Cost Accounting 8th Edition, Raiborn & Kinney Solution Manual

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Cost Accounting 8th Edition, Raiborn & Kinney Solution Manual

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Solution Manual Cost Accounting 8th Raiborn & Kinney

Chapter 1:

1. (LO.1) Select the incorrect comparison between financial and management accounting:
Financial Accounting              Management Accounting
a. Primary focus                         External                                    Internal
b. Overriding criteria                Verifiability                                    GAAP
c. Information timeframe          Historical                                  Current/future
d. Recordkeeping                      Formal                                Formal and informal
2. (LO.1) Oversight of auditing standards for public companies is the responsibility of the
a. Public Company Accounting Oversight Board.
b. Securities and Exchange Commission.
c. Financial Accounting Standards Board.
d. Institute of Management Accountants.
3, (LO.1) The acronym IASB stands for
a. Internal Accounting Standards Board.
b. Internal Auditing Standards Board.
c. International Auditing Standards Board.
d. International Accounting Standards Board.
4. (LO.1) Cost accounting can best be described as
a. the intersection between financial and management accounting.
b. a system that meets the informational demands of both financial and management accounting.
c. a system that provides product cost information to Internal managers for planning, controlling, decision making and evaluating performance.
d. all of the above.
5. (LO.2) Statements on Management Accounting (SMA) are directives on the practice of management and cost accounting. Select the incorrect statement concerning SMAs from the following.
a. SMAs are issued by the Cost Accounting Standards Board.
b. SMAs are not legally binding.
c. SMAs go through a rigorous developmental and exposure process.
d. SMAs describe high-quality or best practices in management accounting.
6. (LO.3) A management accountant who fails to perform professional duties in accordance with relevant standards is acting contrary to which of the following standards?
a. Competency
b. Integrity
c. Objectivity
d. Confidentiality
7. (LO.3) The IMA Code of Ethics requires a management accountant to follow the established policies of the organization when facing an ethical conflict. When management accountants fail to resolve an ethical conflict by talking with their immediate supervisor they should
a. communicate the problem to authorities outside the organization.
b. contact the next higher managerial level.
c. notify the audit committee of the board of directors.
d. contact the chief financial officer.
8. (LO.3) According to the IMA Code of Ethics a practitioner has the responsibility to recognize professional limitations. Under which standard of ethical conduct would this responsibility be included?
a. Competency
b. Confidentiality
c. Integrity
d. Objectivity
9. (LO.4) Strategic planning includes all of the following except:
a. top-level management participation.
b. a long-term focus.
c. analysis of the current months actual variances from budget.
d. identification of long-term key variables including external influences.
10. (LO.4) The strategy that is being used by a company that seeks to provide superior quality products or more unique services than its competitors is a
a. cost leadership strategy. b. differentiation strategy.
c. customer value strategy. d. value chain strategy.
11. (LO.5) All of the following are staff personnel except:
a. production supervisor.
b. cost accountant.
c. corporate controller.
d. tax accountant.
12. (LO.5) An organizations collection of knowledge, skills, and information is referred to as its
a. political capital.
b. qualitative capital.
c. intangible capital.
d. intellectual capital.
13. (LO.6) All of the following are examples of upstream functions in the value chain except
a. supply.
b. research and development.
c. production.
d. design.
14. (LO.7) Which balanced scorecard perspective focuses on those things that the organization must do well to meet customer needs and expectations?
a. Customer perspective
b. Learning and growth perspective
c. Financial perspective
d. Internal business perspective
15. (LO.8) Which of the following is a violation of the Foreign Corrupt Practices Act?
a. Paying cash bribes to foreign officials
b. Giving sporting event tickets to foreign officials
c. Providing free samples to the families of foreign officials
d. All of the above

Chapter 2:

1. (LO.1) Select the incorrect statement concerning cost objects.
a. When the cost object is the Production Department, the cost of a production supervisors salary would be a direct cost.
b. A direct cost must be conveniently and economically traceable to the cost object.
c. When the cost object is a Tundra truck, the cost of the trucks engine is a direct cost.
d. When the cost object is the Toyota Princeton Indiana manufacturing plant the cost of overhead is an indirect cost.
2. (LO.2) Which of the following statements is correct concerning fixed costs?
a. Within the relevant range, total fixed costs always increase when volume increases.
b. A step cost may be fixed or variable.
c. The fixed costs per unit will remain constant provided volume remains within the relevant range.
d. Within the relevant range, total fixed costs always decrease when volume increases.
3. (LO.2) A utility bill that includes a flat charge for basic service plus a stated rate for each kilowatt hour of usage beyond a specified level is an example of a
a. mixed cost.
b. step cost.
c. variable cost.
d. independent cost.
4. (LO.2) In relation to the dollar amount of Tundra truck sales, which of the following classifications is appropriate for the truck tires used in production and for the salaries of production supervisors?
Truck Tires Production Supervisor Salaries
a. Variable cost Fixed cost
b. Fixed cost Variable cost
c. Variable cost Mixed cost
d. Mixed cost Fixed cost
5. (LO.3) The estimated unit cost for a company planning to produce and sell at a level of 12,000 units per month is as follows:
Estimated
Cost Item Unit Cost

Direct material $20
Direct labor 32
Variable manufacturing overhead 6
Fixed manufacturing overhead 12
Variable selling 4
Fixed selling 4

What is the total estimated conversion costs per unit?

