Exam 3: Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

In an income statement prepared as an internal report using the variable costing method,fixed manufacturing overhead would

Consider the following three product costing alternatives: process costing,job order costing,and standard costing.Which of these can be used in conjunction with absorption costing?

Which of the following is a term more descriptive of the term "direct costing"?

If underapplied factory overhead is material,it is prorated among Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold.

Machine Master,Inc.had the following data regarding monthly power costs:

Month	Machine hours	Power cost
Jan	300	$680
Feb	600	720
Mar	400	695
Apr	200	640

Assume that management expects 500 machine hours in May.Using the high-low method,calculate May's power cost using machine hours as the basis for prediction.

Ellis Corporation The following information was extracted from the first year absorption-based accounting records of Ellis Corporation

Total fixed costs incurred	$100,000
Total variable costs incurred	50,000
Total period costs incurred	70,000
Total variable period costs incurred	30,000
Units produced	20,000
Units sold	12,000
Unit sales price	$12

Refer to Ellis Corporation.What is Cost of Goods Sold for Ellis Corporation's first year?

If underapplied factory overhead is immaterial,the account is closed by a credit to Cost of Goods Sold.

The following information regarding fixed production costs from a manufacturing firm is available for the current year:

Fixed costs in the beginning inventory	$ 16,000
Fixed costs incurred this period	100,000

Which of the following statements is not true?

How can a company produce both variable and absorption costing information from a single accounting system?

Unabsorbed fixed overhead costs in an absorption costing system are

On December 30,a fire destroyed most of the accounting records of the Stone Division,a small one-product manufacturing division that uses standard costs and flexible budgets.All variances are written off as additions to (or deductions from)income;none are pro-rated to inventories.You have the task of reconstructing the records for the year.The general manager informs you that the accountant has been experimenting with both absorption costing and variable costing. The following information is available for the current year: a. Cash on hand, December 31                                                                                   $10 b. Sales                                                                                                                         $128,000 c. Actual fixed indirect manufacturing costs                                                               21,000 d. Accounts receivable, December 31                                                                         20,000 e. Standard variable manufacturing costs per unit                                                             1 f. Variances from standard of all variable manufacturing costs                                   $5,000 U g. Operating income, absorption-costing basis                                                             $14,400 h. Accounts payable, December 31                                                                               18,000 i. Gross profit, absorption costing at standard (before deducting variances)                                                                                                                        22,400 j. Total liabilities                                                                                                             100,000 k. Unfavorable budget variance, fixed manufacturing costs                                           1,000 U l. Notes receivable from chief accountant                                                                       4,000 m. Contribution margin, at standard (before deducting variances)                                 48,000 n. Direct-material purchases, at standard prices                                                             50,000 o. Actual selling and administrative costs (all fixed)                                                     6,000 Required: Compute the following items (ignore income tax effects). 1. Operating income on a variable-costing basis. 2. Number of units sold. 3. Number of units produced. 4. Number of units used as the denominator to obtain fixed indirect cost application rate per unit on absorption-costing basis. 5. Did inventory (in units) increase or decrease? Explain. 6. By how much in dollars did the inventory level change (a) under absorption costing, (b) under variable costing? 7. Variable manufacturing cost of goods sold, at standard prices. 8. Manufacturing cost of goods sold at standard prices, absorption costing.

Phoenix Corporation The records of Phoenix Corporation revealed the following data for the current year.

Work in Process	$ 73,150
Finished Goods	115,000
Cost of Goods Sold	133,650
Direct Labor	111,600
Direct Material	84,200

Refer to Phoenix Corporation.Assume,for this question only,actual overhead is $98,700 and applied overhead is $93,250.Manufacturing overhead is:

Wyatt Corporation Wyatt Corporation has the following standard costs associated with the manufacture and sale of one of its products:

Direct material	$3.00 per unit
Direct labor	2.50 per unit
Variable manufacturing overhead	1.80 per unit
Fixed manufacturing overhead	4.00 per unit (based on an estimate of 50,000 units per year)
Variable selling expenses	.25 per unit
Fixed SG&A expense	$75,000 per year

During its first year of operations Wyatt manufactured 51,000 units and sold 48,000. The selling price per unit was $25. All costs were equal to standard. Refer to Wyatt Corporation.Under variable costing,the standard production cost per unit for the current year was

Expected capacity is a long-run measure of activity.

An outlier is

Richardson Company The following information is available for Richardson Company for its first year of operations:

Sales in units	5,000
Production in units	8,000
Manufacturing costs:
Direct labor	$3 per unit
Direct material	$5 per unit
Variable overhead	$1 per unit
Fixed overhead	$100,000
Net income (absorption method)	$30,000
Sales price per unit	$40

Refer to Richardson Company.What was the total amount of Selling,General and Administrative expense incurred by Richardson Company?

If actual overhead exceeds applied overhead,factory overhead is said to be ____________________.

Terry Smith Corporation used least squares regression analysis to obtain the following output: Personnel Department Cost Explained by Number of Employees

Constant	$5,800
Standard error of Y estimate	$630
R - squared	0.8924
No. of observations	20
Degrees of freedom	18
X coefficient(s)	1.902
Standard error of coefficient(s)	0.0966

a. What is the total fixed cost? b. What is the variable cost per employee? c. Prepare the line ar cost function. d. What is the coefficient of determination? Comment on the goodness of fit

In a normal cost system,factory overhead is assigned to an overhead control account and then allocated to products and services.

Which of the following is not associated with absorption costing?