# Each of the following would be a period cost except

September 8, 2016

Question
1. Each of the following would be a period cost except:

a. the salary of the company president’s secretary

b. depreciation of a machine used in manufacturing

c. the cost of a general accounting office

d. sales commissions

2. Within the relevant range, variable cost per unit will:

Select one:

a. increase as the level of activity increases

b. remain constant

c. decrease as the level of activity increases

d. none of these

3. An example of a committed fixed cost is:

Select one:

a. a training program for salespersons

b. property taxes on the factory building

c. new product research and development

d. executive travel expenses

4. Jumpst Corporation uses the cost formula Y = \$3,600 + \$0.30X for the maintenance cost in Department B, where X is machine-hours. The August budget is based on 20,000 hours of planned machine time. Maintenance cost expected to be incurred during August is:

Select one:

a. \$3,600

b. \$6,000

c. \$6,300

d. \$9,600

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Management believes that inspection cost is a mixed cost that depends on units produced.

Using the high-low method, the estimate of the fixed component of inspection cost per month is closest to:

Select one:

a. \$8,887

b. \$8,743

c. \$8,683

d. \$6,869

6. A company with a degree of operating leverage of 4 would expect net operating income to increase by 200% if sales increased from \$100,000 to \$150,000.

Select one:

a. True

b. False

7. A venture capitalist would want to assure that s/he can earn a specific return within a specific time period before making an investment. Which measure can be utilized to help estimate if this return can be reached:

Select one:

a. current ratio

b. break even point

c. margin of safety

d. none of the above

8. Gardner Furniture Company produces two kinds of chairs: an oak model and a chestnut wood model. The oak model sells for \$60, and the chestnut wood model sells for \$100.

The variable expenses are as follows:

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Expected sales in units next year are 5,000 oak chairs and 1,000 chestnut chairs. Fixed expenses are budgeted at \$135,000 per year.

The yearly breakeven point in total sales for the expected sales mix is:

Select one:

a. \$500,000

b. \$300,000

c. \$270,000

d. \$485,000

9. Hunter Corporation sells a product for \$180 per unit. The product’s current sales are 34,900 units and its break-even sales are 25,128 units.

The margin of safety as a percentage of sales is closest to:

Select one:

a. 61%

b. 28%

c. 39%

d. 72%

10. Butremovic Corporation’s contribution format income statement for the most recent month follows:

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Required:

a. Compute the degree of operating leverage to two decimal places.

b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from an 8% increase in sales.

11. Simoneaux Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the machine-hours for the upcoming year at 22,000 machine-hours. The estimated variable manufacturing overhead was \$8.65 per machine-hour and the estimated total fixed manufacturing overhead was \$609,400. The predetermined overhead rate for the recently completed year was closest to:

Select one:

a. \$36.35 per machine-hour

b. \$33.32 per machine-hour

c. \$27.70 per machine-hour

d. \$8.65 per machine-hour

12. The following data have been recorded for recently completed Job 674 on its job cost sheet. Direct materials cost was \$2,039. A total of 32 direct labor-hours and 175 machine-hours were worked on the job. The direct labor wage rate is \$14 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is \$15 per machine-hour. The total cost for the job on its job cost sheet would be:

Select one:

a. \$2,487

b. \$2,967

c. \$2,068

d. \$5,112

13. Paskey Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed to cost of goods sold at the end of the month. In July the company completed job C77T that consisted of 12,000 units of one of the company’s standard products. No other jobs were in process during the month. The job cost sheet for job C77T shows that the job’s total cost was \$771,600. During the month, 10,000 completed units from job C77T were sold. No other products were sold during the month. The unadjusted cost of goods sold (in other words, the cost of goods sold BEFORE adjustment for any underapplied or overapplied overhead) for July is closest to:

Select one:

a. \$734,400

b. \$643,000

c. \$771,600

d. \$643,900

14. Bakker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of \$77,250 and 2,500 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to \$79,000 and actual direct labor-hours were 2,400.

The overhead for the year was:

Select one:

a. \$3,090 overapplied

b. \$4,840 underapplied

c. \$3,090 underapplied

d. \$4,840 overapplied

15. Huneke Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. During May, the cost of goods manufactured was \$142,000 and manufacturing overhead was underapplied by \$1,000. The beginning finished goods inventory was \$27,000 and the ending finished goods inventory was \$42,000.

The unadjusted cost of goods sold (in other words, cost of goods sold before adjusting for any underapplied or overapplied overhead) for May is closest to:

Select one:

a. \$127,000

b. \$144,000

c. \$128,000

d. \$142,000

16. Segment margin is sales minus:

Select one:

a. variable expenses and traceable fixed expenses

b. variable expenses

c. variable expenses and common fixed expenses

d. traceable fixed expenses

17. Hatch Company has two divisions, O and E. During the year just ended, Division O had a segment margin of \$9,000 and variable expenses equal to 70% of sales. Traceable fixed expenses for Division E were \$19,000. Hatch Company as a whole had a contribution margin ratio of 40%, a segment margin of \$25,000, and sales of \$200,000. Given this data, the sales for Division E for last year were:

Select one:

a. \$87,500

b. \$150,000

c. \$50,000

d. \$116,667

18. Favini Company, which has only one product, has provided the following data concerning its most recent month of operations:

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What is the net operating income for the month under variable costing?

Select one:

a. \$3,700

b. \$(23,600)

c. \$11,800

d. \$8,100

19. Byron Company, which has only one product, has provided the following data concerning its most recent month of operations:

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What is the unit product cost for the month under variable costing?

Select one:

a. \$83

b. \$86

c. \$92

d. \$77

20. The Gasson Company sells three products, Product A, Product B and Product C, and had sales of \$1,000,000 during the month of June. The company’s overall contribution margin ratio was 37% and fixed expenses totaled \$350,000. Sales were: Product A, \$500,000; Product B, \$300,000; and Product C, \$200,000. Traceable fixed costs were: Product A, \$120,000; Product B, \$100,000; and Product C, \$60,000. The variable expenses of Product A were \$300,000 and the variable expenses of Product B were \$180,000.

The common fixed expense for Gasson Company for the month of June was:

Select one:

a. \$280,000

b. \$70,000

c. \$20,000

d. \$350,000

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