6. (LO.3) Which of the following is not a product cost for Tundra trucks?
a. Steering wheel
b. Glue
c. Salary of product sales manager
d. Overhead
7. (LO.4) Which of the following types of firms has the highest degree of conversion causing a major transformation from input to output?
a. Lees Landscaping Company
b. Toyota Manufacturing Company
c. Wal-Mart Stores
d. All of the above
8. (LO.4) Select the incorrect statement concerning the stages of the production or conversion process.
a. A manufacturing companys Finished Goods inventory account is similar to a service companys Supplies inventory account.
b. Firms such as retailers that engage in only low or moderate degrees of conversion ordinarily have only a single inventory account.
c. The production process occurs in three stages: raw material, work in process, and finished goods.
d. At the point of sale, product costs flow from an inventory account to Cost of Goods Sold expense.
9. (LO.5) Which of the following would not be classified as direct material for a Tundra truck?
a. Cost of the battery
b. Cost of the glue used to secure the carpet in the cab of the truck
c. Cost of freight paid on the truck windshield
d. Cost of the fuel tank
10. (LO.5) Which of the following would be classified as direct labor for the production of a Tundra truck?
a. Wages paid to assembly line (production) workers
b. Bonuses paid to production workers for exceeding production goals
c. Production workers Social Security taxes
d. All of the above
11. (LO.5) Which of the following costs would not be classified as overhead for the production of Tundra trucks?
a. Salary of plant manager
b. Indirect labor costs
c. Salary of Toyota Chief Executive Officer
d. Depreciation of production machinery
12. (LO.6) All of the following are reasons why overhead costs are allocated to cost objects except:
a. to compare alternative courses of action for management planning and decision making.
b. to identify the fixed and variable components of the various overhead costs.
c. to determine the full cost of the cost object.
d. to motivate the manager in charge of the cost object to manage it efficiently.
13. (LO.7) A Company had the following inventories at the beginning and end of January:
January 1 January 31

Finished goods $12,500 $11,700
Work in process 23,500 25,100
Direct material 13,400 12,400

The following additional manufacturing data were available for the month of January:

Direct material purchased $18,900
Direct labor 30,000
Actual factory overhead 17,500

What was the total cost of direct material used for January?
a. $19,900
b. $18,900
c. $17,900
d. $6,500
14. (LO.7) B Company had the following inventories at the beginning and end of January:

January 1 January 31
Finished goods $125,000 $117,000
Work in process 235,000 251,000
Direct material 134,000 124,000

The following additional manufacturing data were available for the month of January:

Direct material used $189,000
Direct labor 300,000
Actual factory overhead 175,000

What was B Companys cost of goods manufactured for January?
a. $672,000
b. $660,000
c. $658,000
d. $648,000

15. (LO.7) C Company had the following inventories at the beginning and end of January:

January 1 January 31
Finished goods $125,000 $117,000
Work in process 235,000 251,000
Direct material 134,000 124,000

Assuming the Cost of Goods Manufactured for January was $660,000, what was C Companys
cost of goods sold for January?

Chapter 3:
1. (LO.1) All of the following are reasons for using predetermined overhead rates in product costing except:
a. to overcome the problem of fluctuations in activity levels that have no impact on fixed overhead costs.
b. to overcome the problem caused by overhead containing both fixed and variable costs.
c. to adjust for variations in actual overhead costs that are unrelated to fluctuations in activity.
d. to allow management to determine whether a product, product line, or customer is profitable.
2. (LO.2) What is the best method for disposing of significant underapplied factory overhead?
a. Charge the underapplied amount to cost of goods sold
b. Prorate the underapplied amount to cost of goods sold, finished goods, and work in process
c. Prorate the underapplied amount to inventory only (work in process and finished goods)
d. Charge the underapplied amount to a loss account at the end of the period
3. (LO.2) Select the incorrect statement concerning overapplied overhead.
a. The overhead control account will have a debit balance.
b. The amount of overhead transferred to WIP from the overhead control account exceeded the actual amount of overhead incurred.
c. Overapplied overhead must be closed at year-end because a single years activity level was used to set the predetermined overhead rate.
d. Overapplied overhead may result if the companys actual utilization of capacity is greater than expected.
4. (LO.3) In determining cost behavior in business, the cost function is often expressed as y = a + bx. What does the a term represent?
a. Total variable costs b. Total fixed costs
c. Unit variable cost d. Unit fixed cost
5. (LO3) M Company derived the following cost equation to explain its monthly manufacturing overhead cost:
OH = $80,000 + $12MH, where MH = machine hours
The standard time required to manufacture one unit is 4 machine hours. The company applies manufacturing overhead to production on the basis of machine hours and its normal annual production is 50,000 units. What is the estimated variable manufacturing overhead cost for a month in which scheduled production is 5,000 units?
a. $360,000
b. $320,000
c. $240,000
d. $80,000
6. (LO.4) Which method of separating mixed costs ensures the best fitting regression line?
a. High-low method
b. Scattergraph method
c. Proration method
d. Least squares regression method
7. (LO.4) W Company is working on its annual profit plan for the coming year. The company wants to determine the cost behavior pattern of its maintenance costs. The prior years data regarding maintenance hours and costs are as follows.

Hours of Maintenance
Activity Costs

January 480 $ 4,200
February 320 3,000
March 400 3,600
April 300 2,820
May 500 4,350
June 310 2,960
July 320 3,030
August 520 4,470
September 490 4,260
October 470 4,050
November 350 3,300
December 340 3,160

Using the high-low method, estimate the amount of maintenance cost per hour.
a. $2,781
b. $570
c. $7.50
d. $0.13
8. (LO.4) X Company uses simple regression to separate its selling costs (y) into fixed and variable components based on units sold (x). A computer software program generated the following regression analysis results:
Average x 400
Average y 3600
a 684.65
Standard error of a 49.515
b 7.2884
Standard error of b 0.12126
Std error of the estimate 34.469
r2 0.99724
What equation should X Company use to estimate its selling costs?
a. y = $3,600 + 400x b. y = $684.65 + 7.2884x c. y = $3,600 + 7.2884x d. y = $684.65 + .12126x
9. (LO.5) In applying overhead, individual department rates would be used instead of a plant wide rate if
a. the manufactured products differ in the resources consumed from the individual departments in the plant.
b. a company wants to adopt a standard cost system.
c. a companys manufacturing operations are highly automated.
d. manufacturing overhead is the largest component of product cost.
10. (LO.6) Which cost accumulation and reporting system treats the costs of all manufacturing components (direct material, direct labor, and both variable and fixed overhead) as product costs?
a. Absorption costing
b. Variable costing
c. Mixed costing
d. None of the above
11. (LO.6) Which cost accumulation and reporting system reports the total contribution margin?
a. Absorption costing
b. Variable costing
c. Mixed costing
d. None of the above
12. (LO.6) Which cost accumulation and reporting system is required for external reporting and tax purposes?
a. Absorption costing
b. Variable costing
c. Mixed costing
d. None of the above
13. (LO.7) The primary difference between absorption and variable costing lies in the treatment of :
a. variable selling and administrative costs.
b. variable overhead costs.
c. fixed overhead costs.
d. fixed selling and administrative costs.
14. (LO.7) Which cost accumulation and reporting system provides management an incentive to over-produce (i.e., produce more units than can be sold)?
a. Absorption costing
b. Variable costing
c. Mixed costing
d. None of the above
15. (LO.7) In a period in which there is no change in inventory, which cost accumulation and reporting system will report higher profits?
a. Absorption costing
b. Variable costing
c. Mixed costing
d. None of the above

