Question 1

Which of the following is a conversion resource?

Accepted Answer

A)  Office supplies 
B)  Supervisory labor 
C)  Sales department 
D)  Hard drives used in manufacture of computers 
A)  Office supplies 
B)  Supervisory labor 
C)  Sales department 
D)  Hard drives used in manufacture of computers

Question 2

The following data are available for the Saint Paul Manufacturing Company for the year 2007, its first year of operations:
  
Required:Calculate cost of goods sold under throughput costing, variable costing and absorption costing.

Accepted Answer

The answer of The following data are available for the...

Question 3

Which of the following is not an argument in favor of throughput costing?

Accepted Answer

A)  Managers cannot hide committed costs or past resource spending by increasing production 
B)  Only increases in sales will increase profits 
C)  Increases in sales and production will increase profits 
D)  Base production decisions should be based on resource supply and use only 
A)  Managers cannot hide committed costs or past resource spending by increasing production 
B)  Only increases in sales will increase profits 
C)  Increases in sales and production will increase profits 
D)  Base production decisions should be based on resource supply and use only

Question 4

Period costs

Accepted Answer

A)  Do not become part of the value of inventory for financial or tax reporting 
B)  Become part of the value of inventory for financial reporting but not tax reporting 
C)  Become part of the value of inventory for tax reporting but not financial reporting 
D)  Are the same as indirect manufacturing costs 
A)  Do not become part of the value of inventory for financial or tax reporting 
B)  Become part of the value of inventory for financial reporting but not tax reporting 
C)  Become part of the value of inventory for tax reporting but not financial reporting 
D)  Are the same as indirect manufacturing costs

Question 5

Briefly compare and contrast throughput costing, variable costing and absorption costing. What are the theoretical arguments for and against each method?

Accepted Answer

Throughput costing uses only unit level

Question 6

Which of the following describes a sunk cost?

Accepted Answer

A)  A cost that is not intended to vary with production or sales volume 
B)  Foregone benefit that could have been realized from the best alternative use of resources 
C)  Past resources payments that cannot be changed by any current or future decision 
D)  Costs that can be changed quickly and easily 
A)  A cost that is not intended to vary with production or sales volume 
B)  Foregone benefit that could have been realized from the best alternative use of resources 
C)  Past resources payments that cannot be changed by any current or future decision 
D)  Costs that can be changed quickly and easily

Question 7

Assume the role of the controller of Quinn Machine Tools, Inc. Explain to Joel why he is wrong.
   Consider the following cost and production information for Quinn Machine Tools, Inc.
  
Quinn Machine Tools, Inc. uses the throughput costing method.
Required
(a) Compute the throughput contribution margin, operating income, and ending inventory for Quinn Machine Tools, Inc.
(b) Assume that sales of part D-1251 increases by 15 units during the given period (production remains constant). Re-compute the above figures.
(c) Joel Shukla, the production manager of Quinn Machine Tools, argues with the controller that computing costs for each different part is a waste of time. He asks: "Costs per unit of the different parts are average costs after all. How is that an improvement over using overall average cost?"

Accepted Answer

(a)
 @#IMG-DLM& (b)
 @#IMG-DLM& 
Note: Sales revenue and cos

Question 8

Use the following to answer questions:
  
-The throughput product cost of goods sold is:

Accepted Answer

A)  $96,000 
B)  $120,000 
C)  $144,000 
D)  $80,000 
A)  $96,000 
B)  $120,000 
C)  $144,000 
D)  $80,000

Question 9

Use the following to answer questions:
  
-The absorption cost of goods sold is:

Accepted Answer

A)  $246,667 
B)  $120,000 
C)  $180,000 
D)  $40,000 
A)  $246,667 
B)  $120,000 
C)  $180,000 
D)  $40,000

Question 10

When inventory levels decrease absorption costing will result in a higher operating income than direct costing.
AASCB: Analytic

Accepted Answer

A) True 
 B)False

Question 11

When inventory levels increase, absorption costing will result in a higher operating income than direct costing.
AASCB: Analytic

Accepted Answer

A) True 
 B)False

Question 12

Most management systems measure both opportunity costs and out of pocket costs.

Accepted Answer

A) True 
 B)False

Question 13

Boylan Company had an operating profit of $400,000 using variable costing in April, 2007. Beginning inventory was 36,000 units and ending inventory was 46,000 units. The committed (fixed) overhead was $10 per unit for the beginning and ending inventory. Sales were $900,000 and committed (fixed) operating expenses were $50,000.
Required: Calculate the operating profit in April, 2007 using absorption costing.

