An Advanced Level Managerial Accounting Test!

A job-order costing system is most likely to be used by a caterer because caterers typically provide customized services and products for each event or client. Job-order costing is a cost accounting method that tracks the costs associated with specific jobs or projects, making it suitable for industries that produce unique products or services. Caterers often create custom menus and provide personalized services for each event, which requires tracking the costs associated with each job separately. Therefore, a caterer is the most likely industry to utilize a job-order costing system.

The budgeted variable cost per unit is $0.35. This can be calculated by dividing the total variable costs ($3,500) by the number of wings that will be cooked and sold (24,000). This gives us a variable cost of $0.1458 per wing. However, since the question asks for the cost per unit, we round this up to the nearest cent, which is $0.35.

The total sunk costs in this scenario are $60,000. Sunk costs refer to costs that have already been incurred and cannot be recovered. In this case, the company purchased the original machinery for $60,000 in 2014. Even though management is considering buying a new machine and selling the original one, the original cost of $60,000 is still a sunk cost because it has already been spent and cannot be recovered. The other options, $80,000, $15,000, and $20,000, are not relevant to the calculation of sunk costs in this scenario.

A factor that limits the level of production is called a constraint. Constraints can be physical, such as limited resources or capacity, or they can be imposed by external factors such as regulations or market demand. Constraints act as barriers that restrict the ability to produce at a higher level, and they need to be identified and managed in order to optimize production efficiency and effectiveness.

The margin of safety refers to the difference between the expected level of sales and the break-even sales. It is a measure of how much sales can decrease before a company starts incurring losses. A higher margin of safety indicates that the company is more resilient to fluctuations in sales and has a larger buffer before reaching the break-even point. Conversely, a lower margin of safety suggests that the company is more vulnerable to changes in sales and may be at a higher risk of operating at a loss.

Period costs are costs that are expensed in the period they are incurred and are identified with specific accounting periods. These costs are not directly associated with the production of goods or services. Selling and administrative expenses, such as advertising, sales salaries, and depreciation of sales equipment, fall under period costs as they are incurred to secure and fill customer orders. On the other hand, costs assigned to goods produced, such as direct materials, direct labor, and manufacturing overhead, are considered product costs. General management costs, including HR, accounting, and corporate headquarters, are also not classified as period costs.

General and administrative costs refer to the expenses incurred by a firm in managing its overall operations and support functions. This includes costs related to human resources, accounting, corporate headquarters, and other administrative support costs. These costs are not directly associated with the production of goods or securing customer orders, but rather with the general management and administration of the organization.

The correct answer is "Total variable costs are expected to be $2,415". Since production and sales are expected to increase by 15%, the total number of boxes of chocolate covered popcorn produced and sold will increase by 15% as well. Therefore, the total variable costs, which include the costs of chocolate and popcorn ingredients, will also increase by 15%. Given that the total variable costs were $2,100 last month, a 15% increase would result in total variable costs of $2,415.

The total cost to produce 12,000 units can be calculated by finding the cost per unit and multiplying it by the number of units. In this case, the total variable cost per unit is $10 ($100,000 / 10,000 units) and the total fixed cost per unit is $15 ($150,000 / 10,000 units). Therefore, the total cost per unit is $25 ($10 + $15). Multiplying this by 12,000 units gives us a total cost of $300,000.

A job cost sheet would serve as a subsidiary ledger to the work in process account. A job cost sheet is a document that tracks the costs associated with a specific job or project. It includes details such as direct materials used, direct labor costs, and overhead costs allocated to the job. The work in process account is used to track the costs of unfinished goods or services. By using a job cost sheet as a subsidiary ledger, the company can easily monitor and control the costs associated with each individual job or project.

Selling costs are the costs associated with securing and filling customer orders, such as advertising expenses, salaries of sales personnel, and depreciation of sales equipment. These costs are directly related to the sales function of a company and are incurred in order to generate revenue. They are separate from the costs associated with general management, production, and administrative expenses.