Chapter 4:
1. (LO.1) Activity-based management (ABM) focuses on improving customer value and enhancing profitability. Which of the following is an impact of implementing ABM to control production processes?
a. More effective performance evaluation
b. More accurate cost determination and control
c. More efficient production processes
d. All of the above
2. (LO.1) Select the incorrect statement from the following.
a. An activity is any repetitive action that is performed in fulfillment of a business function.
b. Non-value-added activities increase the time spent on a product but do not increase its
worth.
c. The objective of activity-based management is to eliminate all non-value-added activities.
d. Activity analysis attempts to classify activities as value added or non-value-added.
3. (LO.1) All of the following are non-value-added time except:
a. inspection time. b. move time.
c. processing time. d. wait time.
4. (LO.2) Which of the following correctly computes manufacturing cycle efficiency?
a. Total Cycle Time Total Value-Added Time. b. Total Cycle Time / Total Value-Added Time.
c. Total Value-Added Time + Total Non-Value-Added Time. d. Total Value-Added Time / Total Cycle Time.
5. (LO.2) The need to rework products because of a poorly designed training program is an example of a non-value-added activity caused by
a. systemic factors.
b. physical factors.
c. human factors.
d. None of the above.
6. (LO3) All of the following are examples of batch-level costs except:
a. costs of engineering change orders.
b. purchase order costs.
c. inspection costs.
d. movement costs.
7. (LO.3) Select the incorrect matching of cost and cost level.
a. Unit level : Direct material
b. Facility level : Equipment maintenance
c. Product level : Product development
d. Batch level : Setup costs
8. (LO.4) Which costing system assigns costs within multiple cost pools to products using multiple drivers?
a. Activity-based costing b. Variable costing
c. Traditional costing d. None of the above
9. (LO.4) E Corporation, which makes electronic components for NASAs space shuttle, uses
activity-based costing. One of its activities is described below:

Est. Qty of Required for
Activity Cost Driver Cost Driver Cost Rate Current contract
(1) Quality control No. of units 210,000 units $0.14 17,500 units

Select the incorrect statement from the following.
a. $2,450 will be assigned to the contract on which the company is currently working.
b. The companys annual estimated quality control costs cannot be determined from the information provided.
c. Since the component is being built for the U.S. Government for use on the space shuttle, it is not unusual for the company to inspect every unit produced.
d. It is likely that the company uses a different cost driver to assign other support costs such as
setup costs.

The next two questions are based on the following information:

P Company is considering using activity-based costing instead of its traditional costing system because it believes its current system may be providing misleading information. The following data shows the budgeted manufacturing overhead.

Budgeted Budgeted
Activity Cost Driver Activity Cost
Materials handling No. of parts handled 6,000,000 $720,000
Setup costs No. of setups 750 315,000
Machining costs Machine hours (MH) 30,000 540,000
Quality control No. of batches 500 225,000
Total overhead cost $1,800,000

The company also estimates that it will work 50,000 direct labor hours in the coming year. The following information is provided for one of the companys products for the coming year:

Direct material and Direct Labor
Direct materials cost per unit $4.40
Direct labor cost per unit
.05 DLH @ $15/DLH .75
Total $5.15

Sales and production data:
Expected sales 20,000 units Batch size 5,000 units Setups 2 per batch Total parts per finished unit 5 parts
Machine hour required 80 MH per batch

10. (LO.4) If the organization uses a traditional full cost system, the cost per unit of this product for the coming year will be
11. (LO.4) If the organization uses an activity-based cost system, the cost per unit of this product for the coming year will be
a. $6.30.
b. $6.21.
c. $6.08.
d. $6.00.
12. (LO.5) The use of activity-based costing normally results in:
a. substantially lower unit costs for low-volume products than is reported by traditional product costing.
b. equalizing setup costs for all product lines.
c. decreased setup costs being charged to low-volume products.
d. substantially greater unit costs for low-volume products than is reported by traditional product costing.
13. (LO.5) Because of the changes that are occurring in the basic operations of many firms, all of the following represent trends in the way indirect costs are allocated except:
a. treating direct labor as an indirect manufacturing cost in an automated factory.
b. using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time.
c. preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations.
d. using several machine cost pools to measure product costs on the basis of time in a machine center.
14. (LO.5) Activity-Based Costing is appropriate for which of the following organizations?
a. One that produces and sells a wide variety of products.
b. One that produces and sells a single complex product.
c. One that provides a single service to customers.
d. All of the above
15. (LO.6) A number of barriers must be overcome to implement activity-based costing systems successfully. Select the barrier that is not matched up properly with its type.
a. Fear of change Individual barrier
b. Regulatory agencies Environmental barrier
c. Corporate culture issues Organizational barrier
d. All of the above barriers are properly classified.

