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Question 1: At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $6,000. Using the high-low method, the estimated fixed cost element of power costs is?
Variable Cost per machine hour = (12000-6000)/(7000-2000)=$1.2 per Machine Hour
Fixed Cost Element = 12000-(7000*1.2)= $3600
Question 2: Hartley, Inc. has a product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartley’s contribution margin ratio?
Contribution Margin Ration = (200-75)/200= .625 or 62.5%
Question 3: Kemper Company’s direct materials budget shows total cost of direct materials purchases for April $200,000, May $240,000 and June $280,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for June are:
Budgeted Cash Payment = 280000*60% + 240000*40%= $264,000
Question 4: On January 1, Dooley Company has a beginning cash balance of $63,000. During the year, the company expects cash disbursements of $510,000 and cash receipts of $435,000. If Dooley requires an ending cash balance of $60,000, Dooley Company must borrow:
Amount Company must Borrow =(510,000+60000)-(63000+435000)= $72000
MULTIPLE CHOICE
From an internal control standpoint, the asset most susceptible to improper diversion and use is
- Prepaid insurance
- Cash
- Building
- Land
Manufacturing costs that cannot be classified as either direct materials or direct labor are known as
- Period costs
- Nonmanufacturing costs
- Selling and administrative expenses
- Manufacturing overhead
A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n)
- Period cost
- Indirect material
- Direct material
- Miscellaneous expense
Sales are $500,000 and variable costs are $350,000. What is the contribution margin ratio?
- 43%
- 30%
- 70%
- Cannot be determined because amounts are not expressed per unit.
A company desires to sell a sufficient quantity of products to earn a profit of $180,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $360,000, how many units must be sold to earn net income of $180,000?
- 101,250 units
- 67,500 units
- 54,000 units
- 40,500 units
If a check correctly written and paid by the bank for $428 is incorrectly recorded on the company’s books for $482, the appropriate treatment on the bank reconciliation would be to
- Add $54 to the bank’s balance
- Add $54 to the book’s balance
- Deduct $54 from the bank’s balance
- Deduct $428 from the book’s balance
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Hayward Manufacturing Company developed the following data
| Beginning work-in-process inventory | $270,000 |
| Direct materials used | 210,000 |
| Actual overhead | 330,000 |
| Overhead applied | 240,000 |
| Cost of goods manufactured | 360,000 |
| Ending work in process | 450,000 |
Hayward Manufacturing Company’s total manufacturing costs for the period is
- $570,000
- $540,000
- $390,000
- Cannot be determined from the data provided
The increased use of automation and less use of the work force in companies has caused a trend towards an increase in
- Both variable and fixed costs
- Fixed costs and a decrease in variable costs
- Variable costs and a decrease in fixed costs
- Variable costs and no change in fixed costs
When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is
Job cost sheets constitute the subsidiary ledger for the
- Finished Goods Inventory account
- Cost of Goods Sold account
- Work-in-Process Inventory account
- Cost of Goods Manufactured account
In CVP analysis, the term cost
- Includes only manufacturing costs
- Means cost of goods sold
- Includes manufacturing costs plus selling and administrative expenses
- Excludes all fixed manufacturing costs
Which of the following is not a manufacturing cost category?
- Cost of goods sold
- Direct materials
- Direct labor
- Manufacturing overhead
Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $820,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $840,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?
- $840
- $41,000
- $42,000
- $820
For inventoriable costs to become expenses under the matching principle
- The product must be finished and in stock
- The product must be expensed based on its percentage of completion
- The product to which they attach must be sold
- All accounts payable must be settled
From an internal control standpoint, the asset most susceptible to improper diversion and use is