EXAM 3 - ACCOUNTING 2010 (Mizzou)-
Graded A
During its first year of operations, Connor Company paid $45,160 for direct materials
and $19,400 in wages for production workers. Lease payments and utilities on the
production facilities amounted to $8,400. General, selling, and administrative expenses
were $9,400. The company produced 6,400 units and sold 5,400 units for $16.40 a unit.
The average cost to produce one unit is which of the following amounts?
$9.92
$12.87
$11.40
$13.51 - ANSWER-$11.40
Which of the following types of labor costs will never flow through the inventory
account?
Plant supervision
Assembly labor
Sales commissions
Material handling - ANSWER-Sales Commission
Which of the following statements is true with regard to product costs versus general,
selling, and administrative costs?
Product costs associated with unsold units appear on the income statement as general
expenses.
General, selling, and administrative costs appear on the balance sheet.
Product costs associated with units sold appear on the income statement as cost of
goods sold.
None of these are true. - ANSWER-Product costs associated with units sold appear on
the income statement as cost of goods sold
Which of the following transactions would cause net income for the period to decrease?
Paid $2,500 cash for raw material cost
Purchased $8,000 of merchandise inventory
Recorded $5,000 of depreciation on production equipment
Used $2,000 of office supplies - ANSWER-Used $2,000 of office supplies
Which of the following is not classified as manufacturing overhead?
,Factory insurance
Salary of factory supervisor
Production supplies
Product delivery costs - ANSWER-Product delivery costs
The Page Turner Publishing Company is trying to decide whether to accept a special
order for its latest blockbuster. In making this decision, which level of costs will most
likely be relevant to the decision?
Batch-level costs.
Facility-level costs.
Unit-level costs.
None of these answers are correct. - ANSWER-Unit-level costs
Outdoor Living Company has just received a special order for 500 hammocks. Outdoor
Living has sufficient idle capacity to accept the order. Accepting the order will increase
Outdoor Living's total variable manufacturing costs. Which type of cost is considered
RELEVANT to Outdoor Living's decision whether to accept or reject the special order?
Salary of the production manager
Depreciation on equipment that would be used to make the hammocks
Raw materials to make the 500 hammocks
Company president's salary - ANSWER-Raw materials to make the 500 hammocks
Outdoor Living Company has just received a special order for 500 hammocks. Outdoor
Living has sufficient idle capacity to accept the order. Accepting the order will increase
Outdoor Living's variable manufacturing costs. Which type of cost is considered a SUNK
COST to Outdoor Living's decision whether to accept or reject the special order?
Depreciation on equipment that would be used to make the hammocks
Labor cost to make the 500 hammocks
Materials handling cost
Raw materials to make the 500 hammocks - ANSWER-Depreciation on equipment that
would be used to make the hammocks
The Mighty Music Company produces and sells a desktop speaker for $100. The
company has the capacity to produce 50,000 speakers each period. At capacity, the
costs assigned to each unit are as follows:
Unit level costs$ 45Product level costs$ 15Facility level costs$ 5
The company has received a special order for 500 speakers. If this order is accepted,
the company will have to spend $15,000 on additional costs.
, Assuming that no sales to regular customers will be lost if the order is accepted, at what
selling price will the company be indifferent between accepting and rejecting the special
order?
$75
$95
$60
$45 - ANSWER-$75
Benitez Company currently outsources a relay switch that is a component in one of its
products. The switches cost $20 each. The company is considering making the
switches internally at the following projected annual production costs:
Unit-level material cost$ 3Unit-level labor cost$ 2Unit-level overhead$ 1Batch-level set-
up cost (5,000 units per batch)$ 25,000Product-level supervisory salaries$
37,500Allocated facility-level costs$ 20,000
The company expects an annual need for 5,000 switches. If the company makes the
product, it will have to utilize factory space currently being leased to another company
for $1,500 a month. If the company decides to make the parts, total costs will be:
$10,500 more than if the switches are purchased.
$20,000 less than if the switches are purchased.
$27,000 less than if the switches are purchased.
$30,500 more than if the switches are purchased. - ANSWER-$10,500 more than if the
switches are purchased
All of the following are variables that could be considered in a decision to outsource a
component that is currently being produced in-house. Which of the following is not likely
to be relevant?
The impact on employee morale
The book value of equipment used in making the component
The importance of vertical integration to the company
The reliability of the supplier - ANSWER-The book value of equipment used in making
the component
Which of the following is a true statement regarding product-level costs?
Product-level costs are incurred to support the entire company.
Product-level costs are only relevant to a decision when adding a product to a
company's product line.
Product-level costs are generally relevant to special order decisions.
