Managerial Accounting
Question 1: True & False, Multiple Questions
1. The most difficult part of computing accurate unit costs is determining the proper amount of direct material cost to assign to each product.
2. Activity-based costing systems rely on multiple bases for overhead cost allocation.
3. Traditional costing systems group costs according to activity cost pools.
4. A cost driver is a factor or activity that has a direct cause-effect relationship with the resources consumed.
5. An advantage of ABC is that it is inexpensive to implement.
6. The effectiveness of any budgeting system depends directly on whether a budget is understood and accepted by top management.
7. Participative budgeting is the active participation of all affected employees in the formulation of the budgets.
8. Managers may lie to increase the resources allocated to their department.
9. Budgetary slack helps buffer managers from budget cuts imposed by higher level management and provides protection against cost increases or revenue shortfalls due to unforeseen events.
10. Cheating does not include making short-run decisions to increase profits that are not in the company's best long-run interests
11. An operating budget is the major part of a master budget that focuses on the income statement and its supporting schedules.
12. The following activity is value added:
A. Storage of raw materials.
B. Moving parts from machine to machine.
C. Shaping a piece of metal on a lathe.
D. All of the above.
13. An activity that adds costs to the product but does not increase its market value is a:
A. Value-added activity.
B. Cost driver.
C. Cost-benefit activity.
D. Non-value-added activity
14. The activity-based overhead rate is computed by dividing:
A. Estimated overhead per activity by expected use of cost drivers per activity.
B. Actual overhead per activity by expected use of cost drivers per activity.
C. Estimated overhead per activity by actual use of cost drivers per activity.
D. Actual overhead per activity by actual use of cost drivers per activity
15. In order to achieve the most accurate costing, the cost driver chosen for a given activity must show a ___________ between the cost driver and the actual consumption of overhead costs.
A. Reasonable relationship.
B. Low degree of correlation.
C. High degree of correlation.
D. Moderate connection.
16. Donna Crawford Co. has identified an activity cost pool to which it has allocated estimated overhead of $1,920,000. It has determined the expected use of cost drivers for that activity to be 160,000 inspections. Widgets require 40,000 inspections, Gadgets 30,000 inspections, and Targets 90,000 inspections. The overhead assigned to each product is:
A.Widgets $40,000, Gadgets $30,000, Targets $90,000.
B. Widgets $480,000, Gadgets $360,000, Targets $108,000.
C. Widgets $360,000, Gadgets $480,000, Targets $1,080,000.
D. Widgets $480,000, Gadgets $360,000, Targets $1,080,000. 16
17. Which of the following would be the best cost driver for the activity of purchasing?
A. The number of employees in the purchasing department.
B. Total number of items ordered.
C. Total dollar value of items orders.
D. The number of purchase orders issued.
18. The overhead rate for Machine Setups is $100 per setup. Products A and B have 80 and 60 setups, respectively. The overhead assigned to each product is:
A. Product A $8,000, Product B $8,000.
B. Product A $8,000, Product B $6,000.
C. Product A $6,000, Product B $6,000.
D. Product A $6,000, Product B $8,000
19. Activity-based costing:
A. Is the initial phase of converting to a just-in-time operating environment.
B. Can be used only in a job order costing system.
C. Is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.
D. Uses direct labor as its primary cost driver.
20. Activity-based costing (ABC):
A. Can be used only in a process cost system.
B. Focuses on units of production.
C. Focuses on activities performed to produce a product.
D. Uses only a single basis of allocation.
21. A major benefit of effective budgeting is that ________.
It compels managers to think ahead.
It aids managers in communicating objectives to employees.
It provides benchmarks to evaluate subsequent performance.
All of the above.
22. Budgets are generally more effective if they are _____.
Created with the active participation of all affected employees.
Understood and accepted by affected managers.
Supported by top management.
All of these answers are correct
23. ________ starts with the assumption that current activities in a company will not automatically continue in the next period.
Activity based budget
Strategic budget
Master budget
Zero base budget
24. ________ budget that requires justification of expenditures for every activity, including continuing activities. Budget for every activity starts at zero.
Sales budget
Zero base budget
Operation budget
Capital budget
25. _____ budgeting is when budgets are formulated with the active participation of all affected employees
a. Financial b. Team c. Participative d. Shared
26. Budgets are generally more effective if they are _____.
a. Created with the active participation of all affected employees
b. Understood and accepted by affected managers
c. Supported by top management
d. All of these answers are correct
27. Budgets generate negative feelings if they are _____.
a. Used to point out managers' failings
b. Used primarily to limit spending
c. Congruent with rewards
d. Used to point out managers' failings and used primarily to limit spending.
28. Cheating may take the form of _____.:
Making short-run decisions to increase profits that are not in the company's best long-run interests.
Creating budgetary slack.
Decreasing profits when actual profits are significantly exceeding the profit target.
All of these answers are correct.
29. _____ is generally prepared as the first step in preparing the operating budgets.
a. A sales budget
b. An operating expense budget
c. A purchases budget
d. A budgeted income statement
30. All of the following are operating budgets except the _____.
a. Sales budget
b. Operating expenses budget
c. Budgeted income statement
d. Cash budget
31. _____ budget is a major part of the master budget that focuses on the income statement and its supporting schedules.
a. An operating
b. A financial
c. A cash
d. A capital
32. All of the following are financial budgets except the _____.
a. purchases budget
b. capital budget
c. cash budget
d. budgeted balance sheet
Question 2:
Longview, Corp. is considering the use of activity-based costing. The following information is provided for the production of two product lines:
Activity Cost Cost Driver
Setup S 107,000 Number of setups
Machine maintenance 50,000 Machine hours
Total indirect manufacturing costs S 157,000
|
Product A
|
Product B
|
Total
|
Direct labor hours
|
7.000
|
3.000
|
10,000
|
Number of setups
|
30
|
70
|
100
|
Number of machine hours
|
1,200
|
3,800
|
5,000
|
Longview plans to produce 350 units of Product A and 225 units of Product B.
