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Essay, 14 pages (3500 words)

# Management accounting essay example

Use the following to answer question 1: Marger, Inc. , provided the following data for two recent months: [pic] |1. |Which of the following classifications best describes the behavior of Cost T? | |A) |Variable | |B) |Fixed | |C) |Mixed | |D) |None of the above | 2. |The following data pertains to activity and maintenance costs for two recent years: | | | | | |[pic] | | |Using the high-low method, the cost formula for maintenance would be: | |A) |\$1. 50 per unit. | |B) |\$1. 25 per unit. | |C) |\$3,000 plus \$1. 50 per unit. | |D) |\$6,000 plus \$0. 75 per unit. | |3. Rible Company has observed that at an activity level of 8,000 units the cost for maintenance is \$15,000, and at 10,000 units the| | |cost for maintenance is \$16,500. Using the high-low method, the cost formula for maintenance is: | |A) |\$15,000 plus \$0. 15 per unit. | |B) |\$9,000 plus \$0. 75 per unit. | |C) |\$1. 65 per unit. | |D) |\$1. 875 per unit. | |4. |Which of the following types of firms likely would have a high proportion of variable costs in its cost structure? | |A) |Public utility. | |B) |Airline. | |C) |Fast foodoutlet. |D) |Architectural firm. | |5. |Factory overhead is an example of a: | |A) |mixed cost. | |B) |fixed cost. | |C) |variable cost. | |D) |irrelevant cost. | Use the following to answer question 6: Buffo Company fabricates metal folding chairs. Data concerning the company’s revenue and cost structure follow: [pic] |6. |If Buffo plans to produce and sell 3,000 units next month, the expected contribution margin would be: | |A) |\$30,750. |B) |\$74,250. | |C) |\$26,750. | |D) |\$96,500. | Use the following to answer question 7: Frank Company operates a cafeteria for its employees. The number of meals served each week over the last seven weeks, along with the total costs of operating the cafeteria are given below: [pic] Assume that the relevant range includes all of the activity levels mentioned in this problem. |7. |Using the high-low method of analysis, the variable cost per meal served in the cafeteria would be estimated to be: | |A) |\$1. 50. | |B) |\$2. 0. | |C) |\$2. 80. | |D) |\$1. 00. | Use the following to answer question 8: Stewart Company is attempting to classify costs according to their cost behavior. Data concerning activity and costs are listed below: [pic] |8. |If Stewart Company sells 1,150 units in March and this activity is within the relevant range, the expected total cost would most| | |likely be closest to: | |A) |\$2,610. 50. | |B) |\$1,774. 00. |C) |\$4,343. 92. | |D) |\$4,384. 50. | |9. |A disadvantage of the high-low method of cost analysis is that: | |A) |it cannot be used when there are a very large number of observations. | |B) |it is too time consuming to apply. | |C) |it uses two extreme data points, which may not be representative of normal conditions. | |D) |it relies totally on the judgment of the person performing the cost analysis. | Use the following to answer question 10: Marger, Inc. provided the following data for two recent months: [pic] |10. |Which of the following classifications best describes the behavior of Cost U? | |A) |Variable | |B) |Fixed | |C) |Mixed | |D) |None of the above | |11. |Fox Company’s contribution margin ratio is 20%.

If the degree of operating leverage is 15 at the \$225,000 sales level, net | | |operating income at the \$225,000 sales level must equal: | |A) |\$2,250. | |B) |\$6,750. | |C) |\$3,000. | |D) |\$5,063. | |12. |Korn Company sells two products, as follows: | | | | | |[pic] | | |Fixed expenses total \$300,000 annually.

The expected sales mix in units is 60% for product Y and 40% for product Z. How much is | | |Korn’s expected break-even sales in dollars? | |A) |\$300,000 | |B) |\$420,000 | |C) |\$475,000 | |D) |\$544,000 | |13. |Brown Company has sales of 2,000 units at \$70 per unit. Variable expenses are 40% of the selling price.

