# Accounting problem set.

2. Prime costs of a company are $3,000,000, manufacturing overhead is $1,500,000 and direct labor is $750,000. What is the amount of direct materials?

a. $1,500,000.

b. $750,000.

c. $2,250,000.

d. Cannot be determined from the information provided.

9. Which of the following is not typical of traditional costing systems?

a. Use of a single predetermined overhead rate.

b. Use of direct labor hours or direct labor cost to assign overhead.

c. Assumption of correlation between direct labor and incurrence of overhead cost.

d. Use of multiple cost drivers to allocate overhead.

16. The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 1,200 units, the actual direct labor cost was $25,600 for 2,000 direct labor hours worked, the total direct labor variance is

a. $960 unfavorable.

b. $3,200 favorable.

c. $2,000 unfavorable.

d. $3,200 unfavorable.

17. Adler Company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 3,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

a. Income would decrease by $12,000.

b. Income would increase by $12,000.

c. Income would increase by $210,000.

d. Income would increase by $60,000.

Match the items in the two columns below by entering the appropriate code letter in space provided.

A. Activity index G. Break-even point

B. Variable costs H. Contribution margin

C. Fixed costs I. Margin of safety

D. High-low method J. Contribution margin ratio

E. Relevant range K. Variable costing

F. Mixed costs L. Absorption costing

____ 1. The amount of revenue remaining after deducting variable costs.

____ 2. Costs that contain both a variable and a fixed cost element.

____ 3. The percentage of sales dollars available to cover fixed costs and produce income.

____ 4. Identifies the activity which causes changes in the behavior of costs.

____ 5. The difference between actual or expected sales and sales at the break-even point.

____ 6. Costs that vary in total directly and proportionately with changes in the activity level.

____ 7. The level of activity at which total revenues equal total costs.

____ 8. The range over which the company expects to operate during the year.

____ 9. Costs that remain the same in total regardless of changes in the activity level.

____ 10. A costing approach in which all manufacturing costs are charged to the product.

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2. Prime costs of a company are $3,000,000, manufacturing overhead is $1,500,000 and direct labor is $750,000. What is the amount of direct materials?

a. $1,500,000.

b. $750,000.

c. $2,250,000.

d. Cannot be determined from the information provided.

Prime costs of a company = direct labor + direct materials + manufacturing overhead

$3,000,000 = $750,000 + direct materials + $1,500,000

$750,000 = direct materials

Answer: b

9. Which of the following is not typical of traditional costing systems?

a. Use of a single predetermined overhead rate.

b. Use of direct labor hours or direct labor cost to assign overhead.

c. Assumption of correlation between direct labor and incurrence of overhead cost.

d. Use of multiple cost drivers to allocate overhead.

Answer: d

This approach differs from traditional systems because cost ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what is the amount of direct materials, which is not typical of traditional costing systems, the total direct labor variance, affect of the acceptance of the special order by Adler Company, and the matching of the items given.

Computing the Mean and Median Numbers

60. Owens Orchards sells apples in a large bag by weight. A sample of seven bags contained the following numbers of apples: 23, 19, 26, 17, 21, 24, and 22.

a. Compute the mean number and median number of apples in a bag.

b. Verify that _(X _) _ 0.

Describing Data: Numerical Measures

62. The Citizens Banking Company is studying the number of times the ATM located in a Loblaw Supermarket at the foot of Market Street is used per day. Following are the numbers of times the machine was used over each of the last 30 days. Determine the mean number of times the machine was used per day.

83 64 84 76 84 54 75 59 70 61

63 80 84 73 68 52 65 90 52 77

95 36 78 61 59 84 95 47 87 60

68. The American Automobile Association checks the prices of gasoline before many holiday weekends. Listed below are the self-service prices for a sample of 15 retail outlets during the May 2003 Memorial Day weekend in the Detroit, Michigan, area.

1.44 1.42 1.35 1.39 1.49 1.49 1.41 1.46

1.41 1.49 1.45 1.48 1.39 1.46 1.44

a. What is the arithmetic mean selling price?

b. What is the median selling price?

c. What is the modal selling price?

70. A recent article suggested that if you earn $25,000 a year today and the inflation rate continues at 3 percent per year, you'll need to make $33,598 in 10 years to have the same buying power. You would need to make $44,771 if the inflation rate jumped to 6 percent.

Confirm that these statements are accurate by finding the geometric mean rate of increase.

72. The weights (in pounds) of a sample of five boxes being sent by UPS are: 12, 6, 7, 3, and 10.

a. Compute the range.

b. Compute the mean deviation.

c. Compute the standard deviation.

6. A firm will promote two employees out of a group of six men and three women.

a. List the outcomes of this experiment if there is particular concern about gender equity.

b. Which concept of probability would you use to estimate these probabilities?

66. A survey of undergraduate students in the School of Business at Northern University revealed the following regarding the gender and majors of the students:

Major

Gender Accounting Management Finance Total

Male 100 150 50 300

Female 100 50 50 200

Total 200 200 100 500

a. What is the probability of selecting a female student?

b. What is the probability of selecting a finance or accounting major?

c. What is the probability of selecting a female or an accounting major? Which rule of addition did you apply?

d. Are gender and major independent? Why?

e. What is the probability of selecting an accounting major, given that the person selected

is a male?

f. Suppose two students are selected randomly to attend a lunch with the president of the

university. What is the probability that both of those selected are accounting majors?

38. The accounting department at Weston Materials, Inc., a national manufacturer of unattached garages, reports that it takes two construction workers a mean of 32 hours and a standard deviation of 2 hours to erect the Red Barn model. Assume the assembly times follow the normal distribution.

a. Determine the z values for 29 and 34 hours. What percent of the garages take between

32 hours and 34 hours to erect?

b. What percent of the garages take between 29 hours and 34 hours to erect?

c. What percent of the garages take 28.7 hours or less to erect?

d. Of the garages, 5 percent take how many hours or more to erect?

44. The number of passengers on the Carnival Sensation during one-week cruises in the

Caribbean follows the normal distribution. The mean number of passengers per cruise is

1,820 and the standard deviation is 120.

a. What percent of the cruises will have between 1,820 and 1,970 passengers?

b. What percent of the cruises will have 1,970 passengers or more?

c. What percent of the cruises will have 1,600 or fewer passengers?

d. How many passengers are on the cruises with the fewest 25 percent of passengers?

60. In establishing warranties on HDTV sets, the manufacturer wants to set the limits so that few will need repair at manufacturer expense. On the other hand, the warranty period must be long enough to make the purchase attractive to the buyer. For a new HDTV the mean number of months until repairs are needed is 36.84 with a standard deviation of 3.34 months. Where should the warranty limits be set so that only 10 percent of the HDTVs need repairs at the manufacturer's expense?

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