See the attached file.
(a) Calculate how many bottles of each type were produced in the week with the highest production level and how many bottles of each type were produced in the week with the lowest production levels.
(b) Calculate separately the cost of producing a single unit of each type of bottle when the weekly
production level achieved is:
(i) 12,800 bottles in total
(ii) 16,000 bottles in total.
Calculate the unit costs to four decimal places of a £
(c) Completed bottles are sent to another company for cleaning, labeling and packing. This company employs several part-time personnel to clean, label and pack the bottles. These staff are paid on an incremental piecework basis. The details of the piecework scheme are as follows:
No of bottles prepared and packed Rate paid per bottle
2,001 â?" 2,000 1.6p
2,001 â?" 3,000 1.7p
3,001 â?" 4,000 1.8p
* Note: Only the extra bottles qualify for the higher rates, and any bottles that are broken are deducted from the number of bottles that qualify for piecework.
The figures below refer to the output achieved by three of the employees during a recent week:
Employee A B C
Bottles prepared and packed 2,500 3,200 3,900
Bottles broken 50 150 100
Calculate separately the amount payable to each of employees A, B and C based on the output achieved
Managerial accounting for cost producing is examined in the solution.
Managerial Accounting Questions
Please help me with answering these study guide for my next managerial accounting exam. Your help is very much appreciated.
1. Managerial accounting places less emphasis on precision and more emphasis on flexibility and relevance than financial accounting.
2. Managerial accounting is not governed by generally accepted accounting principles (GAAP).
3. Supply chain management involves acquiring and bringing inside the company all of the processes that bring value to customers.
4. An enterprise system integrates data across an organization into a single software system that enables all employees to have simultaneous access to a common set of data.
5. The cost of the cushions that are used to manufacture sofas is best described as a:
A. manufacturing overhead cost.
B. period cost.
C. variable cost.
D. conversion cost.
6. A security guard's wages at a factory would be an example of:
A. Item A
B. Item B
C. Item C
D. Item D
7. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final product should be classified as:
