Managerial Accounting Essay Sample

Managerial Accounting Pages
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Please submit a separate answer sheet, with the answers carefully numbered as mentioned here.

1. At the beginning of the year, manufacturing overhead for the year was estimated to be $670,530. At the end of the year, actual direct labor-hours for the year were 29,400 hours, the actual manufacturing overhead for the year was $665,530, and manufacturing overhead for the year was under-applied by $27,550. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

2. Carver Company produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is:

3. The Factory Overhead account in a job costing system is credited for the:
a) Excess of applied overhead over actual overhead.
b) Actual overhead.
c) Applied overhead.
d) Indirect materials and indirect labor.

4. Himalyan Corp. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses total $35,000 per period. By how much will net operating income change if sales are expected to increase by $40,000?

5. If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:
6. The Work in Process inventory account of a manufacturing company shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

7. Under normal circumstances the Work in Process account used in a job costing system: a) Will include charges for direct labor, direct materials, and applied overhead. b) Will include only charges for direct materials and applied overhead. The labor is charged to expense as incurred. c) Will include charges for direct labor, direct materials, and actual overhead. d) Will include only charges for direct labor and direct materials.

8. Sargent Company applies overhead cost to jobs on the basis of 80 percent of direct labor cost. If Job 210 shows $10,000 of manufacturing overhead cost applied, how much was the direct labor cost on the job?

9. The theoretically correct method of allocating under- or overapplied overhead is to: a) Allocate the amount to cost of goods sold. b) Allocate the amount to finished goods. c) Allocate the amount to work in process and finished goods. d) Allocate the amount among work in process, finished goods, and cost of goods sold.10. Lily Company has the following estimated costs for next year: Direct materials: $ 30,000

Direct labor: 110,000
Indirect materials: 10,000
Rent on factory equipment: 32,000
Salary of production supervisor: 70,000
Advertising expense: 22,000
Sales commissions: 150,000
The company estimates that 10,000 direct labor and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, the predetermined overhead rate per hour will be:

11. With the job order cost system a credit balance in the Factory Overhead account at the end of an accounting period would indicate: a) That an error in the job cost system has occurred.
b) That the company lost money during the period.
c) The presence of underapplied overhead.
d) The presence of overapplied overhead.

12. Braam Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,500 hours. At the end of the year, actual direct labor-hours for the year were 9,700 hours, the actual manufacturing overhead for the year was $143,350, and manufacturing overhead for the year was underapplied by $18,220. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:

13. In the Vasquez Company, any over- or underapplied overhead is closed out to Cost of Goods Sold. Last year, the company incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Company’s Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any over- or underapplied overhead, for the year must have been:

14. Jensen Manufacturing uses a job order cost system. Overhead is applied at the rate of $20 per direct labor hour. Job #777 includes $2,000 of direct labor cost and 150 direct labor hours. $1,500 of indirect labor cost was actually incurred. The proper journal entry to record the wage related cost is: a) Debit Work in Process, $3,500; Credit Wages Payable, $3,500. b) Debit Wage Expense, $3,500; Credit Wages Payable, $3,500. c) Debit Work in Process, $2,000; Debit Factory Overhead, $1,500; Credit Wages Payable, $3,500. d) Debit Work in Process, $3,500; Credit Factory Overhead, $1,500; Credit Wage Expense, $2,000.

15. The Work in Process inventory account of a manufacturing company shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

16. A company has two processing departments: X and Y. Which of the following entries or sets of journal entries would be used to record the transfer between processing departments and from the final processing department to finished goods? a) DR Work in Process Y CR Work in Process X , DR Finished Goods CR Work in Process Y| b) DR Finished Goods CR Work in Process X , DR Finished Goods CR Work in Process Y| c) DR Finished goods CR Work in Process|

d) DR Work in Process X CR Work in Process Y , DR Finished Goods R Work in Process X

17. In a process costing system, the journal entry used to record the transfer of units from Department A, a processing department, to Department B, the next processing department, includes a debit to: a) Work in Process – Department A and a credit to Work in Process – Department B. b) Work in Process – Department B and a credit to Work in Process – Department A. c) Work in Process – Department B and a credit to Materials. d) Finished Goods and a credit to Work in Process – Department B.

18. Fixed cost per unit decreases when:
a) Production volume increases.
b) Production volume decreases.
c) Variable cost per unit decreases.
d) Variable cost per unit increases.

19. Prime cost + Factory overhead cost is:
a) Conversion cost.
b) Production cost.
c) Total cost.
d) None of given option.

20. When a manufacturing process requires mostly human labor and there are widely varying wage rates among workers, what is probably the most appropriate basis of applying factory costs to work in process? a) Machine hours

b) Cost of materials used
c) Direct labor hours
d) Direct labor dollars

21. Complete the following table
| Per unit| Total
Fixed cost| Increase| Constant
Variable cost
Total cost| Increase| Decrease

a) Constant, Decrease
b) Decrease, Decrease
c) Increase, Increase
d) Increase, Decrease

22. For which one of the following industry would you recommend a Job Order Costing system? a) Oil Refining
b) Grain dealing
c) Beverage production
d) Law Cases

23. The difference between total revenues and total variable costs is known as:
a) Contribution margin
b) Gross margin
c) Operating income
d) Fixed costs

24. If 120 units produced, 100 units were sold @ Rs. 200 per unit. Variable cost related to production & selling is Rs. 150 per unit and fixed cost is Rs. 5,000. If the management wants to decrease sales price by 10%, what will be the effect of decreasing unit sales price on profitability of company? (Cost & volume profit analysis keep in your mind while solving it) a) Remains constant

b) Profits will increased
c) Company will have to face losses
d) None of the given options

25. Which of the following statements is (are) true?
a) Companies that produce many different products or services are more likely to use job-order costing systems than process costing systems b) Job-order costing systems are used by manufactures only and process costing systems are used by service firms only c) Job-order costing systems are used by service firms and process costing systems are used by manufacturers d) All of the given options

26. While calculating the finished goods ending inventory, what would be the formula to calculate per unit cost? a) Cost of goods sold / number of units sold
b) Cost of goods to be manufactured / number of units manufactured c) Cost of goods manufactured / number of units manufactured d) Total manufacturing cost / number of units manufactured

27. Which one of the following cost would not be termed as Product Costs? a) Indirect Material
b) Direct Labor
c) Administrative Salaries
d) Plant supervisor’s Salary|

28. An example of an inventoriable cost would be:
a) Shipping fees
b) Advertising flyers
c) Sales commissions
d) Direct materials

29. A company has the following cost data for the month:
Conversion cost: Rs. 78,900
Prime Cost: Rs. 115,700
Beginning Work in Process Inventory: Rs. 4,700
Ending Work in Process Inventory: Rs. 2,800
Beginning Finished Goods Inventory: Rs. 27,600
Ending Finished Goods Inventory: Rs. 29,200
Manufacturing Overhead Costs: Rs. 14,500
What is the Cost of Goods Sold for the month?
a) Rs. 132,100
b) Rs. 116,000
c) Rs. 130,200
d) Rs. 130,500

30. Manson Company produces fishing boats. From the production supervisor’s perspective, depreciation on the factory is: a) Uncontrollable and fixed.
b) Uncontrollable and variable.
c) Controllable and fixed.
d) Controllable and variable.

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