Supplies used by the factory janitor are most likely considered an indirect material cost for Westerhouse because they are not directly used in the production of refrigerators. Instead, they are used to support the overall operation of the factory. Indirect material costs are expenses that are necessary for the production process but do not become part of the final product. In this case, the supplies used by the factory janitor are not directly incorporated into the refrigerators but are still necessary for the smooth functioning of the manufacturing facility.

The budgeted fixed cost per unit is $0.10. This can be calculated by adding up all the fixed costs (Rent, Depreciation, and Other fixed costs) which equals $2,400, and then dividing it by the total number of wings to be cooked and sold (24,000). $2,400 divided by 24,000 equals $0.10.

Cost of Goods Manufactured is not a specific account that appears on the balance sheet. Instead, it is a calculation that represents the total cost of producing finished goods during a specific period. This cost includes direct materials, direct labor, and manufacturing overhead. The Cost of Goods Manufactured is transferred to the balance sheet as Finished Goods Inventory, which represents the value of completed goods that are ready for sale. Therefore, while Raw Materials Inventory, Finished Goods Inventory, and Work in Process Inventory are all accounts that appear on the balance sheet, Cost of Goods Manufactured does not.

not-available-via-ai

Cost functions within the relevant range are assumed to be linear. The relevant range refers to the range of activity levels in which a company expects to operate and where the cost behavior is predictable. Within this range, the company assumes that the relationship between costs and activity levels is linear, meaning that costs will increase or decrease proportionally with the level of activity. However, outside the relevant range, the cost behavior may change, and cost functions are not necessarily linear. Therefore, the statement that cost functions within the relevant range are assumed to be linear is true.

General and Administrative Cost is the correct answer because these costs are typically fixed and do not vary with the level of production or sales. They include expenses such as salaries of top management, office rent, utilities, and administrative staff wages. These costs are necessary for the overall functioning of the organization and are not directly related to the production process. Therefore, they remain constant regardless of the level of production or sales.

A cash-flow budget is a crucial part of planning as it helps in forecasting and managing the inflow and outflow of cash for a specific period. It allows businesses to estimate their future cash needs, identify potential cash shortfalls or surpluses, and make informed decisions regarding investments, expenses, and financing. By creating a cash-flow budget, organizations can effectively plan their cash resources and ensure they have enough liquidity to meet their financial obligations and achieve their goals.

Preparing financial statements is not part of the planning and control process because it is a separate accounting function that involves recording and summarizing financial transactions. The planning and control process, on the other hand, involves setting goals, developing plans, implementing those plans, and monitoring and comparing actual results to the planned results to ensure that objectives are being met. While financial statements may provide information for decision-making and control, they are not directly involved in the planning and control process itself.

The principle being followed in this scenario is management by exception. This means that the managers are only investigating departures from the budget that appear to be significant, rather than wasting time and resources on small amounts that may not have a significant impact. This approach allows managers to focus on addressing and resolving the most important issues and deviations from the budget.

The margin of safety ratio is a measure of how much sales can decline before a company starts incurring losses. It is calculated by dividing the margin of safety (the difference between actual sales and breakeven sales) by the expected sales. This ratio helps businesses assess their level of risk and determine the extent to which they can withstand a decrease in sales without suffering losses. By comparing the margin of safety to the expected sales, companies can make informed decisions regarding pricing, production levels, and overall financial stability.

Overtime premium is not considered a period cost because it is directly related to the production process and can be allocated to specific products or projects. Period costs, on the other hand, are not directly tied to production and are incurred over a specific period of time. Commissions, advertising costs, and general office salaries are all examples of period costs as they are incurred to support the overall operations of the business rather than being directly tied to production.

The profit budget is a budget that indicates the planned income for a specific period. It helps the organization to forecast and plan their expected revenue and determine the profitability of their operations. By estimating the planned income, the organization can make informed decisions regarding their expenses, investments, and overall financial strategy. This budget is crucial for setting financial goals and evaluating the financial performance of the organization.

