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managerial accounting
Questions and Answers of
Managerial Accounting
Albert Company provided the following information:Common fixed cost totaled $46,000. Albert allocates common fixed cost to product 1 and product 2 on the basis of sales. If product 2 is dropped,
Many companies use absorption costing because it a. accords with GAAP. b. is most useful for management decision making. c. provides the contribution margin.
A segment could be which of the following? a. Product b. Customer type c. Geographic region d. All of the above e. None of the above
Suppose that a material has a lead time of three days and that the average usage of the material is 12 units per day. The maximum usage is 15 units per day. What is the safety stock? a.
Suppose that a material has a lead time of three days and that the average usage of the material is 12 units per day. What is the reorder point? a. 12 b. 15 c.
Which of the following is a reason for carrying inventory? a. To balance setup and carrying costs b. To satisfy customer demand c. To avoid shutting down
The EOQ for Part B-22 is 2,500 units, and four orders are placed each year. The total annual ordering cost is $1,200.Which of the following is true? a. The total carrying cost is
In a segmented income statement, which of the following statements is true? a. Segment margin is greater than contribution margin. b. Common fixed expenses must be allocated
A company shows the following unit costs for its product: Direct materials $40 Direct
What are value-added activities? Value-added costs?
What is activity-based product costing?
Dykes, Inc. has the following two activities: (1) Retesting reworked products, cost: $160,000. The retesting cost of the most efficient competitor is $50,000. (2) Welding subassemblies, cost:
Refer to Cornerstone Exercise 7-29. The following activity data have been collected: Cutting
An example of an environmental prevention cost is a. restoring land to its natural state. b. developing environmental management systems. c. licensing facilities
An example of a societal cost is a. maintaining pollution equipment. b. recycling scrap. c. disposing of toxic materials. d. medical care due to
An example of an environmental internal failure cost is a. cleaning up oil spills. b. damaging ecosystems from solid waste disposal. c. verifying supplier
Which of the following represents environmental detection costs? a. Developing environmental performance measures b. Recycling products c. Disposing of toxic
Which of the following is an external failure cost (quality)? a. Lost market share b. Retesting c. Rework d. Design reviews e. All of the
Which of the following is an internal failure cost (quality)? a. Supplier evaluation and selection b. Scrapped units c. Packaging inspection d. Product
Which of the following is an appraisal cost (quality)? a. Design reviews b. Quality reporting c. Manager of an inspection team d. Warranties
Which of the following is a quality prevention cost? a. Quality planning b. Supplier evaluation and selection c. Quality audits d. Field trials
Striving to produce the same activity output with lower costs for the inputused is concerned with which of the following dimensions of activity performance? a. Quality b.
Thom Company produces 100 units in 5 hours. The velocity for Thom a. is 20 units per hour. b. is 5 hours per unit. c. is 3 minutes per unit. d. is 1
Thom Company produces 100 units in 5 hours. The cycle time for Thom a. is 20 units per hour. b. is 5 hours per unit. c. is 3 minutes per unit. d. is 1
The cost of inspecting incoming parts is most likely to be reduced by a. activity sharing. b. activity selection. c. activity reduction. d. activity
Suppose that a company is spending $50,000 per year for inspecting, $40,000 for purchasing, and $60,000 for reworking products. A good estimate of nonvalue-added costs would be a.
Which of the following are nonvalue-added activities? a. Moving goods b. Storing goods c. Inspecting finished goods d. Reworking a defective
A forklift and its driver used for moving materials are examples of a. activity outputs. b. activity output measures. c. resource drivers. d. activity
Lambert Company has two suppliers: Deming and Leming. The cost of warranty work due to defective components is $2,000,000. The total units repaired under warranty average 100,000, of which 90,000
This year, Lambert Company will ship 1,500,000 pounds of goods to customers at a cost of $1,200,000. If a customer orders 10,000 pounds an produces $200,000 of revenue (total revenue is $20 million),
Which of the following is a true statement about activity-based supplier costing? a. The cost of a supplier is the purchase price of the components or materials acquired. b.
Which of the following is a true statement about activity-based customer costing? a. Customer diversity requires multiple drivers to trace costs accurately to customers. b.