Chapter 5:
1. (LO.1) All of the following would most likely use a job order costing system except:
a. a dental practice.
b. an auto repair shop.
c. a small appliance maker.
d. an architectural firm.
2. (LO.1) Which of the following costs is not charged to Work in Process in a normal cost system?
a. Actual overhead
b. Actual direct materials
c. Actual direct labor
d. Estimated indirect labor
3. (LO.1) Which of the following product costs would be charged to Work in Process assuming a standard costing system?
a. Actual direct material costs b. Actual overhead costs
c. Actual direct labor costs d. Applied overhead costs
4. (LO.2) Select the incorrect job order costing system characteristic.
a. Costs are accumulated by job.
b. A job may consist of multiple units provided all units are similar.
c. Costs of different jobs cannot logically be averaged so a unique cost must be determined for each job.
d. Jobs are usually produced to distinct customer specifications.
5. (LO.3) Which of the following serves at a subsidiary ledger for the Work in Process account?
a. Standard cost card
b. Material requisition form
c. Job requisition form
d. Job order cost sheet
6. (LO.3) Which of the following is not a source document used in job order costing systems?
a. Cost of production report
b. Employee time sheet
c. Job cost sheet
d. Material requisition form
7. (LO.4) Select the response that represents the correct flow of costs in a job order costing system.
a. Raw materials, work in process, cost of goods sold, finished goods
b. Raw materials, work in process, finished goods, cost of goods sold
c. Raw materials, overhead, work in process
d. Direct material, finished goods, work in process
8. (LO.4) The journal entry to apply overhead to production would include:
a. a debit to Manufacturing Overhead Control.
b. credits to various accounts such as Cash, Accumulated Depreciation, and Accounts Payable.
c. a credit to Manufacturing Overhead Control.
d. a credit to Work in Process.
9. (LO.4) The journal entry to transfer production from the Finishing Department to Finished Goods would include a:
a. credit to Finished Goods.
b. debit to Cost of Goods Manufactured.
c. credit to WIP Finishing.
d. credit to Cost of Goods Manufactured.
10. (LO.4) M Corporation manufactures a specialty line of jeans using a job-order-cost system.
During May, the following costs were incurred in completing Job M1: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Overhead was applied at the rate of $25 per machine hour, and Job M1 required 800 machine hours. If Job M1 resulted in 7,000 good jeans, the cost of goods sold per unit would be
a. $5.50.
b. $6.30.
c. $5.70.
d. $8.50.
11. (LO.4) Q Company uses a normal cost system. The following information is from its financial records for the year:
Total manufacturing costs, $2,500,000
Cost of goods manufactured, $2,425,000
Applied overhead, 30% of total manufacturing costs
Predetermined OH rate, 80% of direct labor cost

Assuming the companys work in process inventory at January 1 was 75 percent of its December 31 work in process inventory, what is the carrying value of the companys work in process inventory at December 31?
a. $75,000
b. $100,000
c. $225,000
d. $300,000
12. (LO.5) Which of the following costing systems does not involve computing cost variances?
a. Actual costing system
b. Normal costing system
c. Standard costing system
d. All of the above systems involve computing cost variances
13. (LO.5) Select the incorrect statement concerning standard costs and job order costing.
a. A standard cost system determines product cost by using predetermined norms in the
inventory accounts for prices and/or quantities of cost components.
b. Standards can be used in a job order cost system only if a company typically engages in jobs that produce fairly similar products.
c. Under GAAP, standard cost job order systems may not substitute for actual or normal costing
systems.
d. Standard cost variances can be computed for actual-to-standard differences regardless of whether standards have been established for both quantities and prices or for prices or rates only.
14. (LO.6) Which of the following statements is true concerning job order costing and management decision making?
a. Job order costing assists managers in their planning, controlling, decision making and performance evaluations functions.
b. Job order costing allows managers to trace costs associated with specific current jobs to better estimate costs of future jobs.
c. Job order costing provides a means by which managers can better control the costs associated with their operations.
d. All of the above are true statements.
15. (LO.7) Select the incorrect statement regarding the accounting for product losses.
a. Normal losses that are anticipated on all jobs are estimated and included in the development of the predetermined OH rate.
b. Normal losses that are associated with a particular job are charged to a loss account in the period they are incurred.
c. Abnormal losses are charged to a loss account in the period they are incurred.
d. The difference between normal and abnormal loss is one of degree and therefore must be determined by management.

Chapter 6:
1. (LO.1) Which of the following would least likely use a process costing system?
a. Manufacturer of custom furniture
b. Manufacturer of soft drinks c. Manufacturer of gasoline
d. Manufacturer of paper
2. (LO.1) Which of the following is not a basic objective of process costing?
a. Compute an average cost per unit since units are homogeneous
b. Allocate production costs between whole units and partial units
c. Separate production costs into fixed and variable components
d. Determine the amount of production costs that should be transferred to the next department
3. (LO.1) Select the incorrect statement regarding equivalent units of production (EUP).
a. Two units 50% complete are equivalent to one unit 100% complete.
b. Except in very rare instances, only one EUP calculation is needed per department.
c. EUP equals the number of whole units of output that could have been produced during a period from the actual effort expended.
d. The objective of EUP calculations is to eliminate the costing problem caused by partially completed units.
4. (LO.2) The steps in process costing are listed below:
1 Calculate physical units to be accounted for
2 Calculate physical units accounted for
3 Calculate equivalent units of production (EUP)
4 Calculate total costs to be accounted for
5 Calculate the cost per EUP
6 ?
What is the missing step?
a. Assign costs to whole and partial units in ending inventory
b. Assign costs to whole units produced during the period
c. Assign costs to units started and completed during the period
d. Assign costs to units transferred out and units in ending inventory
5. (LO.2) Which of the following is true about the weighted average method of process costing?
a. The calculation of EUP must take into consideration the units in both beginning and ending inventory.
b. The cost per EUP will include prior period costs if the department had beginning inventory.
c. The most common alternative to the weighted average method is the last-in, first-out method.
d. The weighted average method refers to a method of determining which units were sold and
which units remain in inventory.
Use the following information for the next three questions.
Z Company employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. The production quantity schedule for April is reproduced below:

Units
Work in process on April 1 (60% complete as to conversion costs) 1,000
Units started during April 5,000
Total units to account for 6,000

Units completed and transferred out 4,000
Work in process on April 30 (20% complete as to conversion costs) 2,000
Total units accounted for 6,000

Costs pertaining to the month of April are as follows:
Beginning inventory costs: (DM, $54,600; Conversion, $35,560) $ 90,160
Costs incurred during April (DM, $468,000; Conversion $574,060) $1,042,060

6. (LO.2) Using the weighted average method, the equivalent units for direct materials for April are:
a. 6,000 units.
b. 5,000 units.
c. 4,400 units.
d. 3,800 units.
7. (LO.2) Using the weighted average method, the equivalent units for conversion costs for April are:
a. 6,000 units.
b. 5,000 units.
c. 4,400 units.
d. 3,800 units.
8. (LO.2) Using the weighted average method, the equivalent unit materials cost for April is:
a. $78.00.
b. $87.10.
c. $130.65.
d. $138.55.
9. (LO.2) Using the weighted average method, the 4,000 units completed during April will be transferred out at an EUP unit cost of:

Use the following information for the next two questions.