A. direct materials.
B. a period cost.
C. administrative expense.
D. manufacturing overhead.
8. The annual insurance premium for the factory building would be a:
A. fixed cost, period cost, and indirect cost with regard to units of product.
B. fixed cost, product cost, and direct cost with regard to units of product.
C. variable cost, product cost, direct cost with regard to units of product.
D. fixed cost, product cost, indirect cost with regard to units of product.
9. All of the following are examples of product costs except:
A. depreciation on the company's retail outlets.
B. salary of the plant manager.
C. insurance on the factory equipment.
D. rental costs of the factory facility.
10. Which of the following statements is correct concerning job-order costing?
A. Job-order costing would be appropriate for a textbook publisher.
B. All the costs appearing on a job cost sheet are actual costs.
C. Indirect materials are charged to a specific job.
D. Job-order costing is mainly used in firms with homogeneous products such as oil refineries.
11. Which of the following types of firms typically would use process costing rather than job-order costing?
A. A small appliance repair shop.
B. A manufacturer of commercial passenger aircraft.
C. A specialty equipment manufacturer.
D. A breakfast cereal manufacturer.
12. Which of the following would usually be found on a job cost sheet under a normal cost system?
A. Item A
B. Item B
C. Item C
D. Item D
13. The job cost sheet:
A. summarizes all costs charged to a particular job.
B. contains only direct costs such as direct materials and direct labor.
C. is discarded after production is completed on a particular job.
D. is useful only in process costing.
14. A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that:
A. The cost per unit of A has remained unchanged.
B. The cost per unit of B has decreased.
C. The cost per unit of A has decreased.
D. The cost per unit of B has remained unchanged.
15. With respect to a fixed cost, an increase in the activity level within the relevant range results in:
A. an increase in fixed cost per unit.
B. a proportionate increase in total fixed costs.
C. an unchanged fixed cost per unit.
D. a decrease in fixed cost per unit.
16. Contribution margin can be defined as:
A. the amount of sales revenue necessary to cover variable expenses.
B. sales revenue minus fixed expenses.
C. the amount of sales revenue necessary to cover fixed and variable expenses.
D. sales revenue minus variable expenses.
17. Which of the following statements is correct with regard to a CVP graph?
A. A CVP graph shows the maximum possible profit.
B. A CVP graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.
C. A CVP graph assumes that total expense varies in direct proportion to unit sales.
D. A CVP graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales.
18. Target profit analysis is used to answer which of the following questions?
A. What sales volume is needed to cover all expenses?
B. What sales volume is needed to cover fixed expenses?
C. What sales volume is needed to earn a specific amount of net operating income?
D. What sales volume is needed to avoid a loss?
19. Escareno Corporation has provided its contribution format income statement for June. The company produces and sells a single product.
If the company sells 8,200 units, its total contribution margin should be closest to:
20. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November.
If the company sells 5,300 units, its net operating income should be closest to:
21. The Bronco Birdfeed Company reported the following information:
How much will the sale of one additional case add to Bronco's net operating income?
22. Absorption costing treats all manufacturing costs as product costs.
23. In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost.
Abdi Company, which has only one product, has provided the following data concerning its most recent month of operations:
24. What is the unit product cost for the month under variable costing?
25. What is the unit product cost for the month under absorption costing?
26. Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce.
A. low, little
B. low, considerable
C. high, little
D. high, considerable
27. Tatman Corporation uses an activity-based costing system with the following three activity cost pools:
The activity rate for the Fabrication activity cost pool is closest to:
A. $3.30 per machine-hour
B. $13.20 per machine-hour
C. $10.30 per machine-hour
D. $8.80 per machine-hour
28. Which of the following budgets are prepared before the sales budget?
A. Item A
B. Item B
C. Item C
D. Item D
29. Which of the following benefits could an organization reasonably expect from an effective budget program?
A. Better control of the organization's costs.
B. Better coordination of an organization's activities.
C. Better communication of the organization's objectives.
D. All of the above.
30. Pitkins Company collects 20% of a month's sales in the month of sale, 70% in the month following sale, and 6% in the second month following sale. The remainder is uncollectible. Budgeted sales for the next four months are:
Cash collections in April are budgeted to be:
31. To measure controllable production inefficiencies, which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product?
A. Average historical performance for the last several years.
B. Engineering estimates based on ideal performance.
C. Engineering estimates based on attainable performance.
D. The hours per unit that would be required for the present workforce to satisfy expected demand over the long run.
32. The variance that is most useful in assessing the performance of the purchasing department manager is:
A. the materials quantity variance.
B. the materials price variance.
C. the labor rate variance.
D. the labor efficiency variance.
33. During a recent lengthy strike at Morell Manufacturing Company, management replaced striking assembly line workers with office workers. The assembly line workers were being paid $18 per hour while the office workers are only paid $10 per hour. What is the most likely effect on the labor variances in the first month of this strike?
A. Item A
B. Item B
C. Item C
D. Item D
34. The purpose of a flexible budget is to:
A. allow management some latitude in meeting goals.
B. eliminate fluctuations in production reports by ignoring variable costs.
C. compare actual and budgeted results at virtually any level of activity.
D. reduce the time to prepare the annual budget.
35. The fixed manufacturing overhead budget variance equals:
A. Actual fixed manufacturing overhead cost--Applied fixed manufacturing overhead cost.
B. Actual fixed manufacturing overhead cost--Budgeted fixed manufacturing overhead cost.
C. Budgeted fixed manufacturing overhead cost--Applied fixed manufacturing overhead cost.
D. Actual fixed manufacturing overhead cost--(Actual hours x Standard fixed overhead rate).
36. Mongelli Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below:
The Inn's variable overhead costs are driven by the number of guests.
What would be the total budgeted overhead cost for a month if the activity level is 99 guests? Assume that the activity levels of 90 guests and 99 guests are within the same relevant range.
