versus the reciprocal method?

The company realizes that it is not worth the cost or trouble to obtain more accurate cost data.

Which of the following are the products that result from a single production process?

Joint products

Which of the following are production costs that are directly traceable to individual production lines rather than shared by multiple product lines?

Separable costs

A company produces custom tote bags for firms to use in advertising. The company begins all custom projects with the production of a single size white tote. Which of the following is an example of a joint cost for the tote production company?

Production of the single size white tote

Which of the following is a method of allocating joint costs such that all product lines are allocated joint costs on the basis of a consistent physical measurement such as quantity, weight, length, or volume?

Physical units method

Among a company’s financial information, you are given several pieces of information including that the company had taxes of $370,000, manufacturing overhead of $530,000, cost of goods sold of $740,000, revenue of $2,900,000. What is the company’s gross profit?

$2,160,000 $2,900,000 − $740,000 = $2,160,000

Biochem incurs $180,000 in joint costs to produce 34,000 gallons of RX1 and 46,000 gallons of RX2. RX1 is sold for $4.00 per gallon, while RX2 is sold for $6.00 per gallon. Biochem allocates joint costs using the physical units method. Determine the reported profit per gallon for RX1.

$1.75

Tempo Company produces three products from a joint process. The three products are sold after further processing as there is no market for any of the products at the split-off point. Joint costs per batch are $315,000. Other product information is shown below. If Tempo uses the net realizable value method of allocating joint costs, how much of the joint costs will be allocated to each unit of Product C?

Product A: 20,000 × ($5.00- $0.70) =$86,000 Product: 30,000 × ($6.00- $3.00) = 90,000 Product C: 50,000 × ($7.00- $1.72) = 264,000 Total= $ 440,000 Product C allocation $264,000 ÷ $440,000 = 60% $315,000 × 60% = $189,000 Unit joint cost: $189,000/50,000 = $ 3.78

Which statement is true regarding job-order costing and process costing?

Process costing tracks the same production costs as a job-order costing system.

Process costing accumulates costs by

manufacturing processes.

Which of the following is true regarding partially completed products?

Accounting standards require that costs be assigned to the income statements in the period in which they occur and to balance sheets as of a given date.

A company has one product and produced 43,000 units this year. Among its costs, the company has the following: research and development of $540,000; total production costs of $420,000; total revenue of $1,000,000; taxes of $59,000. What is the company’s cost per unit?

$9.77 420,000/43000

How many steps are required for process costing?

Which of the following is a true statement regarding the weighted-average method?

The weighted-average method focuses on equivalent units and costs that are completed to date, or at the end of the period.

What is the final step in accounting for process costing?

Assigning costs to completed and in-process units

What is the primary advantage of using the FIFO method instead of the weighted-average method for process costing?

Changes in production costs between periods are more apparent using FIFO.

In times of inflation, compared to the weighted-average method, the FIFO method will result in

higher profits because lower-cost units will be the first to be expensed as cost of goods sold.

A company had 10,000 units of work-in-process inventory on June 1. The company started 15,000 units during the month of June and transferred 17,000 of those units out during the month. What was the company’s work-in-process inventory on June 30?

8,000

In January, Pinnacle Paintball company has 500 units in beginning work-in-process (BWIP), and the company began production on an additional 1,300 units during the month. Ending work-in-process (EWIP) was 250 units. Pinnacle uses the weighted-average method of process costing. How many units were completed during January?

1,550

Brite Candles Incorporated used the first in, first out (FIFO) method of process costing and calculated that for December, the company had 20,050 equivalent units for direct materials and 23,000 equivalent units for conversion costs. $220,000 of Direct Materials costs were added in December, and $120,800 of conversion costs were added. A) What is the December cost per equivalent unit for DM? B) What is the December cost per equivalent unit for conversion costs?

Direct materials (DM): $10.97 (220,000 current direct materials (DM) ÷ 20,050 equivalent units (EU)) Conversion cost (CC): $5.25 (120,800 current conversion cost (CC) ÷ 23,000 equivalent units (EU))

Which of the following is a sub-unit in which the manager is responsible for both the costs and the revenues (sales) associated with that sub-unit?

Profit center

Managers in a sub-unit of a company are evaluated based on their ability to generate returns on invested funds. The sub-unit they are in is most likely which of the following?

An investment center

Which of the following is the profit earned for each dollar of sales?

Return on sales

Which of the following is the after-tax average cost of all long-term investments?

Weighted-average cost of capital

A company has profit $590,000 on sales of $5,000,000. What is the company’s return on sales?

11.80%

Which of the following is the lowest acceptable amount of earnings from an organization’s investment in assets?

Minimum rate of return

Which of the following is a transfer price based on the prices that outside suppliers are currently charging?

Market-based transfer price

ShopTime is a (fictitious) multinational retailer that sells groceries and home goods. Corporate uses EVA to evaluate the financial performance of its regions. Use the data for ShopTime Asia, shown below, to calculate the EVA for this business unit. Shoptime-Asia Total Assets: $75,000,000 Total Liabilities: $60,000,000 Current Liabilities: $48,000,000 Operating Profit (before tax): $22,000,000 Operating Profit (after tax): $17,000,000 Weighted-average Cost of Captial: 12% What is the economic value added (EVA) for Shoptime Asia?

EVA = After tax operating income − (WACC × (Total Assets − Current Liabilities) EVA = $17,000,000 − (0.12 × ($75,000,000 − $48,000,000) EVA = $13,760,000

A company’s recent operating results are shown below. Operating Results Sales $ 4,370,000.00 Expenses $ 2,728,000.00 Operating income $ 1,642,000.00 Total assets $ 9,818,000.00 Total liabilities $ 7,663,000.00 The company has set a target return on investment (ROI) of 18%. Management is evaluating the following two plans. Plan 1: Invest $1,200,000 in a new location that will produce $3,000,000 in additional sales each year. Operating expenses will increase by $2,781,600 each year. Plan 2: Reduce company costs by improving technology in the manufacturing process. An equipment investment of $730,000 will reduce annual operating costs by $315,000. A) What would be the ROI for Plan 1? B) What would be the ROI for Plan 2 C)Which plan would result in the company having an ROI at or above the targeted 18%?

A) 16.89% B) 18.55% C) Plan 2 ROI = Operating Income ÷ Total Assets

Cost Midterm 1&2 RVW Flashcards

(66 cards)