Underapplied overhead refers to a situation where the actual overhead costs incurred by a company are greater than the overhead costs allocated or applied to its products or services. This can occur when the estimated overhead costs used for allocation purposes are lower than the actual costs incurred. In such cases, the applied overhead is not sufficient to cover the actual overhead, resulting in underapplied overhead. This can lead to a distortion in the company's financial statements as the costs allocated to products or services may be lower than the actual costs incurred.

The schedule of cost of goods manufactured is an analysis of the work in process account. This schedule shows the total cost of goods that were in the process of being manufactured during a specific period. It includes the costs of direct materials, direct labor, and manufacturing overhead that were incurred to produce the goods. The schedule helps in tracking the progress of production and determining the cost of goods that have been completed and transferred to finished goods inventory.

Product costs are considered an asset until the finished goods are sold because they are directly associated with the production of goods. These costs include direct materials, direct labor, and manufacturing overhead. Until the goods are sold, these costs are recorded as inventory on the balance sheet and are not expensed. Once the goods are sold, the costs are transferred from inventory to cost of goods sold and are recognized as an expense in the period the costs are incurred.

Decreasing unit variable costs will decrease the break-even point because it reduces the amount of revenue needed to cover the fixed costs and start generating a profit. When the variable costs decrease, the contribution margin per unit increases, meaning that each unit sold contributes more towards covering the fixed costs. This allows the break-even point to be reached at a lower level of unit sales, making it easier for the company to start making a profit.

Comparing actual results to expected results is an example of control because it involves monitoring and evaluating the performance of a system or process to ensure that it is on track and achieving the desired outcomes. By comparing actual results to expected results, organizations can identify any variances or deviations from the plan and take corrective actions to bring the performance back in line with the desired objectives. Control is an important aspect of management as it helps in maintaining efficiency, effectiveness, and accountability in achieving organizational goals.

The break-even point in dollars can be calculated by dividing the fixed costs by the contribution margin ratio. The contribution margin ratio is 1 minus the variable cost ratio. In this case, the variable cost ratio is 60% or 0.6, so the contribution margin ratio is 1 - 0.6 = 0.4. Therefore, the break-even point in dollars is $612,000 / 0.4 = $1,530,000.

Management by exception is a control technique where managers only intervene or take action when actual results deviate significantly from planned or expected results. This approach allows managers to focus their attention and resources on areas that require immediate attention or corrective action, rather than micromanaging every aspect of the organization. Therefore, management by exception is an example of control as it helps in monitoring and regulating the performance of the organization.

When there is overapplied overhead, it means that the actual overhead costs incurred are less than the overhead costs applied to the production process. This results in a credit balance in the manufacturing overhead account. To rectify this, the excess amount is debited back to the manufacturing overhead account. Therefore, the correct answer is manufacturing overhead.

It may deviate with GAAP standards, and its can present non-monetary information.

Depreciation on finished goods warehouse is not considered a product cost because it is not directly associated with the production of goods. Product costs are expenses that are directly incurred in the manufacturing process, such as direct materials and indirect labor. Depreciation on finished goods warehouse, on the other hand, is a cost associated with the storage and handling of finished goods, which is not directly involved in the production process.

Depreciation on finished goods warehouse is considered a selling cost because it is directly related to the selling process. When goods are stored in the warehouse, their value decreases over time due to wear and tear, obsolescence, or other factors. This decrease in value is accounted for as depreciation. Since the finished goods warehouse is where the products are stored before being sold, the depreciation on this warehouse is considered a selling cost.

The cost of goods manufactured is credited to the work in process account. This is because the work in process account represents the cost of unfinished goods that are still in the production process. As the goods are completed, their costs are transferred from the work in process account to the finished goods account. Once the finished goods are sold, their costs are then transferred to the cost of goods sold account.

The two options "Evaluating managers to determine how their performance should be rewarded or punished" and "Evaluating operations to provide information as to whether they should be changed or not" are associated with control because they involve assessing and monitoring performance to ensure that goals are being achieved and making necessary changes or adjustments if needed. These actions help in maintaining control over the company's operations and resources to ensure effectiveness and efficiency.

