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Management accounting

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Please show all steps and reasoning behind selected answers for problems 11 thru 14.
1. Wages paid to a timekeeper in a factory are a:
Prime Cost YES.....Conversion Cost NO
Prime Cost YES.....Conversion Cost YES
Prime Cost NO....Conversion Cost NO
Prime Cost NO.....Conversion Cost YES

2. Fixed costs expressed on a per unit basis:
will increase with increases in activity.
will decrease with increases in activity.
are not affected by activity.
should be ignored in making decisions since they cannot change.

3. Inventoriable costs are also known as:
variable costs
conversion costs
product costs
fixed costs

4. When the activity level is expected to decline within the relevant range, what effects would be anticipated with respect to each of the following?
Fixed Costs per Unit Increase and Variable Costs per Unit Increase
Fixed Costs per Unit Increase and Variable Costs per Unit do not change
Fixed Costs per Unit do not change and Variable Costs per Unit do not change
Fixed Costs per Unit do not change and Variable Costs per Unit Increase

5. Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to:
understate the predetermined overhead rate
overstate the predetermined overhead rate
have no effect on the predetermined overhead rate
cannot be determined from the information given

6. A process cost system is employed in those situations in which:
many different products, jobs, or batches of production are being produced each period
where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis
a service is performed such as in a law firm or an accounting firm
full or absorption cost approach is not employed

7. Equivalent units for a process costing system using the FIFO method would be equal to:
units completed during the period, plus equivalent units in the ending work in process inventory
units started and completed during the period, plus equivalent units in the ending work in process inventory
units completed during the period and transferred out
units started and completed during the period, plus equivalent units in the ending work in process inventory, plus work needed to complete units in the beginning work in process inventory

8. The contribution margin ratio always decreases when the:
break-even point increases
break-even point decreases
variable expenses as a percentage of net sales increase
variable expenses as a percentage of net sales decrease

9. The break-even point in unit sales is found by dividing total fixed expenses by:
the contribution margin ratio
the variable expenses per unit
the sales price per unit
the contribution margin per unit

10. Under variable costing:
net operating income will tend to move up and down in response to changes in levels of production
inventory costs will be lower than under absorption costing
net operating income will tend to vary inversely with production changes
net operating income will always be higher than under absorption costing

11. The following data (in thousands of dollars) have been taken from the accounting records of Larklin Corporation for the just completed year.
Sales $820
Purchases of raw materials $180
Direct labor $130
Manufacturing overhead $200
Administrative expenses $180
Selling expenses $140
Raw materials inventory, beginning $60
Raw materials inventory, ending $20
Work in process inventory, beginning $50
Work in process inventory, ending $20
Finished goods inventory, beginning $110
Finished goods inventory, ending $150
Required: Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.

12. The Michigan Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below:
Percent completed
Units Materials Conversion
Work in process, June 1 40,000 65% 45%
Work in process, Jun 30 35,000 75% 65%
The department started 175,000 units into production during the month and transferred 180,000 completed units to the next department.
REQUIRED: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.
13. A cement manufacturer has supplied the following data:
Tons of cement produced and sold 220,000
Sales revenue $924,000
Variable manufacturing expense $297,000
Fixed manufacturing expense $280,000
Variable selling and admin expense $165,000
Fixed selling and admin expense $82,000
Net operating income $100,000
Required:
a. Calculate the company's unit contribution margin
b. Calculate the company's unit contribution ratio
c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

14. Maffei Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling Price $ 138

Units in beginning Inventory 0
Units Produced 7200
Units sold 7000
Units in ending Inventory 200

Variable Costs per unit:
Direct materials $ 42
Direct labor $ 32
Variable manufacturing overhead $ 1
Variable selling and admin $ 8

Fixed Costs:
Fixed manufacturing overhead $ 280,800
Fixed selling and admin $ 98,000
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the variable costing method.
d. Prepare an income statement for the month using the absorption costing method.

