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Solutions.
As the production level increases, the cost per unit decreases for a fixed cost. correct answers
TRUE
Lucius Smith is an assembler for a chair manufacturer. Normally, he spends one hour (at
$25/hour) for each chair he assembles. After assembling 500 chairs he notices that the quality
will be improved if he spends 10 more minutes on each chair. Management agrees and thereafter
he spends one hour and ten minutes assembling each chair. This will change the? correct answers
Variable cost line
Fixed cost per unit remains the same over all levels of production. correct answers FALSE
Costs that change in total with increased production are correct answers Variable costs
A variable cost changes in total over increasing amounts of units produced. correct answers
TRUE
A variable cost per unit decreases as the production level increases. correct answers FALSE
The costs of all jobs completed, but not yet sold are in the finished good account. correct answers
TRUE
Direct materials are a conversion cost. correct answers FALSE
Conversion costs are correct answers are the total of direct labor and factory overhead costs.
They are combined because it is the labor and overhead together that convert the raw material
into the finished product.
Prime costs correct answers the direct cost of a commodity in terms of the materials and labor
involved in its production, excluding fixed costs. Examples: direct materials and direct cost
If the sales mix changes, the composition of the composite unit changes, but the breakeven point
does not. correct answers FALSE
Absorption costing yields a higher net income if the units produced exceed the units sold. correct
answers TRUE
Variable costing differs from absorption costing in that correct answers variable costing does not
include fixed factory overhead in inventory.
Absorption costing is not only useful for external reporting, it is essential for internal reporting
because it shows a clear picture of cost behavior. correct answers FALSE - variable costing
shows a clear picture of cost behavior because it separates fixed costs from variable costs
, Variable costing is used for internal reporting but absorption costing is used for external
reporting. correct answers TRUE
Breakeven indicates that the sales dollars cover all fixed and variable costs of manufacturing.
correct answers TRUE
Which of the following will not be found on an absorption costing income statement? gross
margin, contribution margin, net income, cost of goods sold correct answers Contribution margin
Breakeven indicates that the sales dollars cover only fixed costs. correct answers FALSE
If units produced are less than units sold, net income using absorption costing is: correct answers
less than variable costing
A manufacturing overhead budget accounts for direct and indirect labor. correct answers FALSE
A direct materials purchases budget includes materials that are part of overhead. correct answers
FALSE
Direct labor costs are part of the cost of goods sold budget. correct answers TRUE
The budgeted balance sheet is done correct answers after the budgeted income statement
The cash disbursements budget is done correct answers After the case receipts budget
To calculate the overhead volume variance, actual overhead costs are required. correct answers
FALSE
Standards may be viewed as labor as too loose. correct answers FALSE
The flexible overhead budget consists of fixed overhead only. correct answers FALSE
Time and motion studies are acceptable information for developing labor efficiency variances.
correct answers TRUE
Overhead volume variance is a production indicator. correct answers TRUE
As the interest rate used to discount from future cash flows is increased, present value of future
cash inflows: correct answers Decreases
Flexible Budget correct answers Abudget that adjusts to the activity or volume levels of a
company. Unlike a static budget, which does not change from the amounts established when the
budget was created, a flexible budget continuously "flexes" with a business's variations in costs.
opportunity cost correct answers the "cost" incurred by not enjoying the benefit associated with
the best alternative choice
Solutions.
As the production level increases, the cost per unit decreases for a fixed cost. correct answers
TRUE
Lucius Smith is an assembler for a chair manufacturer. Normally, he spends one hour (at
$25/hour) for each chair he assembles. After assembling 500 chairs he notices that the quality
will be improved if he spends 10 more minutes on each chair. Management agrees and thereafter
he spends one hour and ten minutes assembling each chair. This will change the? correct answers
Variable cost line
Fixed cost per unit remains the same over all levels of production. correct answers FALSE
Costs that change in total with increased production are correct answers Variable costs
A variable cost changes in total over increasing amounts of units produced. correct answers
TRUE
A variable cost per unit decreases as the production level increases. correct answers FALSE
The costs of all jobs completed, but not yet sold are in the finished good account. correct answers
TRUE
Direct materials are a conversion cost. correct answers FALSE
Conversion costs are correct answers are the total of direct labor and factory overhead costs.
They are combined because it is the labor and overhead together that convert the raw material
into the finished product.
Prime costs correct answers the direct cost of a commodity in terms of the materials and labor
involved in its production, excluding fixed costs. Examples: direct materials and direct cost
If the sales mix changes, the composition of the composite unit changes, but the breakeven point
does not. correct answers FALSE
Absorption costing yields a higher net income if the units produced exceed the units sold. correct
answers TRUE
Variable costing differs from absorption costing in that correct answers variable costing does not
include fixed factory overhead in inventory.
Absorption costing is not only useful for external reporting, it is essential for internal reporting
because it shows a clear picture of cost behavior. correct answers FALSE - variable costing
shows a clear picture of cost behavior because it separates fixed costs from variable costs
, Variable costing is used for internal reporting but absorption costing is used for external
reporting. correct answers TRUE
Breakeven indicates that the sales dollars cover all fixed and variable costs of manufacturing.
correct answers TRUE
Which of the following will not be found on an absorption costing income statement? gross
margin, contribution margin, net income, cost of goods sold correct answers Contribution margin
Breakeven indicates that the sales dollars cover only fixed costs. correct answers FALSE
If units produced are less than units sold, net income using absorption costing is: correct answers
less than variable costing
A manufacturing overhead budget accounts for direct and indirect labor. correct answers FALSE
A direct materials purchases budget includes materials that are part of overhead. correct answers
FALSE
Direct labor costs are part of the cost of goods sold budget. correct answers TRUE
The budgeted balance sheet is done correct answers after the budgeted income statement
The cash disbursements budget is done correct answers After the case receipts budget
To calculate the overhead volume variance, actual overhead costs are required. correct answers
FALSE
Standards may be viewed as labor as too loose. correct answers FALSE
The flexible overhead budget consists of fixed overhead only. correct answers FALSE
Time and motion studies are acceptable information for developing labor efficiency variances.
correct answers TRUE
Overhead volume variance is a production indicator. correct answers TRUE
As the interest rate used to discount from future cash flows is increased, present value of future
cash inflows: correct answers Decreases
Flexible Budget correct answers Abudget that adjusts to the activity or volume levels of a
company. Unlike a static budget, which does not change from the amounts established when the
budget was created, a flexible budget continuously "flexes" with a business's variations in costs.
opportunity cost correct answers the "cost" incurred by not enjoying the benefit associated with
the best alternative choice