37. In order to properly report segment margin as a guide to long-run segment profitability and performance, fixed costs must be separated into two broad categories. One category is common fixed costs. What is the other category?
A. discretionary fixed costs
B. committed fixed costs
C. traceable fixed costs
D. specialized fixed costs
38. Toxemia Salsa Company manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The following information was taken from last year's income statement segmented by flavor (brackets indicate a negative amount):
Toxemia expects similar operating results for the upcoming year. If Toxemia wants to maximize its profitability in the upcoming year, which flavor or flavors should Toxemia discontinue?
A. no flavors should be discontinued
C. Wimpy and Mild
D. Wimpy, Mild, and Medium
39. Uchimura Corporation has two divisions: the AFE Division and the GBI Division. The corporation's net operating income is $42,000. The AFE Division's divisional segment margin is $15,700 and the GBI Division's divisional segment margin is $175,400. What is the amount of the common fixed expense not traceable to the individual divisions?
40. Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $580,000, variable expenses of $301,600, and traceable fixed expenses of $186,500. The Alpha Division has sales of $510,000, variable expenses of $178,500, and traceable fixed expenses of $222,100. The total amount of common fixed expenses not traceable to the individual divisions is $235,500. What is the company's net operating income?
41. Costs which can be eliminated in whole or in part if a particular business segment is discontinued are called:
A. sunk costs.
B. opportunity costs.
C. avoidable costs.
D. irrelevant costs.
42. Which of the following best describes an opportunity cost:
A. it is a relevant cost in decision making, but is not part of the traditional accounting records.
B. it is not a relevant cost in decision making, but is part of the traditional accounting records.
C. it is a relevant cost in decision making, and is part of the traditional accounting records.
D. it is not a relevant cost in decision making, and is not part of the traditional accounting records.
43. The acceptance of a special order will improve overall net operating income so long as the revenue from the special order exceeds:
A. the contribution margin on the order.
B. the incremental costs associated with the order.
C. the variable costs associated with the order.
D. the sunk costs associated with the order.
44. The Jabba Company manufactures the "Snack Buster" which consists of a wooden snack chip bowl with an attached porcelain dip bowl. Which of the following would be relevant in Jabba's decision to make the dip bowls or buy them from an outside supplier?
A. Item A
B. Item B
C. Item C
D. Item D
45. Kinsi Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that:
A. uses the lowest number of stamping machine hours.
B. generates the highest contribution margin per unit.
C. generates the highest contribution margin ratio.
D. generates the highest contribution margin per stamping machine hour.
46. Gandy Company has 5,000 obsolete desk lamps that are carried in inventory at a manufacturing cost of $50,000. If the lamps are reworked for $20,000, they could be sold for $35,000. Alternatively, the lamps could be sold for $8,000 for scrap. In a decision model analyzing these alternatives, the sunk cost would be:
47. Suture Corporation's discount rate is 12%. If Suture has a 5-year investment project that has a project profitability index of zero, this means that:
A. the net present value of the project is equal to zero.
B. the internal rate of return of the project is equal to the discount rate.
C. the payback period of the project is equal to the project's useful life.
D. both A and B above are true.
48. If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:
A. equal to 16%.
B. less than 16%.
C. greater than 16%.
D. cannot be determined from this data.
49. (Ignore income taxes in this problem.) Congener Beverage Corporation is considering an investment in a capital budgeting project that has an internal rate of return of 20%. The only cash outflow for this project is the initial investment. The project is estimated to have an 8 year life and no salvage value. Cash inflows from this project are expected to be $100,000 per year in each of the 8 years. Congener's discount rate is 16%. What is the net present value of this project?
50. Three potential investment projects (A, B, and C) at Nit Corporation all require the same initial investment, have the same useful life (3 years), and have no expected salvage value. Expected net cash inflows from these three projects each year is as follows:
What can be determined from the information provided above?
A. the net present value of project C will be the highest.
B. the internal rate of return of projects A and C cannot be computed.
C. the net present value and the internal rate of return will be the same for all three projects.
D. both A and B above.