28 Dec •actual costs

ACC650 Managerial Accounting

Week 7 Quiz

•Consider the following comments about absorption- and variable-costing income statements:

I. A variable-costing income statement discloses a firm’s contribution margin.

II. Cost of goods sold on an absorption-costing income statement includes fixed costs.

III. The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements.

Which of the above statements is (are) true?

•I only.

•II only.

•I and II.

•II and III.

•I, II, and III.

•Vega Enterprises has computed the following unit costs for the year just ended:

Direct material used $12

Direct labor 18

Variable manufacturing overhead 25

Fixed manufacturing overhead 29

Variable selling and administrative cost 10

Fixed selling and administrative cost 17

Under absorption costing, each unit of the company’s inventory would be carried at:

•$55.

•$35.

•$65.

•None of the answers is correct.

•$84.

•All of the following are inventoried under absorption costing except:

•direct labor

•raw materials used in production.

•utilities cost consumed in manufacturing.

•sales commissions.

•machine lubricant used in production.

•The point in a joint production process where each individual product becomes separately identifiable is commonly called the:

•decision point.

•separation point.

•individual product point.

•split-off point.

•joint product point.

•Montana Industries has computed the following unit costs for the year just ended:

Variable manufacturing overhead $85

Fixed manufacturing overhead 20

Variable selling and administrative cost 18

Fixed selling and administrative cost 11

Which of the following choices correctly depict amounts included in the per-unit cost of inventory under variable costing and absorption costing?

•Variable, $85; absorption, $105.

•Variable, $85; absorption, $116.

•Variable, $103; absorption, $105.

•Variable, $103; absorption, $116.

•None of the answers is correct.

•Which of the following statements pertain to both variable costing and absorption costing?

•The income statement discloses the amount of gross margin generated during the reporting period.

•Fixed selling and administrative expenses are treated in the same manner as fixed manufacturing overhead.

•Both variable and absorption costing can be used for external financial reporting.

•Variable selling costs are written-off as expenses of the accounting period.

•Fixed manufacturing overhead is attached to each unit produced.

•Which of the following would be considered a service department for an airline?

•Maintenance.

•Information Systems.

•Purchasing.

•Flight Catering.

•All of the answers are correct.

•Which of the following statements pertain to variable costing?

•Fixed manufacturing overhead is attached to each unit produced.

•The income statement not does disclose a company’s contribution margin.

•This method must be used for external financial reporting.

•Variable manufacturing overhead becomes part of a unit’s cost.

•None of the answers is correct.

•Which of the following methods fully recognizes the fact that some service departments provide service to other service departments?

•Direct method.

•Indirect method.

•Step-down method.

•Reciprocal method.

•Dual-cost allocation method.

•Under dual-cost allocation, fixed costs are allocated on the basis of a user department’s:

•long-run usage of a service department’s output.

•short-run usage of a service department’s output.

•long-run usage and short-run usage of a service department’s output.

•neither long-run usage nor short-run usage of a service department’s output.

•either long-run usage or short-run usage of a service department’s output.

•Which of the following methods would be of little use when allocating service department costs to production departments?

•The reciprocal method.

•The net-realizable-value method.

•The dual-cost allocation method.

•The direct method.

•The step-down method.

•For external-reporting purposes, generally accepted accounting principles require that net income be based on:

•absorption costing.

•variable costing.

•direct costing.

•semivariable costing.

•activity-based costing.

•Which of the following product-costing systems is/are required for tax purposes?

•Variable costing.

•Either absorption or variable costing.

•Throughput costing.

•Absorption costing.

•Either absorption, variable costing, or throughput costing.

• Tennison Corporation has two service departments (Maintenance and Human Resources) and three production departments (Machining, Assembly, and Finishing). Maintenance is the larger service department and Assembly is the largest production department. The two service departments service each other as well as the three producing departments. On the basis of this information, which of the following cost allocations would not occur under the direct method?

•Human Resources cost would be allocated to Finishing.

•Machining cost would be allocated to Assembly.

•Both machining cost would be allocated to Assembly and maintenance cost would be allocated to Human Resources.

•Maintenance cost would be allocated to Finishing.

•Maintenance cost would be allocated to Human Resources.

•Which of the following statements about joint-cost allocation is false?

•Joint-cost allocation is useful in deciding whether to further process a product after split-off.

•Joint-cost allocation is useful in making a profit determination about individual joint products.

•Joint-cost allocation is helpful in inventory valuation.

•Joint-cost allocation can be based on the number of units produced.

•Joint-cost allocation can be accomplished by using several different methods that focus on sales value and product “worth.”

•Which of the following situations would cause variable-costing income to be lower than absorption-costing income?

•Units sold equaled 39,000 and units produced equaled 42,000.

•Units sold and units produced were both 42,000.

•Units sold equaled 55,000 and units produced equaled 49,000.

•Sales prices decreased by $7 per unit during the accounting period.

•Selling expenses increased by 10% during the accounting period.

• The joint-cost allocation method that recognizes the revenues at split-off but does not consider any further processing costs is the:

•relative-sales-value method.

•net-realizable-value method.

•physical-units method.

•reciprocal-accounting method

•gross margin at split-off method.

•The underlying difference between absorption costing and variable costing lies in the treatment of:

•direct labor.

•variable manufacturing overhead.

•fixed manufacturing overhead.

•variable selling and administrative expenses.

•fixed selling and administrative expenses.

•When allocating service department costs, companies should use:

•a rate that is based on matrix theory.

•actual costs rather than budgeted costs, and a rate that combines variable and fixed costs.

•budgeted costs rather than actual costs, and a rate that combines variable and fixed costs.

•budgeted costs rather than actual costs, and separate rates for variable and fixed costs.

•actual costs rather than budgeted costs, and separate rates for variable and fixed costs.

•Hancock Machining manufactures A, B, and C, all of which are joint products, and D, which is classified as a by-product. If joint manufacturing costs amount to $450,000 and the company is using a popular accounting method, the firm will:

•allocate $450,000 among A, B, and C.

•allocate $450,000 among A, B, C, and D.

•increase $450,000 by the net realizable value of D and then allocate the total among A, B, and C.

•decrease $450,000 by the net realizable value of D and then allocate the total among A, B, and C.

•decrease $450,000 by the net realizable value of D and then allocate the total among A, B, C, and D.