29 Dec Fixed selling and admin

Question 1

(TCO A) Direct material cost is a part of

Conversion Cost NO…. Prime Cost NO.

Conversion Cost YES…. Prime Cost NO.

Conversion Cost YES…. Prime Cost YES.

Conversion Cost NO…. Prime Cost YES.

Question 2

(TCO A) Wages paid to an assembly line worker in a factory are a

Prime Cost YES…..Conversion Cost YES.

Prime Cost YES…..Conversion Cost NO.

Prime Cost NO….Conversion Cost NO.

Prime Cost NO…..Conversion Cost YES.

Question 3

(TCO A) Property taxes on a company’s factory building would be classified as a(n)

variable cost.

opportunity cost.

period cost.

product cost.

Question 4

(TCO A) Depreciation of office buildings and office equipment is also known as

variable costs.

conversion costs.

period costs.

product costs.

Question 5

(TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n)

period cost.

incremental cost.

opportunity cost.

None of the above

Question 6

(TCO B) A job-order cost system is employed in those situations when

many different products, jobs, or batches of production are being produced each period.

manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.

the product moves from department to department before being completed.

the unit cost of production is computed by dividing the total production costs by the number of units produced.

Question 7

(TCO B) Which of the following statements about the process-costing system is/are correct?

In a process-costing system, each processing department has a work-in-process account.

In a process-costing system, equivalent units are separately computed for materials and for conversion costs.

In a process-costing system, overhead can be under- or over-applied just as in job-order costing.

All of the statements above are correct.

See Chapter 4.

Question 8

(TCO C) The contribution margin equals

sales – expenses.

sales – variable costs.

sales – cost of goods sold.

sales – fixed costs.

Question 9

(TCO C) To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following?

Variable expense per unit

Variable expense per unit/selling price per unit

Fixed expense per unit

(Selling price per unit – variable expense per unit) / selling price per unit

Question 10

(TCO D) In an income statement prepared using the variable costing method, fixed manufacturing overhead would

not be used.

be used in the computation of the contribution margin.

be used in the computation of net operating income but not in the computation of the contribution margin.

be treated the same as variable manufacturing overhead.

Question 11

15 / 15 pts

(TCO A) The following data (in thousands of dollars) have been taken from the accounting records of ABC Corporation for the just-completed year.

Sales

$920

Purchases of raw materials

$215

Direct labor

$170

Manufacturing overhead

$275

Administrative expenses

$180

Selling expenses

$140

Raw materials inventory, beginning

$100

Raw materials inventory, ending

$65

Work-in-process inventory, beginning

$75

Work-in-process inventory, ending

$35

Finished goods inventory, beginning

$130

Finished goods inventory, ending

$165

REQUIRED: Prepare a Schedule of Cost of Goods Manufactured Statement in the text box below.

Question 12

20 / 20 pts

(TCO B) The following company manufactures a product that goes through three processing departments. Information relating to activity in the first department during a given month is provided below.

Percentage Completed

Units

Materials

Conversion

WIP, Jan 1

140,000

65%

45%

WIP, Jan 31

120,000

75%

65%

The department started 580,000 units into production during the month and transferred 600,000 completed units to the next department.

REQUIRED: Compute the total equivalent units of production for materials and conversion costs for the given month, assuming that the company uses the weighted-average method of accounting for units and costs.

Question 13

25 / 25 pts

(TCO C) Drake Company’s income statement for the most recent year appears below.

Sales (45,000 units) $1,350,000

Less: variable expenses 750,000

Contribution margin 600,000

Less: fixed expenses 375,000

Net operating income $225,000

REQUIRED:

a. Calculate the unit contribution margin in dollars.

b. Calculate the break-even point in dollars.

c. If the company desires a net operating income of $290,000, how many units must it sell?

Question 14

(TCO D) The following Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price: $ 175

Units Data:

Units in beginning inventory 0

Units produced 9,500

Units sold 8,000

Units in ending Inventory 1,500

Variable costs per unit:

Direct materials $ 55

Direct labor $ 38

Variable manufacturing overhead $ 2

Variable selling and admin $ 10

Fixed costs:

Fixed manufacturing overhead $ 300,000

Fixed selling and admin $ 125,000

REQUIRED:

a. What is the unit product cost for the month under variable costing?

b. What is the unit product cost for the month under absorption costing?

c. Prepare an income statement for the month using the variable costing method.

d. Prepare an income statement for the month using the absorption costing method.