A company developed the following per-unit standards for its product: 2 pounds of direct materials at $6 per pound.

Last month, 2,000 pounds of 1 direct materials were purchased for $11,400. The direct materials price variance for last month was a. $11,400 favorable. Working: Standard cost of direct materials = 6 per pound b. $600 favorable. Actual cost of direct materials = $11,400/2000 = $5.7 c. $300 favorable. Direct material price variance = (Actual price - standard price)*units purchased d. $600 unfavorable. =($5.7 - $6)*2000 = $600 Answer: b

The standard rate of pay is $5 per direct labor hour. If the actual direct labor payroll was $19,600 for 4,000 direct labor hours worked, the direct 2 labor price (rate) variance is a. $800 unfavorable. Working: Standard rate of pay = $5 per hour b. $800 favorable. Actual rate of pay = $19,600/4000 = $4.9 c. $1,000 unfavorable. Direct labor price variance = (Actual pay rate - standard pay rate)*labor hours used b. $400 favorable. =($4.9 - $5)*4000 = -$400 (favorable) Answer: d

3 Cost of goods sold is equal to a. total manufacturing costs plus beginning work in process less ending work in process. b. cost of goods sold plus beginning work in process less ending work in process. c. total manufacturing costs plus ending work in process less beginning work in process. d. cost of goods manufactured plus beginning finished goods less ending finished goods. Answer: d

4 An appropriate cost driver for ordering and receiving materials cost is the a. direct labor hours. b. machine hours. c. number of parts. d. number of purchases orders. Answer: d The ordering and receiving cost is related to number of orders rather than quantity purchased.

5 An example of a value-added activity in a manufacturing operation is a. machine repair. b. inventory control. c. engineering design. d. building maintenance. Answer: c Except engineering design all the mentioned activities are non-value added

Juniper, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs of $74,400 and sales for the current year 6 of $100,000. How much is Juniper's break even point? a. 4,600 units Working: Break even point = Fixed cost/contribution margin = $74,400/$12 = 6200 units b. $25,600 c. 6,200 units d. 2,133 units Answer: c

Scenario goes with 7. And 8.: Dustin Company sells its product for $40 per unit. During 2005, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $10, direct labor $6, and variable overhead $2. Fixed costs are: $480,000 manufacturing overhead, and $60,000 selling and administrative expenses. 7 The per unit manufacturing cost under absorption costing is: a. $16. b. $18. c. $26. Particular d. $27. Manufacturing costs: Variable per unit: Direct materials Direct labor Prime cost Manufacturing overheads : Variable overhead Fixed per period Add cost of beginning inventory Less cost of ending Inventory Cost of goods sold Selling and admin. costs: Variable per unit Fixed per period Cost as per absorption costing

Cost per unit

Total

$ $ $

10 6 16 2 8 26 -

$ 600,000 $ 360,000 $ 960,000 120,000 $ 480,000 $ 1,560,000 $ 260,000 $ 1,300,000 $ $ 60,000

$ $

$ $ $ $ $

26 26 1 27

$ 1,360,000

Answer: Answer:

8 The per unit manufacturing cost under variable costing is: a. $16. b. $18. Particular Cost per unit c. $26. Variable cost:d. $27 Direct materials 10 Direct labor 6 Variable overhead 2 Total variable cost of manufacturing. $ 18 Add cost of beginning inventory $ Less cost of ending Inventory $ 18.0 Variable cost of goods sold $ 18.0 Variable selling and admn.cost $ Variable cost of units sold $ 18.0 Add : fixed cost Manufacturing costs $ 9.60 Selling and admin. Costs $ 1.20 Cost as per Variable costing $ 28.80

Total 600,000 360,000 120,000 $ 1,080,000 $ $ 180,000.0 $ 900,000.0 $ $ 900,000.0 480,000 60000 $ 1,440,000

Answer:

28.8 The correct answer is $28.8. This is not given as one of the options. Alternatives for this question are same as previous question

Pentecost Corporation desires to earn target net income of $40,000. If the selling price per unit is $30, unit variable cost is $24, and 9 total fixed costs are $160,000, the number of units that the company must sell to earn its target net income is a. 13,333.00 Contribution margin =selling price per unit -variable cost per unit =30-24 =$6 b. 33,333.00 Units company must sold to earn target income = (Fixed cost+ targeted income)/contribution margin c. 20,000.00 = (160000+40000)/6 d. 26,667.00 33333.3333 Answer: b

10 The starting point of a master budget is the preparation of the

a. b. c. d. Answer:

cash budget. sales budget. production budget. budgeted balance sheet. b

11 The cost classification scheme most relevant to responsibility accounting is a. controllable vs. uncontrollable. b. fixed vs. variable. c. semivariable vs. mixed. d. direct vs. indirect. Answer: a

12 A flexible budget a. is also called a static budget. b. can be considered a series of related static budgets. c. can be prepared for sales or production budgets, but not for an operating expense budget. d. typically uses an activity index different from that used in developing the predetermined overhead rate. Answer: b

Flexible budget consist of different levels of activities. A flexible budget, therefore, can be considered as a series of static budge In flexible budget, a static budget is prepared for one level of an activity 13 An appropriate cost driver for an assembling cost pool is the number of a. purchase orders. b. setups. c. parts. d. direct labor hours Answer: c Assembly and complexity of it is driven by number of parts to be assembled.

14 Under the absorption cost approach, all of the following are included in the cost base except a. direct materials. b. fixed manufacturing overhead. c. selling and administrative costs. d. variable manufacturing overhead. Answer: c

st month, 2,000 pounds of

dard price)*units purchased Favorable

r hours worked, the direct

4.9 dard pay rate)*labor hours used $400 (favorable)

= $74,400/$12 = 6200 units

on are same as previous question. Please check the alternatives

ntribution margin (160000+40000)/6

dered as a series of static budgets.