If total fixed expenses | | |are \$44,000, the degree of operating leverage is: | |A) |0. 79. | |B) |1. 40. | |C) |3. 50. | |D) |2. 10. | Use the following to answer question 14: Budget data for the Bidwell Company are as follows: [pic] |14. |If fixed expenses increased \$31,500, the break-even sales in units would be: | |A) |34,500 units. | |B) |80,500 units. | |C) |69,000 units. | |D) |94,500 units. Use the following to answer question 15: Evergreen Corp. has provided the following data: [pic] |15. |The number of units needed to achieve a target net operating income of \$49,500 would be: | |A) |1,238 units | |B) |2,750 units. | |C) |3,200 units. | |D) |2,057 units. | Use the following to answer question 16: A manufacturer of premium wire strippers has supplied the following data: [pic] |16. The company’s degree of operating leverage is closest to: | |A) |20. 09 | |B) |7. 73 | |C) |1. 86 | |D) |55. 64 | Use the following to answer question 17: Consider the following budgeted data for Urqhart Corporation: [pic] |17. If the unit contribution margin is increased by 10%, the total fixed expense is decreased by 20%, and all other data remain as | | |in the budget, net operating income will be: | |A) |\$102,500. | |B) |\$105,000. | |C) |\$ 90,000. | |D) |\$ 93,750. | Use the following to answer question 18: The costs of publishing a grade school textbook can be assumed to be as follows: [pic] Each book sells for \$10 per copy. |18. |The unit contribution margin for each copy of the book is: | |A) |\$5. 5. | |B) |\$4. 15. | |C) |\$5. 40. | |D) |\$7. 15. | |19. |If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative | | |to its previous position will: | |A) |shift downward and have a steeper slope. | |B) |shift downward and have a flatter slope. | |C) |shift upward and have a flatter slope. | |D) |shift upward and have a steeper slope. | Use the following to answer question 20:

A company that makes organic fertilizer has supplied the following data: [pic] |20. |The company’s degree of operating leverage is closest to: | |A) |3. 50 | |B) |1. 49 | |C) |9. 54 | |D) |2. 41 | |21. Trumbull Company budgeted sales on account of \$120,000 for July, \$211,000 for August, and \$198,000 for September. Collection | | |experience indicates that none of the budgeted sales will be collected in the month of the sale, 60% will be collected the month| | |after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be| | |budgeted for September would be: | |A) |\$169,800. | |B) |\$147,960. |C) |\$197,880. | |D) |\$194,760. | Use the following to answer question 22: Young Enterprises has budgeted sales in units for the next five months as follows: [pic] Past experience has shown that the ending inventory for each month should be equal to 10% of the next month’s sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months. |22. |The desired ending inventory for August is: | |A) |540 units. |B) |680 units. | |C) |720 units. | |D) |380 units. | Use the following to answer question 23: Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three yards of Material A to make one Bik. Budgeted production of Biks for the next five months is as follows: [pic] The company wants to maintain monthly ending inventories of Material A equal to 20% of the following month’s production needs. On January 31, this target had not been attained since only 2,000 yards of Material A were on hand. The cost of Material A is \$0. 80 per yard.

The company wants to prepare a Direct Materials Purchases Budget. |23. |The desired ending inventory of Material A for the month of March is: | |A) |9,300 yards. | |B) |7,140 yards. | |C) |3,100 yards. | |D) |8,400 yards. | Use the following to answer question 24: The Gomez Company, a merchandising firm, has budgeted its activity for December according to the following information: * Sales at \$500,000, all for cash. * Merchandise Inventory on November 30 was \$250,000. * The cash balance at December 1 was \$20,000. Selling and administrative expenses are budgeted at \$50,000 for December and are paid for in cash. * Budgeted depreciation for December is \$30,000. * The planned merchandise inventory on December 31 is \$260,000. * The cost of goods sold represents 75% of the selling price. * All purchases are paid for in cash. |24. |The budgeted cash receipts for December are: | |A) |\$125,000. | |B) |\$375,000. | |C) |\$530,000. | |D) |\$500,000. | Use the following to answer question 25:

Young Enterprises has budgeted sales in units for the next five months as follows: [pic] Past experience has shown that the ending inventory for each month should be equal to 10% of the next month’s sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months. |25. |The beginning inventory in units for September should be: | |A) |460 units. | |B) |6,800 units. | |C) |540 units. | |D) |680 units. | Use the following to answer question 26:

May Company, a merchandising firm, has budgeted sales as follows for the third quarter of the year: [pic] Cost of goods sold is equal to 65% of sales. The company wants to maintain a monthly ending inventory equal to 130% of the Cost of Goods Sold for the following month. The inventory on June 30 is less than this ideal since it is only \$65,000. The company is now preparing a Merchandise Purchases Budget. |26. |The desired beginning inventory for September is: | |A) |\$117,000. |B) |\$ 76,050. | |C) |\$ 91,000. | |D) |\$ 59,150. | Use the following to answer question 27: Smith Company makes and sells a single product called a Pod. Each Pod requires 1. 4 hours of labor at a labor rate of \$9. 60 per hour. Smith Company needs to prepare a Direct Labor Budget for the second quarter of the year. |27. |The budgeted direct labor cost per Pod would be: | |A) |\$13. 44. | |B) |\$9. 60. | |C) |\$7. 38. | |D) |\$11. 00. | |28. Self-imposed budgets typically are: | |A) |not subject to review by higher levels of management since to do so would contradict the participative aspect of the | | |budgeting processing. | |B) |not subject to review by higher levels of management except in specific cases where the input of higher management is | | |required. | |C) |subject to review by higher levels of management in order to prevent the budgets from becoming too loose. | |D) |not critical to the success of a budgeting program. |29. |Shocker Company’s sales budget shows quarterly sales for the next year as follows: | | | | | |[pic] | | |Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter’s sales. | | |Budgeted production for the second quarter of the next year would be: | |A) |7,200 units. |B) |8,000 units. | |C) |8,800 units. | |D) |8,400 units. | |30. |The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for \$24 dollars and has a unit | | |variable cost of \$18. The company has budgeted the following data for November: | | | | | | | | |* Sales of \$1,152,000, all in cash. | | | | | | | |* A cash balance on November 1 of \$48,000. | | | | | | | | |* Cash disbursements (other than interest) during November of \$1,160,000. | | | | | | | |* A minimum cash balance on November 30 of \$60,000. | | | | | | | | |If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of \$1,000 and will bear interest at | | |2% per month.

All borrowing will take place at the beginning of the month. The November interest will be paid in cash during | | |November. | | | | | |The amount of cash that must be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 | | |cash balance is: | |A) |\$20,000. | |B) |\$21,000. | |C) |\$37,000. | |D) |\$38,000. | Use the following to answer question 31: The following materials standards have been established for a particular product: pic] |31. |What is the materials quantity variance for the month? | |A) |\$1,740 U | |B) |\$4,350 U | |C) |\$4,590 U | |D) |\$1,836 U | Use the following to answer question 32: The following standards for variable manufacturing overhead have been established for a company that makes only one product: pic] |32. |What is the variable overhead spending variance for the month? | |A) |\$3,010 F | |B) |\$3,010 U | |C) |\$10,435 U | |D) |\$10,435 F | Use the following to answer question 33: The following materials standards have been established for a particular product: [pic] |33. What is the materials quantity variance for the month? | |A) |\$5,050 U | |B) |\$5,125 U | |C) |\$9,292 U | |D) |\$9,430 U | Use the following to answer question 34: Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost.

Arrow has established the following standards for the prime costs of one unit of product. [pic] During May, Arrow purchased 160,000 pounds of direct material at a total cost of \$304,000. The total direct labor wages for May were \$37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours. |34. |The direct material price variance for May is: | |A) |\$16,000 favorable. |B) |\$16,000 unfavorable. | |C) |\$14,250 favorable. | |D) |\$14,250 unfavorable. | |35. |Perkins Company, which has a standard cost system, had 500 pounds of raw material X in its inventory at June 1, purchased in May| | |for \$1. 20 per pound and carried at a standard cost of \$1. 00 per pound. The following information pertains to raw material X for | | |the month of June: | | | | |[pic] | | |The unfavorable materials purchase price variance for raw material X for June was: | |A) |\$ 0. | |B) |\$130. | |C) |\$140. | |D) |\$150. | |36. |If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead spending variance is | | |favorable, then the: | |A) |actual variable manufacturing overhead rate exceeded the standard rate. |B) |standard variable manufacturing overhead rate exceeded the actual rate. | |C) |actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output. | |D) |standard direct labor-hours allowed for the actual output exceeded the actual hours. | Use the following to answer questions 37-38: The Odle Company makes and sells a single product called a Kitt. Odle employs a standard costing system. Each Kitt has a standard cost of 5 pounds of material at \$12 per pound and 0. 9 direct labor hours at \$15 per hour. There were no inventories of any kind on June 1.

During June, the following events occurred: – Purchased 17,000 pounds of material at a total cost of \$190,000. – Used 15,000 pounds of material to produce 2,400 Kitts. – Used 1,900 hours of direct labor time at a total cost of \$38,000. |37. |To record the incurrence of direct labor cost and its use in production, the general ledger would include what kind of entry to | | |the Labor Rate Variance account? | |A) |\$ 9,500 credit. | |B) |\$ 9,500 debit. | |C) |\$15,200 debit. | |D) |\$ 2,000 debit. | |38. |Odle Company purchased material on account.