Underapplied overhead is eliminated by adjusting the accounts related to manufacturing overhead. If the underapplied overhead is a small amount, it is debited to the cost of goods sold account and credited to the manufacturing overhead account. This helps to allocate the underapplied overhead to the cost of goods sold. If the underapplied overhead is a large amount, it is apportioned and closed to the work in process, finished goods, and cost of goods sold accounts. This ensures that the underapplied overhead is properly distributed and accounted for in the financial statements.

The predetermined overhead rate is calculated by dividing the estimated overhead cost by the estimated direct labor cost. In this case, the estimated overhead cost is $174,000 and the estimated direct labor cost is $87,000. Dividing $174,000 by $87,000 gives us a predetermined overhead rate of $2.00.

The expected total cost of the units produced can be calculated by multiplying the variable cost per unit by the number of units produced and adding it to the fixed cost per unit. In this case, the variable cost per unit is $8.00, and the fixed cost per unit is $5.00. The number of units produced is 5,100. Therefore, the expected total cost is (8.00 * 5,100) + (5.00 * 5,100) = $40,800 + $25,500 = $66,300.

if an action is taken

Sales salaries are expensed as incurred because they are considered a period cost. Period costs are expenses that are not directly tied to the production process and are incurred over a specific period of time, such as a month or a year. Sales salaries are paid to employees who are involved in the selling and promotion of products or services, and they are recognized as an expense in the same period that the salaries are earned. This is in contrast to direct materials, indirect labor, and factory depreciation, which are typically considered product costs and are capitalized as part of the cost of goods sold or inventory.

Utilities are considered variable costs because they fluctuate based on the level of production or usage. These costs are directly tied to the amount of electricity, water, gas, or other utilities consumed by a business. As production or usage increases, the cost of utilities also increases, and vice versa. Variable costs are not fixed and can be controlled by adjusting consumption or production levels.

Indirect materials are costs that cannot be directly traced to a specific product or service. They are typically used in the production process but do not become part of the final product. Mixed costs, also known as semivariable costs, consist of both fixed and variable components. In the case of indirect materials, they can vary based on the level of production activity (variable) but also have a fixed component that remains constant regardless of production levels. Therefore, indirect materials can be categorized as a mixed cost (semivariable).

Underapplied overhead occurs when the actual manufacturing overhead is less than the allocated overhead. This means that the company did not allocate enough overhead costs to its products. Since cost of goods sold represents the cost of producing goods that have been sold, it is the appropriate account to debit for underapplied overhead. By debiting cost of goods sold, the company can adjust for the underapplied overhead and accurately reflect the true cost of goods sold.

Direct material and direct labor costs are considered variable costs because they directly vary with the level of production. As production increases, more direct materials and direct labor are required, leading to higher costs. On the other hand, manufacturing overhead, selling costs, and general and administrative costs are typically considered fixed costs, as they do not directly change with the level of production. These costs remain relatively constant regardless of the production volume.

Selling costs and general and administrative costs are considered nonmanufacturing costs because they are not directly related to the production process. Selling costs include expenses incurred in promoting and selling products, such as advertising and sales commissions. General and administrative costs include expenses related to the overall management and administration of the company, such as salaries of executives and office rent. In contrast, product costs are the costs directly associated with manufacturing a product, such as raw materials and labor, while period costs are expenses not directly related to production or the sale of products, such as rent and utilities.

The correct answer choices, "Specifies the resources needed to achieve the company goals" and "Communicate's a company's goals to employees," are both associated with the planning process. Planning involves determining the resources, such as manpower, finances, and materials, required to achieve the company's goals. It also includes effectively communicating these goals to employees, ensuring that everyone is aligned and working towards the same objectives.

Product costs and period costs are both types of costs associated with the production of goods.

Product costs include all costs directly incurred in the production process, such as direct materials, direct labor, and manufacturing overhead. These costs are necessary to create the finished product and are capitalized as part of the inventory until the product is sold.