L Company uses a process cost system to account for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. The production quantity schedule for June is reproduced below:

Units
Work in process on June 1 (20% complete as to conversion costs) 16,000
Units started during June 100,000
Total units to account for 116,000

Units completed and transferred out from beginning inventory 16,000
Units started and completed during June 76,000
Work in process on June 30 (40% complete as to conversion costs) 24,000
Total units accounted for 116,000

Costs pertaining to the month of June are as follows:
Beginning inventory costs: (DM, $54,600; Conversion, $35,560) $ 90,160
Costs incurred during June (DM, $468,000; Conversion $574,060) $1,042,060
10. (LO.3) Using the FIFO method, the equivalent units for direct materials for June are:
a. 116,000 units. b. 100,000 units. c. 85,600 units. d. 76,000 units.
11. (LO.3) Using the FIFO method, the equivalent units for conversion costs for June are:
a. 116,000 units. b. 100,000 units. c. 98,400 units. d. 76,000 units.
12. (LO.3) Using the FIFO method, the direct materials cost per equivalent unit for units started and completed during June is:
a. $6.16.
b. $6.00.
c. $5.23.
d. $4.68.
13. (LO.4) Select the incorrect statement concerning process costing in a multidepartment setting.
a. In this environment, goods are transferred from a predecessor (upstream) department to a successor (downstream) department.
b. Transferred out costs of the predecessor department become transferred in costs of the successor department.
c. Occasionally, successor departments will change the unit of measure used in predecessor departments.
d. By definition, successor departments may not add any additional raw materials to the units received from predecessor departments.
14. (LO.5) Which of the following statements is true concerning process costing?
a. Companies my substitute standard costs for actual costs.
b. EUP calculations for standard process costing are identical to those of FIFO process costing.
c. An advantage of standard process costing is that material, labor, and overhead variances can be computed to assist in performance evaluation.
d. All of the above are true.
15. (LO.6) An appropriate costing system for a company whose various product lines have different direct materials but similar processing techniques is likely a
a. weighted average method of process costing.
b. first-in, first out method of process costing.
c. hybrid method of process costing.
d. last-in, first out method of process costing.
16. (LO.7: Appendix 1) Which of the following is a common variation of the weighted average EUP calculation presented in the chapter?
a. Whole units transferred out + Ending inventory EUP
b. Weighted average EUP Beginning inventory EUP
c. FIFO EUP / 2
d. Whole units transferred out Beginning units
17. (LO.8: Appendix 2) In process costing, the cost of normal continuous losses is handled through the method of neglect, which
a. excludes the spoiled units from the equivalent unit computation, thereby increasing the cost per equivalent unit.
b. includes the spoiled units in the equivalent unit computation, thereby increasing the cost per equivalent unit.
c. excludes the spoiled units from the equivalent unit computation, thereby decreasing the cost per equivalent unit.
d. includes the spoiled units in the equivalent unit computation, thereby decreasing the cost per equivalent unit.

Chapter 7:
1. (LO.1) Select the correct statement regarding standards.
a. A standard is a benchmark or norm used for planning and control.
b. The difference between standard cost and actual cost is referred to as a variance.
c. Standards are developed for materials, labor, and overhead.
d. All of the above
2. (LO.1) The document that summarizes the expected quantities and costs needed to produce a unit is called a
a. bill of materials.
b. total cost of ownership document.
c. operations flow document.
d. standard cost card.
3. (LO.2) This month R Company planned to produce 3,000 units of its product. The standard cost card calls for six pounds of material at $.30 per pound. Actual production for the month was 3,100 units, resulting in a favorable price variance of $380 and an unfavorable quantity variance of
$120. Based on these variances, one could conclude that:
a. more materials were purchased than were used.
b. the actual cost of material was less than the standard cost.
c. the actual usage of material was less than the standard allowed.
d. the actual cost and usage of material were both less than standard.
4. (LO.2) An unfavorable direct labor efficiency variance could be caused by a (n):
a. unfavorable variable overhead spending variance.
b. unfavorable fixed overhead volume variance.
c. unfavorable material usage variance.
d. favorable fixed overhead volume variance.
5. (LO.2) The flexible budget for the month of August was for 9,000 units with direct material at $15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with $127,500 in direct material and $77,775 in direct labor expense. Direct labor hours of 6,375 were actually worked during the month. Variance analysis would show:
a. a favorable direct labor efficiency variance of $1,275.
b. an unfavorable direct labor efficiency variance of $1,275.
c. an unfavorable direct labor rate variance of $1,275.
d. none of the above.
6. (LO.2) The total fixed overhead variance is the:
a. measure of the lost profits from the lack of sales volume.
b. amount of the underapplied or overapplied fixed overhead costs.
c. potential cost reduction that can be achieved from better cost control.
d. measure of production inefficiency.
7. (LO.2) Variable overhead is applied on the basis of standard direct labor hours. If the direct labor efficiency variance is favorable, the variable overhead efficiency variance will be:
a. unfavorable.
b. favorable.
c. zero.
d. the same amount as the labor efficiency variance.
8. (LO.2) Y Companys product has a labor standard of 2 hours per unit. For 2011, it estimates its production will be 200,000 units (400,000 DLHs). It budgets total overhead at $900,000, which results in a fixed overhead rate of $1.50 per hour. Actual data for the year include: Actual production, 198,000 units (440,000 DLHs), Actual variable overhead, $352,000, Actual fixed overhead, $575,000 The variable overhead efficiency variance for the year is:
a. $66,000 unfavorable.
b. $35,520 favorable.
c. $33,000 favorable.
d. $33,000 unfavorable.
9. (LO.3) Standard cost systems should be used for all of the following reasons except:
a. motivation.
b. decision-making.
c. establishing blame.
d. clerical efficiency.
10. (LO.3) Select the correct statement from the following.
a. An extremely favorable variance is not necessarily a good variance.
b. There is a movement in practice toward reporting variances less often than in the past.
c. Only unfavorable variances need to be investigated.
d. For proper performance evaluation to be made, responsibility for variances should not be traced to specific managers.
11. (LO.4) The best basis upon which cost standards should be set to measure controllable production inefficiencies is:
a. engineering standards based on attainable performance.
b. normal capacity.
c. engineering standards.
d. ideal capacity.
12. (LO.5) Variance analysis for conversion cost in automated plants normally focuses on:
a. spending variances for overhead costs.
b. efficiency variances for machinery and production costs rather than labor costs.
c. volume variance for production.
d. all of the above.
13. (LO.6) (Appendix) A possible combination of materials or labor is called
a. materials-time measurement.
b. yield.
c. mix.
d. conversion.
14. (LO.6) (Appendix) A measure of the difference between the actual total quantity of input and the standard total quantity allowed based on output is called the
a. mix variance.
b. yield variance.
c. volume variance.
d. none of the above.
15. (LO.6) (Appendix) Select the correct equation for the labor mix variance.
a. (Actual mix x Actual hours x Actual rate) (Actual mix x Actual hours x Standard rate)
b. (Actual mix x Actual hours x Standard rate) (Actual mix x Actual hours x Standard rate)
c. (Actual mix x Actual hours x Standard rate) (Standard mix x Actual hours x Standard rate)
d. (Standard mix x Actual hours x Standard rate) (Standard mix x Standard hours x Standard rate)

