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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.

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.

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