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# COST ACCOUNTING QUESTIONS

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1. At January 1, 2008, Smithfield, Inc. has beginning inventory of 3,000 surfboards. Jake estimates it will sell 14,000 units during the first quarter of 2006 with a 10% increase in sales each quarter. Smithfield's policy is to maintain an ending inventory equal to 20% of the next quarter's sales. Each surfboard costs \$140 and is sold for \$200.

A. How many units should Smithfield produce during the first quarter of 2008?

B. How much is budgeted sales revenue for the third quarter of 2008?

2. Beavers, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is \$16, while the cost of assembling each unit is estimated at \$17. Unassembled units can be sold for \$55, while assembled units could be sold for \$71 per unit. What decision should Beavers make?

a. Sell before assembly, the company will save \$1 per unit.
b. Sell before assembly, the company will save \$15 per unit.
c. Process further, the company will save \$1 per unit.
d. Process further, the company will save \$16 per unit.

3. Cost of goods manufactured during a period is obtained by taking the total manufacturing costs incurred during the period and adding and subtracting the following inventories:

a. Beginning finished goods inventory Ending finished goods inventory
b. Beginning work in process inventory Ending finished goods inventory
c. Beginning raw materials inventory Ending work in process inventory
d. Beginning work in process inventory Ending work in process inventory

4. Dustin Company sells its product for \$40 per unit. During 2007, 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.

A. The per unit manufacturing cost under absorption costing is:
a. \$16.
b. \$18.
c. \$26.
d. \$27.

B. The per unit manufacturing cost under variable costing is:
a. \$16.
b. \$18.
c. \$26.
d. \$27.

C. Cost of goods sold under absorption costing is:
a. \$ 900,000.
b. \$1,080,000.
c. \$1,300,000.
d. \$1,560,000.

5. The following per unit information is available for a new product of Rivers Company:
Desired ROI \$ 48
Fixed cost 80
Variable cost 120
Total cost 200
Selling price 248
Rivers Company's markup percentage would be
a. 19%.
b. 24%.
c. 40%.
d. 60%.

6. Tablewater Company has just developed a new product. The following data is available for this product:
Desired ROI \$ 36
Fixed cost 60
Variable cost 90
Total cost 150
The target selling price for this product is
a. \$186.
b. \$150.
c. \$126.
d. \$96.

7. 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 labor price (rate) variance is
a. \$800 unfavorable.
b. \$800 favorable.
c. \$1,000 unfavorable.
d. \$400 favorable.

8. 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.

9. Benefits of activity-based costing include all of the following except
a. more accurate product costing.
b. fewer cost pools used to assign overhead costs to products.
c. enhanced control over overhead costs.
d. better management decisions.
10. An example of a value-added activity in a manufacturing operation is
a. machine repair.
b. inventory control.
c. engineering design.
d. building maintenance.

11. Assigning manufacturing costs to work in process results in credits to all of the following accounts except
a. Factory Labor.
c. Raw Materials Inventory.
d. Work in Process Inventory.

12. 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 of \$100,000. How much is Juniper's break even point?
a. 4,600 units
b. \$25,600
c. 6,200 units
d. 2,133 units

13. Homer Company's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost \$22,000. If sales are expected to increase \$40,000, by how much will the company's net income increase?
a. \$18,000
b. \$6,000
c. \$12,000
d . \$12,000

14. Items from Tedder Company's budget for March in which 2,100 units were produced and sold appear below:

Direct materials \$12,000
Indirect material-variable 2,000
Supervisor salaries 10,000
Depreciation on factory equipment 8,000
Direct Labor 7,000
Property taxes on factory 3,000
Total \$42,000

At 2,200 units, how much are budgeted variable manufacturing costs?
a. \$22,000
b. \$43,000
c. \$21,000
d. \$19,905

15. The per-unit standards for direct labor are 2 direct labor hours at \$12 per hour. If in producing 2,400 units, the actual direct labor cost was \$51,200 for 4,000 direct labor hours worked, the total direct labor variance is
a. \$1,920 unfavorable.
b. \$6,400 favorable.
c. \$4,000 unfavorable.
d. \$6,400 unfavorable.