Chapter 8:
1. (LO.1) Short-tem planning that produces single use plans such as the annual budget is referred to as
a. strategic planning.
b. managerial planning.
c. tactical planning.
d. internal planning.
2. (LO.1) A budget sets the resource constraints under which managers must operate for the upcoming budget period. The control phase includes all of the following except:
a. making actual-to-budget comparisons.
b. providing feedback to operating managers.
c. investigating variances.
d. assigning blame for poor performance.
3. (LO.2) All of the following are operating budgets except:
a. selling and administrative budget.
b. purchases budget.
c. cash budget.
d. sales budget.
4. (LO2) When preparing the series of annual operating budgets, management usually starts the process with the:
a. cash budget.
b. budgeted balance sheet.
c. sales budget.
d. production budget.
5. (LO.3) G Company has beginning inventory of 4,000 units. Management estimates that 35,000 units will be sold during the first quarter with a 10% increase in sales each quarter. It is the companys policy to maintain an ending inventory equal to 25% of the next quarters sales. Each unit sells for $3.00. How much sales revenue should be budgeted for the third quarter?
a. $84,700
b. $115,050
c. $126,000
d. $127,050
6. (LO.3) L Companys budget calls for the following production:

Quarter 1 45,000 units Quarter 3 34,000 units
Quarter 2 38,000 units Quarter 4 48,000 units

Each unit of product requires three pounds of direct material. The companys policy is to begin each quarter with an inventory of direct material equal to 30% of that quarters direct material production requirements. Budgeted direct material purchases (in pounds) for the third quarter would be:

7. (LO.3) The following beginning and ending inventory levels (in units) are planned for the upcoming fiscal year:

Beginning of Year End of Year
Raw material 40,000 50,000
Work-in-process 10,000 10,000
Finished goods 80,000 50,000

Two units of raw material are needed to produce each unit of finished product. If the company plans to sell 480,000 units during the upcoming fiscal year, the number of units it would have to manufacture during the year would be:
a. 510,000 units.
b. 480,000 units.
c. 450,000 units.
d. 440,000 units.
8. (LO.3) D Company is planning to sell 2,000 units and produce 2,200 units during the upcoming month. Each unit requires 2 ounces of raw material at a cost of $15.00 per ounce and one-half hour of direct labor at a rate of $12.50 per hour. Overhead is applied at a rate of 120% of direct labor costs. The company has 2,000 ounces of raw material in its beginning inventory and wants to have 2,400 ounces in its ending inventory. How much direct labor cost should be budgeted for the upcoming month?
a. $27,500
b. $16,500
c. $13,750
d. $12,500
9. (LO.3) E Company is planning to sell 2,000 units and produce 2,200 units during the upcoming month. Each unit requires 2 ounces of raw material at a cost of $15.00 per ounce and one-half hour of direct labor at a rate of $12.50 per hour. Overhead is applied at a rate of 120% of direct labor costs. The company has 2,000 ounces of raw material in its beginning inventory and wants to have 2,400 ounces in its ending inventory. How much overhead cost should be budgeted for the upcoming month?
a. $27,500
b. $16,500
c. $13,750
d. $12,500
10. (LO.4) The following credit sales are budgeted by J Company:

January $124,000
February 120,000
March 135,000
April 140,000
May 142,000

The companys past experience indicates that 50% of receivables are collected in the month of sale, 30% in the month following the sale, and 20% in the second month following the sale. What amount should be budgeted as cash receipts for March?