Accepted Answer

$500,000
 
$400,000 plus $10 per unit fi

Question 14

You have the following information regarding Crosby Company:
Sales 25,000 units per year at $45 per unit
Production 30,000 units in 2007 and 20,000 units in 2008
At the beginning of 2007 there was no inventory.
Variable manufacturing costs are $30.00 per unit
Fixed manufacturing costs are $150,000 per year
Marketing costs are all fixed at $75,000 per year
Required:
(a) Prepare an income statement under absorption costing for 2007 and 2008. Include a column for both years taken together.
(b) Prepare an income statement under variable costing for 2007 and 2008. Include a column for both years taken together.
(c) Comment on the results and reconcile any differences in income.

Accepted Answer

(a)
 @#IMG-DLM& (b)
 @#IMG-DLM& (c) In 2007, production exce

Question 15

Throughout costing assigns only batch-level spending for direct costs of products or services.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an example of a product-level cost?

Accepted Answer

A)  Special packaging for a particular customer 
B)  Moving materials for a batch of production 
C)  Designing a product using computer-aided design software 
D)  Random inspection of finished units 
A)  Special packaging for a particular customer 
B)  Moving materials for a batch of production 
C)  Designing a product using computer-aided design software 
D)  Random inspection of finished units

Question 17

Dimmick Corporation produces and sells a single product at $40 per unit. During 2007, the company produced 200,000 units, 160,000 of which were sold during the year. All ending inventory was in finished goods inventory; there was no inventory on hand at the beginning of the year. The following data relate to the company's production process:
  
Required:
Calculate the following.
(a) The unit cost of ending inventory on the balance sheet prepared for stockholders.
(b) The unit cost of ending inventory on a variable cost balance sheet.
(c) The operating income using absorption costing
(d) The operating income using variable costing.
(e) The ending inventory using absorption costing.
(f) The ending inventory using variable costing.
(g) A reconciliation of the difference in operating income between absorption costing and variable costing using the shortcut method.

Accepted Answer

(a) $6.75 ($550,000 + $400,000 + $100,00

Question 18

Work-in-process inventory refers to partially completed units.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions:
  
-The variable operating income is:

Accepted Answer

A)  $120,000 
B)  $140,000 
C)  $104,000 
D)  $128,000 
E)  *** $30 per unit x 4,000 units sold 
A)  $120,000 
B)  $140,000 
C)  $104,000 
D)  $128,000 
E)  *** $30 per unit x 4,000 units sold

Question 20

Use the following to answer questions:
Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30:
  
-The throughput cost per unit for Product 250C is:

Accepted Answer

A)  $10,970 
B)  $4,000 
C)  $1,000 
D)  $6,970 
A)  $10,970 
B)  $4,000 
C)  $1,000 
D)  $6,970

Which of the following is a conversion resource?

The following data are available for the Saint Paul Manufacturing Company for the year 2007, its first year of operations: Required:Calculate cost of goods sold under throughput costing, variable costing and absorption costing.

Which of the following is not an argument in favor of throughput costing?

Period costs

Briefly compare and contrast throughput costing, variable costing and absorption costing. What are the theoretical arguments for and against each method?

Which of the following describes a sunk cost?

Use the following to answer questions: -The throughput product cost of goods sold is:

Use the following to answer questions: -The absorption cost of goods sold is:

When inventory levels decrease absorption costing will result in a higher operating income than direct costing. AASCB: Analytic

When inventory levels increase, absorption costing will result in a higher operating income than direct costing. AASCB: Analytic

Most management systems measure both opportunity costs and out of pocket costs.

Throughout costing assigns only batch-level spending for direct costs of products or services.

Which of the following is an example of a product-level cost?

Work-in-process inventory refers to partially completed units.

Use the following to answer questions: -The variable operating income is:

Use the following to answer questions: Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30: -The throughput cost per unit for Product 250C is:

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Performance Measurement Systems Glossary Photo Credits

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Exam 2: Product Costing Systems: Concepts and Design Issues

Which of the following is a conversion resource?

The following data are available for the Saint Paul Manufacturing Company for the year 2007, its first year of operations: Required:Calculate cost of goods sold under throughput costing, variable costing and absorption costing.

Which of the following is not an argument in favor of throughput costing?

Period costs

Briefly compare and contrast throughput costing, variable costing and absorption costing. What are the theoretical arguments for and against each method?

Which of the following describes a sunk cost?

Use the following to answer questions: -The throughput product cost of goods sold is:

Use the following to answer questions: -The absorption cost of goods sold is:

When inventory levels decrease absorption costing will result in a higher operating income than direct costing. AASCB: Analytic

When inventory levels increase, absorption costing will result in a higher operating income than direct costing. AASCB: Analytic

Most management systems measure both opportunity costs and out of pocket costs.

Throughout costing assigns only batch-level spending for direct costs of products or services.

Which of the following is an example of a product-level cost?

Work-in-process inventory refers to partially completed units.

Use the following to answer questions: -The variable operating income is:

Use the following to answer questions: Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30: -The throughput cost per unit for Product 250C is:

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Performance Measurement Systems Glossary Photo Credits

Filters