The entry to record the purchase of materials will include a: | |A) |credit to Work in Process. | |B) |debit to Accounts Receivable. | |C) |credit to Accounts Payable. | |D) |credit to Raw Materials Inventory. | Use the following to answer question 39: The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August: – Actual cost of direct material purchased and used: \$65,560 – Material price variance: \$5,960 unfavorable – Total materials variance: \$22,360 unfavorable – Standard cost per pound of material: \$4 Standard cost per direct labor hour: \$5 – Actual direct labor hours: 6,500 hours – Labor efficiency variance: \$3,500 favorable – Standard number of direct labor hours per unit of Roff: 2 hours – Total labor variance: \$400 unfavorable |39. |The labor rate variance was: | |A) |\$3,900 favorable. | |B) |\$3,900 unfavorable. | |C) |\$3,100 unfavorable. | |D) |\$3,100 favorable. | |40. |Home Company manufactures tables with vinyl tops. The standard material cost for the vinyl used per Type-R table is \$7. 80 based | | |on six square feet of vinyl at a cost of \$1. 30 per square foot.

A production run of 1,000 tables in January resulted in usage of| | |6,400 square feet of vinyl at a cost of \$1. 20 per square foot, a total cost of \$7,680. The quantity variance resulting from the | | |above production run was: | |A) |\$120 favorable. | |B) |\$480 unfavorable. | |C) |\$520 unfavorable. | |D) |\$640 favorable. | Use the following to answer question 41: The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs).

The company recorded the following activity and cost data relating to manufacturing overhead for October: [pic] |41. |The fixed overhead budget variance for September was: | |A) |\$2,700 favorable. | |B) |\$2,700 unfavorable. | |C) |\$5,400 favorable. | |D) |\$5,400 unfavorable. | Use the following to answer question 42: A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company’s flexible budget for manufacturing overhead are given below: [pic] |42. What was the fixed overhead budget variance for the period to the nearest dollar? | |A) |\$2,440 F | |B) |\$1,200 U | |C) |\$1,999 U | |D) |\$704 F | Use the following to answer question 43: A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity.

Data from the company’s flexible budget for manufacturing overhead are given below: [pic] |43. |How much overhead was applied to products during the period to the nearest dollar? | |A) |\$79,118 | |B) |\$76,035 | |C) |\$77,440 | |D) |\$80,145 | Use the following to answer question 44:

The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October: [pic] |44. |The amount of fixed overhead cost contained in the company’s overhead budget for September was: | |A) |\$45,900. | |B) |\$54,768. | |C) |\$49,920. | |D) |\$47,703. | |45. |Baxter Corporation’s master budget calls for the production of 5,000 units of its product monthly.

The master budget includes | | |indirect labor of \$144,000 annually; Baxter considers indirect labor to be a variable cost. During the month of April, 4,500 | | |units of product were produced, and indirect labor costs of \$10,100 were incurred. A performance report utilizing flexible | | |budgeting would report a spending variance for indirect labor of: | |A) |\$1,900 unfavorable. | |B) |\$700 favorable. | |C) |\$1,900 favorable. | |D) |\$700 unfavorable. |

Use the following to answer question 46: Wicks Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Budgeted costs at 100,000 direct labor-hours are as follows: [pic] |46. |If Wicks Company plans to operate at 90,000 direct labor-hours during the next period, the flexible budget would show indirect | | |labor costs of: | |A) |\$144,000. | |B) |\$63,000. | |C) |\$90,000. | |D) |\$81,000. |

Use the following to answer questions 47-48: The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead: [pic] The following data concerning production pertain to last year’s operations: – The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate. – The company made 6,850 units of product and worked 14,200 actual hours during the year. – Actual variable overhead was \$15,904 and actual fixed overhead was \$30,850 for the year. – The standard direct labor time is two hours per unit of product. |47. The fixed overhead budget variance was: | |A) |\$3,450 unfavorable. | |B) |\$3,450 favorable. | |C) |\$850 unfavorable. | |D) |\$1,200 favorable. | |48. |The fixed element of the predetermined overhead rate was (per DLH): | |A) |\$4. 15. | |B) |\$3. 00. | |C) |\$2. 00. | |D) |\$1. 15. | Use the following to answer question 49: Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours.

Total budgeted costs at 200,000 direct labor-hours are as follows: [pic] |49. |At an activity level of 170,000 direct labor-hours, the flexible budget for factory overhead would show the budgeted amount for | | |utilities as: | |A) |\$ 85,000. | |B) |\$140,000. | |C) |\$160,000. | |D) |\$100,000. | Use the following to answer question 50: The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead: [pic]

The following data concerning production pertain to last year’s operations: – The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate. – The company made 6,850 units of product and worked 14,200 actual hours during the year. – Actual variable overhead was \$15,904 and actual fixed overhead was \$30,850 for the year. – The standard direct labor time is two hours per unit of product. |50. |The fixed overhead cost applied to work in process was: | |A) |\$27,400. | |B) |\$30,000. | |C) |\$30,850. | |D) |\$13,700. |

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