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1. The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram
method
a. includes costs outside the relevant range.
b. considers more than two points.
c. can be used with more types of costs than the high-low method.
d. gives a precise mathematical fit of the points to the line.
3. The cost estimation method that gives the most mathematically precise cost prediction equation is
a. the high-low method.
b. the scatter-diagram method.
c. the contribution margin method.
d. regression analysis.
6. Fixed costs that cannot be reduced within a short period of time are
a. committed.
b. variable.
c. avoidable.
d. unnecessary.
8. Raul's average cost per unit is the same at all levels of volume. Which of the following is true?
a. RAUL must have only variable costs.
b. RAUL must have only fixed costs.
c. RAUL must have some fixed costs and some variable costs.
d. RAUL's cost structure cannot be determined from this information.
9. A mixed cost
a. increases in steps as volume increases.
b. contains a fixed component and a variable component.
c. varies with more than one measure of volume.
d. cannot be accurately predicted.
13. Fixed costs that managers can change on short notice are
a. value-adding costs.
b. variable costs.
c. unavoidable costs.
d. discretionary costs.
17. Harry Company had Php300,000 overhead cost at 20,000 machine hours, Php320,000 overhead cost at 25,000 hours.
Variable overhead cost per machine hour is
18. Hagrid Company had Php400,000 overhead cost at 50,000 machine hours and Php460,000 overhead cost at 60,000 hours
Total fixed overhead is
21. DSP Company earned Php100,000 on sales of Php1,000,000. It earned Php130,000 on sales of Php1,100,000. Total fixed
costs are
Ron Company incurred Php 170,000 in overhead costs making 12,000 units in March. It made 15,000 units and incurred
Php188,000 in overhead costs in April.
25. The statistician of Hermione, Inc. has developed the following cost-prediction equation, using observations from 12,000 to
30,000 machine hours.
Y = Php236,837 + Php3.7625X,
r-squared = .81
standard error = Php24,363
Neville Company incurred Php475,000 in overhead costs making 40,000 units in August. It made 30,000 units and incurred
Php447,000 in overhead costs in September.
28. What are the variable costs per unit associated with Product CEDRIC?
29. What are the fixed costs per unit associated with Product CEDRIC?
30. What are the inventoriable costs per unit associated with Product CEDRIC?
31. What are the period costs per unit associated with Product CEDRIC?
Axle and Wheel Manufacturing currently produces 1,000 axles per month. The following per unit data apply for sales to regular
customers:
Required:
Weasley Sporting Goods Company manufactured 100,000 units in 2016 and reported the following costs:
Required:
40. Albus Dumbledore is paid Php10 an hour for straight-time and Php15 an hour for overtime. One week she worked 42 hours,
which included 2 hours of overtime. How much compensation would be reported as direct labor and manufacturing
overhead?
41. Tire and Spoke Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to
regular customers:
Direct materials Php50
Direct manufacturing labor 5
Variable manufacturing overhead 14
Fixed manufacturing overhead 10
Total manufacturing costs Php79
The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000 bicycles. What is the per unit
cost of producing 2,000 bicycles?
42. Arlo's T-shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities cost. Arlo's sells the T-shirt for
Php14.50 each. Management has prepared the following estimated cost information for next month:
At 8,000 At 10,000
T-shirts T-shirts
T-shirt cost Php48,000 Php60,000
Rent cost Php3,600 Php3,600
Utilities cost Php6,800 Php8,300
Assume that all of the activity levels mentioned in this problem are within the relevant range. Calculate what Arlo's should
expect for total variable cost if 9,000 T-shirts are sold next month.
Items 43-45 SomethingNew is a small one-person company that provides elaborate and imaginative wedding cakes to order for
very large wedding receptions. The owner of the company would like to understand the cost structure of the company and has
compiled the following records of activity and costs incurred. The owner believes that the number of weddings catered is the best
measure of activity.
Wedding Costs
Month s Incurred
January 3 Php3,800
Februar
y 2 Php3,600
March 6 Php4,000
April 9 Php4,300
May 12 Php4,500
June 20 Php5,200
43. Using the high-low method, estimate the variable cost per wedding and the total fixed cost per month. (Round off the variable
cost per wedding to the nearest cent and the total fixed cost to the nearest dollar.)
44. Using the least-squares regression method, estimate the variable cost per wedding and the total fixed cost per month.
(Round off the variable cost per wedding to the nearest cent and the total fixed cost to the nearest dollar.)
45. Using least square, how much would be the total cost when there are 26 wedding for the month of July?
46. One major difference between financial and management accounting is that
a. financial accounting reports are prepared primarily for users external to the company.
b. management accounting is not under the jurisdiction of the Securities and Exchange Commission.
c. government regulations do not apply to management accounting.
d. all of the above are true.
Given the following information for Gryffindor Corporation, prepare the necessary journal entries, assuming that the Raw Material
Inventory account contains both direct and indirect material.
54.In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is a debit to Cash and a credit to
Sales. The other entry is a debit to
57. The indirect costs of converting raw material into finished goods are called
a. period costs.
b. prime costs.
c. overhead costs.
d. conversion costs.
58. The term "relevant range" as used in cost accounting means the range over which
costs may fluctuate.
cost relationships are valid.
production may vary.
relevant costs are incurred.
60. When cost relationships are linear, total variable prime costs will vary in proportion to changes in
direct labor hours.
total material cost.
total overhead cost.
production volume.