Compute the ABC indirect manufacturing cost per unit for each product.
Collect rate and allocate cost ?
Question 3 Monthly, Corp. makes two products: C and D. The following data have been summarized:
Product C Product D
Direct materials cost per unit $ 900 $ 2,100
Direct labor cost per unit 400 200
Indirect manufacturing cost per unit ? ?
Allocation Base Units
Activity Allocation Rate Product C Product D
Setup $ 1,000 37 77
Machine maintenance $ 11 1,350 3,850
The company plans to manufacture 225 units of each product. Calculate the product cost per unit for Products and D using activity-based costing.
Question 4: Royal company is preparing budgets for the quarter ending June 31. Budget sales for the next five months are:
April 20,000 units
May 50,000 units
June 30,000 units
July 25,000 units
August 15,000 units
The selling price is $10 per unit.
All sales are on account; Royal's collection patterns is:
70% collected in the month of sale
25% collected in the month following sale
5% uncollectable
In April the march 31 accounts receivable balance of $30,000 will be collected in full.
MAKE THE SALES AND EXPECTED CASH COLLECTION & The Production Budget IF YOU KNOW THE FOLLOWING INFORMATIONS RELATED TO PRODUCTION BUDGET :The management at royal company wants ending inventory to be equal to 20% of the following month's budgeted sales in units. On march 31 , 4,000 units were on hand. Let's prepare the production budget.
Question 5: Below is the production budget for the Royal company for three months. The management at royal company wants ending inventory to be equal to 20% of the following month's budgeted sales in units. On march 31 , 4,000 units were on hand . What is the required production for May ?
|
April
|
May
|
June
|
Quarter
|
Budgeted sales in unit
|
20,000
|
50,000
|
30,000
|
100,000
|
Add: desired ending inventory
|
10,000
50,000×20%
|
-------
|
5,000
25,000
×20%
|
5,000
|
Total needs
|
30,000
|
------
|
35,000
|
105,000
|
Less: beginning inventory
|
(4,000)
|
(--------)
|
(6,000)
|
(4,000)
|
Required production
|
26,000
|
|
29,000
|
101,000
|
Question 6:
Q6.1: Managers will use cost functions often as a planning and control tool. Why?
Q6.2: Understanding relationships between costs and their cost drivers allows managers to...
Q6.3: list three Examples of Variable Costs
Q6.4: list Types of Fixed Costs and example of it
Q6.5: Which of the following statements about cost behavior are true?
a) Fixed costs per unit vary with the level of activity.
b) Variable costs per unit are constant within the relevant range.
c) Total fixed costs are constant within the relevant range.
d) Total variable costs are constant within the relevant range.
Q6.6: If your fixed monthly utility charge is $40, your variable cost is $0.03 per kilowatt hour, and your monthly activity level is 2,000 kilowatt hours, what is the amount of your utility bill?
Q6.7: x Company recorded the following production activity and maintenance costs for two months:
|
Units
|
Cost
|
High activity level
|
8,000
|
$9,800
|
Low activity level
|
5,000
|
7,400
|
Change
|
3,000
|
$2,400
|
Using these two levels of activity, compute:
The variable cost per unit;
The fixed cost; and then
Express the costs in equation form Y = FC + b X.
Q6.8: Sales salaries and commissions are $10,000 when 80,000 units are sold, and $14,000 when 120,000 units are sold. Using the high-low method, what is the variable portion of sales salaries and commission ?
a) $0.08 per unit b) $0.10 per unit c) $0.12 per unit d) 0.125 per unit
Q6.9: Sales salaries and commissions are $10,000 when 80,000 units are sold, and $14,000 when 120,000 units are sold. Using the high-low method, what is the fixed portion of sales salaries and commission ?
a) $2,000 b) $4,000 c) $10,000 d) $12,000
Q6.10: identify the Limitations of Least Squares Regression Method:
Q6.11: Tesco Company produces two products, X and Y. The following information is presented for both products:
X Y
Selling price per unit $46 $36
Variable cost per unit $38 $24
Total fixed costs are $234,000. The Contribution margin for each product are------ - - - - ?
Q6.12: Tesco Company produces two products, X and Y. The following information is presented for both products:
X Y
Selling price per unit $46 $36
Variable cost per unit $38 $24
Total fixed costs are $234,000. Tesco Company plans to sell 21,000 units of product X and 7,000 units of product Y.
Find the Break-even point in units of X and Y if the sales mix is 3 units of X for every unit of Y
Q6.13: Bata Company manufactures running shoes. The selling price per pair of shoes (one unit) averages $80 and the variable cost per pair is $47.50. The sales volume of $776,000 produces $100,750 of net income before taxes.
The total fixed cost is------
Question 7:
Q7.1 Define Managerial Accounting
Q7.2: Compare and Contrast Managerial and Financial Accounting
Q7.3: Differentiate Between:
a) Period and Product Costs
b) Direct and Indirect Costs
c) Prime costs and Conversion costs
d) Fixed and Variable Costs
Question 8:
Q8.1 : Bram, Co. produced 200 units of product in July. Each unit sells for $199.00 and costs $79.60 each to manufacture. Total fixed and variable costs for July were $30,920. What is the total contribution margin for July?
a) $8,880 b)$23,880 c) $30,920 d)$39,800
Q8.2: What is the main difference between full absorption costing and variable costing?