Product-level costs are generally relevant to outsourcing decisions. - ANSWER-
Product-level costs are generally relevant to outsourcing decisions
Graded A
During its first year of operations, Connor Company paid $45,160 for direct materials
and $19,400 in wages for production workers. Lease payments and utilities on the
production facilities amounted to $8,400. General, selling, and administrative expenses
were $9,400. The company produced 6,400 units and sold 5,400 units for $16.40 a unit.
The average cost to produce one unit is which of the following amounts?
$9.92
$12.87
$11.40
$13.51 - ANSWER-$11.40
Which of the following types of labor costs will never flow through the inventory
account?
Plant supervision
Assembly labor
Sales commissions
Material handling - ANSWER-Sales Commission
Which of the following statements is true with regard to product costs versus general,
selling, and administrative costs?
Product costs associated with unsold units appear on the income statement as general
expenses.
General, selling, and administrative costs appear on the balance sheet.
Product costs associated with units sold appear on the income statement as cost of
goods sold.
None of these are true. - ANSWER-Product costs associated with units sold appear on
the income statement as cost of goods sold
Which of the following transactions would cause net income for the period to decrease?
Paid $2,500 cash for raw material cost
Purchased $8,000 of merchandise inventory
Recorded $5,000 of depreciation on production equipment
Used $2,000 of office supplies - ANSWER-Used $2,000 of office supplies
Which of the following is not classified as manufacturing overhead?
,Factory insurance
Salary of factory supervisor
Production supplies
Product delivery costs - ANSWER-Product delivery costs
The Page Turner Publishing Company is trying to decide whether to accept a special
order for its latest blockbuster. In making this decision, which level of costs will most
likely be relevant to the decision?
Batch-level costs.
Facility-level costs.
Unit-level costs.
None of these answers are correct. - ANSWER-Unit-level costs
Outdoor Living Company has just received a special order for 500 hammocks. Outdoor
Living has sufficient idle capacity to accept the order. Accepting the order will increase
Outdoor Living's total variable manufacturing costs. Which type of cost is considered
RELEVANT to Outdoor Living's decision whether to accept or reject the special order?
Salary of the production manager
Depreciation on equipment that would be used to make the hammocks
Raw materials to make the 500 hammocks
Company president's salary - ANSWER-Raw materials to make the 500 hammocks
Outdoor Living Company has just received a special order for 500 hammocks. Outdoor
Living has sufficient idle capacity to accept the order. Accepting the order will increase
Outdoor Living's variable manufacturing costs. Which type of cost is considered a SUNK
COST to Outdoor Living's decision whether to accept or reject the special order?
Depreciation on equipment that would be used to make the hammocks
Labor cost to make the 500 hammocks
Materials handling cost
Raw materials to make the 500 hammocks - ANSWER-Depreciation on equipment that
would be used to make the hammocks
The Mighty Music Company produces and sells a desktop speaker for $100. The
company has the capacity to produce 50,000 speakers each period. At capacity, the
costs assigned to each unit are as follows:
Unit level costs$ 45Product level costs$ 15Facility level costs$ 5
The company has received a special order for 500 speakers. If this order is accepted,
the company will have to spend $15,000 on additional costs.
, Assuming that no sales to regular customers will be lost if the order is accepted, at what
selling price will the company be indifferent between accepting and rejecting the special
order?
$75
$95
$60
$45 - ANSWER-$75
Benitez Company currently outsources a relay switch that is a component in one of its
products. The switches cost $20 each. The company is considering making the
switches internally at the following projected annual production costs:
Unit-level material cost$ 3Unit-level labor cost$ 2Unit-level overhead$ 1Batch-level set-
up cost (5,000 units per batch)$ 25,000Product-level supervisory salaries$
37,500Allocated facility-level costs$ 20,000
The company expects an annual need for 5,000 switches. If the company makes the
product, it will have to utilize factory space currently being leased to another company
for $1,500 a month. If the company decides to make the parts, total costs will be:
$10,500 more than if the switches are purchased.
$20,000 less than if the switches are purchased.
$27,000 less than if the switches are purchased.
$30,500 more than if the switches are purchased. - ANSWER-$10,500 more than if the
switches are purchased
All of the following are variables that could be considered in a decision to outsource a
component that is currently being produced in-house. Which of the following is not likely
to be relevant?
The impact on employee morale
The book value of equipment used in making the component
The importance of vertical integration to the company
The reliability of the supplier - ANSWER-The book value of equipment used in making
the component
Which of the following is a true statement regarding product-level costs?
Product-level costs are incurred to support the entire company.
Product-level costs are only relevant to a decision when adding a product to a
company's product line.
Product-level costs are generally relevant to special order decisions.
Product-level costs are generally relevant to outsourcing decisions. - ANSWER-
Product-level costs are generally relevant to outsourcing decisions