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Solution Summary

The solution explains some questions relating to types of costs, activity levels, contribution margin, break even

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See Also This Related BrainMass Solution

Managerial Accounting - JIT, TQM, CI, CO

Following are three separate events affecting the managerial accounting systems for different companies.
Match the management concept(s) that the company is likely to adopt for the event identified.
There is some overlap in the meaning of customer orientation and total quality management and, therefore, some responses can include more than one concept.

Event
_______ 1. The company starts measuring inventory a. Total quality management (TQM)
turnover and discontinues elaborate
inventory records. Its new focus is b. Just-in-time (JIT) system
to pull inventory through the system.
_______ 2. The company starts reporting measures c. Continuous improvement (CI)
on customer complaints and product
returns from customers. d. Customer orientation (CO)
_______ 3. The company starts reporting measures
such as the percent of defective products
and the number of units scrapped.

a. Total quality management (TQM)
b. Just-in-time (JIT) system
c. Continuous improvement (CI)
d. Customer orientation (CO)
------------------------------------------------------------------------

The following calendar year-end information is taken from the December 31, 2005, adjusted trial balance
and other records of Plaza Company.

Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . $ 30,750
Depreciation expense?Office equipment . . . . . . . . . 9,250
Depreciation expense?Selling equipment . . . . . . . . . 10,600
Depreciation expense?Factory equipment . . . . . . . . 35,550
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . 104,600
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . 9,350
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Inventories
Raw materials, December 31, 2004 . . . . . . . . . . . . 168,850
Raw materials, December 31, 2005 . . . . . . . . . . . . 184,000
Goods in process, December 31, 2004 . . . . . . . . . 17,700
Goods in process, December 31, 2005 . . . . . . . . . 21,380
Finished goods, December 31, 2004 . . . . . . . . . . . 169,350
Finished goods, December 31, 2005 . . . . . . . . . . . 138,490
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,480
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . 235,725
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,875
Miscellaneous production costs . . . . . . . . . . . . . . . . 10,425
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . 65,000
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . 927,000
Rent expense?Office space . . . . . . . . . . . . . . . . . . 24,000
Rent expense?Selling space . . . . . . . . . . . . . . . . . . 28,100
Rent expense?Factory building . . . . . . . . . . . . . . . 78,800
Maintenance expense?Factory equipment . . . . . . . . 37,400
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,527,000
Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,500
Sales salaries expense . . . . . . . . . . . . . . . . . . . . . . . 394,560
Check (1) Cost of goods
manufactured, $1,955,650
Problem 18-9A
Sales and costs estimation;
contribution margin analysis
C3 A1
King grocery chain, a market leader, wants to increase sales to its existing customers by creating a
customer orientation to better meet buyer needs and wants. Assume that King hires you as a consultant
to analyze its operations and suggest improvements. King's goal is to increase its contribution
margin by $40,000.
Required
1. To increase King's sales and contribution margin from existing customers, offer three improvements
that you have observed in other stores and believe would be successful here.
2. What level of increase in sales is necessary for King to increase contribution margin by $40,000?
(Hint: With each suggestion in part [1], identify the expected sales dollars and the contribution
margin ratio to meet the $40,000 increase in contribution margin.)
PROBLEM SET B
Problem 18-1B
Managerial accountant's role
C1 C3
This chapter discusses the purposes of managerial accounting and the current business environment.
You are to look through the home electronics section of your local newspaper; the Sunday paper is
often best. Review advertisements of home electronics and note how many manufacturers offer these
products and the factors on which they compete.
Required
Discuss the potential contributions and responsibilities of the managerial accounting professional in
helping a home electronics manufacturer succeed. (Hint: Think about information and estimates that
a managerial accountant might provide new entrants into the home electronics market.)

1. Prepare the company's 2005 manufacturing statement.
2. Prepare the company's 2005 income statement that reports separate categories for (a) selling
expenses and (b) general and administrative expenses.
--------------------------------------------------------------
Resources: Fundamental Accounting Principles, pp. 739 and 745

? Complete Exercise 18-5 on p. 739 and questions 1 and 2 of Problem 18-8A on p. 745.
? Post your answers as an attachment.

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