Assume that the moving activity has an expected cost of $80,000. Expected direct labor hours are 20,000, and expected number of moves is 40,000. The best activity rate for moving is a. $4
The receiving department employs one worker, who spends 75 percent of his time on the receiving activity and 25 percent of his time on inspecting products. His salary is $40,000. The amount of cost
Interview questions are asked to determine a. what activities are being performed. b. who performs the activities. c. the relative amount of time spent on each
The second stage of ABC entails the assignment of a. resource costs to departments. b. activity costs to products or customers. c. resource costs to a plantwide
The first stage of ABC entails the assignment of a. resource costs to departments. b. activity costs to products or customers. c. resource costs to a plantwide
Refer to the data for Multiple-Choice Exercise 7-3. Suppose that machine hours are used to assign all overhead costs to the two products. Select the best answer from the following: a.
Consider the information given on two products and their activity usage:The consumption ratios for the setup activity for each product are a. 0.167; 0.833. b. 0.333;
Consider the information given on two products and their activity usage:
Which of the following is a nonunit-level driver? a. Direct labor hours b. Machine hours c. Setup hours d. Direct materials e. Assembly
A unit-level driver is consumed by a product each and every time that a. a batch of products is produced. b. a purchase order is issued. c. a unit is
Refer to the data in Cornerstone Exercise 6-29.Required:Prepare a cost of production report.Data From Exercise 6-29:Bebida Inc. produces soft drinks. Mixing is the first department and its output is
Transferred-in goods are treated by the receiving department as a. units started for the period. b. a material added at the beginning of the process. c. a category
With nonuniform inputs, the cost of EWIP is calculated by a. multiplying the unit cost in each input category by the equivalent units of each input found in EWIP. b.
When materials are added either at the beginning or the end of the process, a unit cost should be calculated for the a. materials and labor categories. b. materials category
For August, Lanny Company had 25,000 units in BWIP, 40 percent complete, with costs equal to $36,000. During August, the cost incurred was $450,000. Using the FIFO method, Lanny had 125,000
Assume for August that Faust Manufacturing has manufacturing costs equal to $80,000. During August, the cost incurred was $720,000. Using the FIFO method, Faust had 120,000 equivalent units for
During July, Faust Manufacturing started and completed 80,000 units. In BWIP, there were 25,000 units, 20 percent complete. In EWIP, there were 25,000 units, 80 percent complete. Using FIFO, the
During June, Faust Manufacturing started and completed 80,000 units. In BWIP, there were 25,000 units, 60 percent complete. In EWIP, there were 25,000 units, 40 percent complete. Using FIFO, the
For September, Murphy Company has manufacturing costs in BWIP equal to $100,000. During September, the manufacturing costs incurred were $650,000. Using the weighted average method, Murphy had
For August, Kimbrell Company has costs in BWIP equal to $50,000. During August, the cost incurred was $450,000. Using the weighted average method, Kimbrell had 125,000 equivalent units for August.
During June, Kimbrell Manufacturing completed and transferred out 100,000 units. In EWIP, there were 25,000 units, 40 percent complete. Using the weighted average method, the equivalent units
During May, Kimbrell Manufacturing completed and transferred out 100,000 units. In EWIP, there were 25,000 units, 80 percent complete. Using the weighted average method, the equivalent units
During May, Kimbrell Manufacturing completed and transferred out 100,000 units. In EWIP, there were 25,000 units, 80 percent complete. Using the weighted average method, the equivalent units
During May, Kimbrell Manufacturing completed and transferred out 100,000 units. In EWIP, there were 25,000 units, 80 percent complete. Using the weighted average method, the equivalent units
Use the following information for Multiple-Choice Exercise 6-9.The drilling department incurred $24,000 of manufacturing costs during the month of October. The department transferred out 2,000 units
Use the following information for Multiple-Choice Exercise 6-8.The drilling department incurred $24,000 of manufacturing costs during the month of October. The department transferred out 2,000 units
Use the following information for Multiple-Choice Exercise 6-7.The drilling department incurred $24,000 of manufacturing costs during the month of October. The department transferred out 2,000 units
During the month of May, the grinding department produced and transferred out 2,000 units. EWIP had 500 units, 60 percent complete. There was no BWIP. The equivalent units of output for May are
The costs transferred from a prior process to a subsequent process a. are treated as another type of material cost. b. are referred to as transferred-in costs (for the
To record the transfer of costs from a prior process to a subsequent process, the following entry would be made: a. debit Finished Goods and credit Work in Process. b. debit
Sequential processing is characterized by a. a pattern where partially completed units are worked on simultaneously. b. a pattern where different partially completed units
Operation costing works well whenever a. heterogeneous products pass through a series of processes and receive similar doses of materials, labor, and overhead. b. homogeneous
Process costing works well whenever a. heterogeneous products pass through a series of processes and receive similar doses of materials, labor, and overhead. b. homogeneous
Refer to Exercise 5-44 for data. Now assume that Dexter Company uses the sequential method to allocate support department costs to the producing departments. Human Resources is allocated first in the
(Appendix 5B) The method that assigns support department costs by giving full recognition to support department interactions is known as a. the sequential method. b. the
(Appendix 5B) The method that assigns support department costs by giving partial recognition to support department interactions is known as a. the sequential method. b. the
(Appendix 5B) The method that assigns support department costs only to producing departments in proportion to each department’s usage of the service is known as a. the sequential
(Appendix 5B) The method that assigns support department costs only to producing departments in proportion to each department’s usage of the service is known as a. the sequential
(Appendix 5B) An example of a support department is a. data processing. b. personnel. c. a materials storeroom. d. payroll. e. all of the
(Appendix 5B) An example of a producing department is a. a materials storeroom. b. the maintenance department. c. engineering design. d.