Period costs, on the other hand, are not directly related to the production process. They include selling costs, such as advertising and sales commissions, as well as general and administrative costs, such as office rent and salaries. These costs are expensed in the period they are incurred and are not included in the cost of inventory.

Therefore, both product costs and period costs are production costs, but they differ in their timing and nature.

Applied overhead is debited to the work in process account because it represents the indirect costs incurred during the manufacturing process. These costs include items such as indirect labor, indirect materials, and other manufacturing expenses that cannot be directly traced to a specific product. By debiting the work in process account, the applied overhead is allocated to the products that are still in the manufacturing process. This helps in accurately determining the cost of production and the value of inventory in the work in process account.

Job Order Costing is a costing system used by companies that produce goods to a customer's unique specifications. In this system, the cost of each job is accumulated on a job cost sheet, which helps in tracking the costs associated with a specific job or order. This allows the company to determine the total cost of producing each job and helps in pricing decisions. This method is different from Process Costing, where companies produce large quantities of identical items and the costs are accumulated by each operation. The unit cost of items in Job Order Costing is determined by dividing the costs of production by the number of units produced.

Process costing is a method used by companies that produce large quantities of identical items. In this method, costs accumulate by each operation or process that the item goes through during production. The unit cost of the items is determined by dividing the total costs of production by the number of units produced. This method is different from job costing, where costs are accumulated on a job cost sheet for each unique customer specification.

Computer-controlled manufacturing, lean manufacturing, and total quality management are all modern manufacturing practices.

Computer-controlled manufacturing refers to the use of computers and automation to control and monitor manufacturing processes, resulting in increased efficiency and accuracy.

Lean manufacturing focuses on eliminating waste and improving efficiency by continuously improving processes and reducing non-value-added activities.

Total quality management is a management approach that aims to continuously improve the quality of products and processes by involving all employees and stakeholders in the organization.

These practices are considered modern because they have emerged and gained popularity in recent years as a response to the changing demands and challenges of the manufacturing industry.

Manufacturing overhead and selling costs can be variable or fixed. Manufacturing overhead includes all indirect costs incurred during the production process, such as utilities, rent, and depreciation. These costs can vary depending on the level of production. Selling costs, on the other hand, include expenses related to marketing and selling a product, such as advertising and sales commissions. These costs can also be variable or fixed, depending on factors like sales volume and marketing strategies.

Total fixed cost and UNIT (not total) variable cost do not change over the levels of interest

The practices in Just in Time production (JIT) include minimizing raw materials and work in process inventories to reduce waste and increase efficiency. JIT also involves developing flexible, balanced production systems that allow for smooth and rapid flow of materials, ensuring that resources are utilized effectively. Additionally, JIT emphasizes the importance of concentrating on improving quality to prevent defects and rework. Lastly, JIT considers the implications for over- and underapplied overhead, ensuring that costs are accurately allocated. This approach focuses on cost of goods sold and aims to eliminate unnecessary inventory and improve overall productivity.

The Contribution Margin Approach is associated with calculating a weighted average contribution margin per unit and using this value in the profit formula to calculate the breakeven point and target sales. It is used when the items sold are similar and the relative product mix is used to calculate the required sales of individual items. This approach allows for a more detailed analysis of each product's contribution to the overall profitability of the company.

The Contribution Margin Ratio Approach is associated with products that are substantially different. In this approach, the total company contribution margin ratio is calculated, which takes into account the weighted average contribution margin per unit for each product. This ratio is then used to compute the required sales in dollars, considering the total company fixed costs (common costs) as well. This approach is suitable when the relative product mix is not uniform and the products have significant variations in their contribution margins.

Regression analysis is the method that visually fits a line through the sample data to develop a cost equation for a mixed cost. This statistical technique is commonly used to determine the relationship between a dependent variable and one or more independent variables. In the context of cost analysis, regression analysis helps in understanding how the cost of a mixed cost (which includes both fixed and variable components) varies with changes in the independent variable(s). By fitting a line through the data points, regression analysis provides a mathematical equation that can be used to estimate the cost equation and make predictions.