11. (LO.4) M Company budgeted direct materials purchases of $150,000 in April and $240,000 in May. It is the companys practice to pay for 70% of its purchases in the month of purchase and the remaining 30% in the following month. Other costs are all paid during the month incurred. During May, the following items were budgeted:

Wages expense $75,000
Purchase of office equipment 36,000
Selling and administrative expenses 24,000
Depreciation expense 18,000

What amount should be budgeted for cash disbursements for May?
a. $366,000
b. $348,000
c. $324,000
d. $213,000
12. (LO.5) Select the correct formula to compute cost of goods manufactured.
a. Beginning WIP + Raw Materials Purchased + Direct Labor + Factory Overhead Ending WIP
b. Beginning Finished Goods + Cost of Goods Sold Ending Finished Goods
c. Raw Materials Used + Direct Labor + Factory Overhead
d. Beginning WIP + Raw Materials Used + Direct Labor + Factory Overhead Ending WIP
13. (LO.6) A continuous budget:
a. presents a statement of expectations for a period but does not present a firm commitment.
b. drops the current month or quarter and adds a future month or a future quarter as the current month or quarter is completed.
c. presents the plan for only one level of activity and does not adjust to changes in the level of activity.
d. presents the plan for a range of activity so that the plan can be adjusted for changes in activity.
14. (LO.6) All of the following are benefits of budgeting except:
a. budgeting provides assurance that the company will achieve its objectives.
b. budgeting facilitates the coordination of activities.
c. budgeting requires managers to plan ahead.
d. budgeting provides specific benchmarks for evaluating performance.
15. (LO.7) (Appendix) Which of the following items should be included in a companys budget
manual?
a. Sample budgetary forms
b. Calendar of scheduled budgetary activities
c. Original, revised, and approved budgets
d. All of the above should be included.

Chapter 9:
1. (LO.1) Which income statement format better facilitates the determination of a companys break- even point?
a. Absorption costing income statement
b. Full costing income statement
c. Variable costing income statement
d. None of the above
2. (LO.1) Select the incorrect equation for computing the breakeven point.
a. Total Fixed Costs = Total Contribution Margin
b. Total Revenue = Total Costs
c. Total Profit = $0
d. Total Variable Costs = Total Fixed Costs
3. (LO.2) A Company sells a product for $7.50 whose variable cost is $2.25 per unit. The company needed to sell 20,000 shirts to break even. What was the companys total fixed costs?
a. $105,000
b. $150,000
c. $45,000
d. $3,810
4. (LO.2) B Company sells a product for $7.50 whose variable cost is $2.25 per unit. The company needed to sell 20,000 shirts to break even and its net income was $5,040 before tax. How many units did the company sell?
a. 2,240
b. 20,000
c. 20,672
d. 20,960
5. (LO.2) W Company manufactures a product that sells for $800 per unit. The unit variable costs
are $600 and total fixed costs are $6,600,000. The annual sales volume required for W Company to break even is:
a. $26,400,000. b. $8,800,000. c. $6,600,000. d. None of the above.
6. (LO.3) F Company manufactures and sells T-shirts. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was $5,040. F Companys expectation for the coming year include the following:
The selling price of the T-shirts will be $9.00
Variable cost to manufacture will increase by one-third
Fixed costs will increase by 10%
The income tax rate of 40% will be unchanged
The number of T-shirts that must be sold to break even in the coming year is:
a. 22,000.
b. 20,000.
c. 19,250.
d. 17,500.
7. (LO.3) A calculation used in a CVP analysis determines the break-even point. Once the break- even point has been reached, operating income will increase by the:
a. contribution margin per unit for each additional unit sold.
b. gross margin per unit for each additional unit sold.
c. fixed costs per unit for each additional unit sold.
d. variable costs per unit for each additional unit sold.
8. (LO.3) A company sells a product for $9.00 which has a variable manufacturing cost of $3.00 per unit. Last year, the company needed to sell 20,000 shirts to break even. Assuming the company is subject to a 40% tax rate and wishes to earn $22,500 profit after tax for the coming year, what sales will be required?
a. $257,625
b. $236,250
c. $213,750
d. $180,000
9. (LO.3) X Company sold a product last year that had a $5.00 unit contribution margin. A significant change in the companys production technology has caused a 10% increase in annual fixed costs but a 20% decrease in unit variable costs. Assuming there was no change in the products $10.00 selling price what is the companys new contribution margin ratio?
a. 60%
b. 50%
c. 40%
d. Cant be determined from the information provided
10. (LO.3) A significant change in Y Companys production technology caused its total fixed costs of
$6,708,716 to increase by 9%. However, the change caused a 20% unit cost decrease in direct labor and a 25% decrease in the unit material cost leading to $25 increase in its $300 unit contribution margin. After incorporating these changes, what is Y Companys new break-even point?
a. 22,500 units
b. 20,643 units
c. 24,375 units
d. 22,363 units
11. (LO.4) One Company sells two products, A and B. A has a unit contribution margin of $40 while B has a unit contribution margin of $25. Last year the company sold 40,000 units of Product A and 60,000 units of Product B. What is the companys weighted average contribution margin?
a. ($40 + $25) / 2
b. ($40 x 40,000) + ($25 x 60,000)
c. ($40 x 0.4) + ($25 x 0.6)
d. None of the above
12. (LO.5) For a profitable company, the amount by which sales can decline before losses occur is known as the:
a. sales volume variance. b. hurdle rate.
c. marginal income rate. d. margin of safety.
13. (LO.5) V Company sold 10,000 units of its product for $100 per unit. Its unit variable costs are
$20 and its total fixed costs are $600,000. Assuming the company has a 40% tax rate, what is its degree of operating leverage?
a. 4.00
b. 0.25
c. 6.67
d. 0.15
14. (LO.6) Which of the following is not an assumption of CVP analysis?
a. All revenues and variable cost are linear.
b. Mixed costs can be accurately separated into their fixed and variable components.
c. Sales exceed production.
d. Labor productivity and market conditions will not change.
15. (LO.6) Select the incorrect statement from the following.
a. If changes occur in selling price or cost, new computations must be made for break-even and CVP analysis.
b. In the long-term, fixed costs should be regarded as a long-term variable cost.
c. Fixed costs exist only in a short-term perspective.
d. In the future, the only nonmonetary variable included in the break-even model will be sales volume.