(Appendix 5B) Those departments that provide essential services to producing departments are referred to as a. revenue generating departments. b. support departments. c.
(Appendix 5B) Those departments responsible for creating products or services that are sold to customers are referred to as a. profit making departments. b. support
(Appendix 5A) When a job costing $2,000 is finished but not sold, the following journal entry is made: a. Cost of Goods Sold 2,000
Wilson Company has a predetermined overhead rate of $5 per direct labor hour. The job order cost sheet for Job 145 shows 1,000 direct labor hours costing $10,000 and materials requisitions totaling
The costs of a job are accounted for on the a. materials requisition sheet. b. time ticket. c. requisition for overhead application. d. job-order cost
When a job is completed, the total cost of the job is a. subtracted from the raw materials account. b. subtracted from the work-in-process account. c. subtracted
When materials are requisitioned for use in production in a job-order costing firm, the cost of materials is added to the a. raw materials account. b. work-in-process
Which of the following is typically a process-costing firm? a. Paint manufacturer b. Custom cabinetmaker c. Large regional medical center d. Law
Which of the following is typically a job-order costing firm? a. Paint manufacturer b. Pharmaceutical manufacturer c. Large regional medical center d.
The overhead variance is overapplied if a. actual overhead is less than applied overhead. b. actual overhead is more than applied overhead. c. applied overhead is
Applied overhead is a. an important part of normal costing. b. never used in normal costing. c. an important part of actual costing. d. the
The predetermined overhead rate equals a. actual overhead divided by actual activity level for a period. b. estimated overhead divided by estimated activity level for a
The predetermined overhead rate is a. calculated at the end of each month. b. calculated at the end of the year. c. equal to actual overhead divided by actual
In a normal costing system, the cost of a job includes a. actual direct materials, actual direct labor, and actual overhead. b. estimated direct materials, estimated direct
The ending balance of which of the following accounts is calculated by summing the totals of the open (unfinished) job-order cost sheets? a. Raw Materials b. Work in
Which of the following statements is true? a. Job-order costing is used only in manufacturing firms. b. The job cost sheet is subsidiary to the work-in-process account.
Solemon Company has fixed costs of $15,000, variable cost per unit of $5, and a price of $8. If Solemon wants to earn a targeted profit of $3,600, how many units must be sold? a.
If a company’s fixed costs rise by $10,000, which of the following will be true? a. The break-even point will decrease. b. The variable cost ratio will increase. c.
Use the following information for 4-10The variable cost ratio and the contribution margin ratio for Corleone are Variable cost ratio
Use the following information for 4-9Corleone Company produces a single product with a price of $15, variable costs per unit of $12, and fixed costs of $9,000.Corleone’s break-even point in
The contribution margin is the a. amount by which sales exceed fixed costs. b. difference between sales and total expenses. c. difference between sales and
If the margin of safety is 0, then a. the company is operating at a loss. b. the company is precisely breaking even. c. the company is earning a small
The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves a. margin of safety. b. operating leverage. c. degree of
An important assumption of cost-volume-profit analysis is that a. both costs and revenues are linear functions. b. all cost and revenue relationships are analyzed within the
In the cost-volume-profit graph, a. the break-even point is found where the total revenue curve crosses the x-axis. b. the area of profit is to the left of the break-even
Break-even revenue for the multiple-product firm can a. be calculated by dividing total fixed cost by the overall contribution margin ratio. b. be calculated by dividing
The amount of revenue required to earn a targeted profit is equal to a. fixed cost divided by contribution margin. b. fixed cost divided by contribution margin ratio.
If the variable cost per unit goes up, Contribution margin Break-even point a. increases
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