Chapter 10:
1. (LO.1) Which of the following is not a required characteristic of relevant information?
a. Must be associated with the decision under consideration
b. Must have a connection to or bearing on some future endeavor
c. Must be important to the decision maker
d. Must be verifiable by an independent reviewer or auditor
2. (LO.1) Contribution to income that is foregone by not using a limited resource for its best alternative use is referred to as
a. marginal cost.
b. incremental cost.
c. non-relevant cost.
d. opportunity cost.
3. (LO.1) Total unit costs are:
a. relevant for cost-volume-profit analysis.
b. needed for determining sunk costs.
c. non-relevant in marginal analysis.
d. needed for determining product contribution.
4. (LO.2) Sunk costs are:
a. relevant to decision making.
b. not relevant to decision making.
c. non-relevant to long-run decisions but not to short-run decisions.
d. fixed costs.
5. (LO.2) In equipment-replacement decisions, which one of the following does not affect the decision-making process?
a. Historical cost of the old equipment
b. Cost of the new equipment
c. Operating costs of the new equipment
d. Current disposal price of the old equipment
6. (LO.3) Select the incorrect statement from the following.
a. A cost that is the same for multiple alternatives under consideration is not relevant.
b. The cost of acquiring the machine that is currently used to produce a component is relevant in making an outsourcing decision.
c. The cost to acquire a component in a make or buy decision is relevant.
d. The salvage or residual value of a piece of machinery is relevant in a keep-or-replace decision.
7. (LO.3) A companys approach to a make-buy decision
a. involves an analysis of avoidable costs.
b. depends on whether the company is operating at or below breakeven.
c. should use absorption costing.
d. should use activity-based costing.
8. (LO.3) P Company currently manufactures all component parts used in the manufacture of various small appliances. A steel handle is used in three different products. The current year budget for 20,000 handles has the following unit cost:

Direct material $0.60
Direct labor 0.40
Variable overhead 0.10
Fixed overhead 0.20
Total unit cost $1.30

A steel company has offered to supply 20,000 handles to P Company for $1.25 each, which includes delivery. Accepting the offer will:
a. decrease the handle unit cost by $0.15. b. decrease the handle unit cost by $0.25.
c. increase the handle unit cost by $0.15. d. Increase the handle unit cost by $0.05.
9. (LO.4) Select the incorrect statement concerning scarce resource decisions.
a. Unit contribution margin rather than gross margin is the appropriate measure of profitability.
b. Scarce resources may include machine hours, skilled labor hours, and raw materials.
c. If the objective is to maximize profits, a scarce resource is best used to produce and sell the product generating the highest contribution margin per unit.
d. Although in the long run, a company may acquire a higher quantity of the scarce resource, in the short run, management must make the most efficient use of the currently available resources.
10. (LO.5) D Company recently expanded its manufacturing capacity, which will allow it to produce up to 15,000 units of Products A and B. The sales department believes it can sell up to 13,000 units of either product this year. Because the two products are very similar, D Company will produce only one of the two products. The following information is available:

Per Unit Data Product A Product B
Selling price $88.20 $80.00
Variable costs 52.80 52.80

Fixed costs will total $369,600 if Product A is produced but will be only $316,800 if Product B is produced. D Company is subject to a 40% income tax rate. If the company desires an after-tax profit of $24,000, how many units of Product B will the company have to sell?
a. 4,460
b. 12,529
c. 13,118
d. 13,853
11. (LO.6) Select the correct statement concerning special order decisions.
a. Such decisions must not violate the Robinson-Patman Act which prohibits companies from pricing the same product at different levels when those amounts do not reflect related cost differences.
b. Companies may give ad hoc discounts if such concessions relate to real or imagined competitive pressures.
c. Special order decisions often hinge on productive capacity issues.
d. All of the above are correct.
12. (LO.6) R Company sells a product for $10.00 that has the following unit cost:

Direct material $1.60
Direct labor 2.40
Variable overhead 1.20
Fixed overhead 1.30
Total unit cost $6.50

A company that does not compete with R Companys existing customers has made an offer to purchase 1,000 units of the product at a proposed price of $6.00. R Company is currently selling all of the units it can produce to its existing customers. Select the correct statement from the following.
a. Reject the offer since the offer price is less than the unit production cost.
b. Accept the offer since the offer price exceeds the sum of the variable costs.
c. Reject the offer to avoid a $4.00 per unit decrease in profit on the 1,000 units.
d. Accept the offer since the offer price exceeds the unit fixed cost.
13. (LO.7) Select the correct definition of segment margin from the following:
a. Revenue Expenses
b. Revenue Variable Costs
c. Revenue Variable Costs Avoidable Fixed Costs
d. Revenue Variable Costs Unavoidable Fixed Costs
14. (LO.8) (Appendix) What problem is being addressed with the following objective function: VC = VC1X1 + VC2X2?
a. Maximization problem
b. Minimization problem
c. Feasible problem
d. Non-negative problem
15. (LO.8) (Appendix) Select the incorrect statement concerning linear programming.
a. The feasible region must fall within or on all of the constraint lines.
b. A corner formed by constraint lines is called a vertex.
c. The optimal solution is found midway between two vertexes.
d. The simplex method is a more efficient way to handle complex linear programming problems.

Chapter 11:
1. (LO.1) A product that results from a joint process may be classified as
a. a joint product.
b. a by-product.
c. scrap.
d. All of the above.
2. (LO.1) Select the incorrect statement from the following.
a. Producing first-quality merchandise and factory seconds in a single operation can be viewed as a joint process.
b. Waste is a residual output from many production processes whose sales value is comparable to that of by-products.
c. By-products are distinguished from scrap by their higher sales value.
d. While joint cost allocations are necessary to determine financial statement valuations, such allocations should not be used in making internal decisions.
3. (LO.1) Select the incorrect statement concerning the split-off point.
a. The split-off point is the point at which joint process outputs are first identifiable as individual products.
b. If joint output is processed beyond the split-off point, additional costs will be incurred and must be assigned to the specific products for which those costs were incurred.
c. A single joint process cannot have multiple spit-off points.
d. Output may be sold at the split-off point or processed further and then sold.
4. (LO.2) In joint product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits?
a. Purchase costs of the materials required for the joint products
b. Separable costs after the split-off point
c. Joint costs to the split-off point
d. Sales salaries for the period when the units were produced
5. (LO.2) Before committing resources to a joint process, management must first decide whether total expected revenue from selling the joint output basket of products is likely to exceed the:
a. selling expenses for the goods.
b. joint costs and separate processing costs after split-off.
c. disposal costs for any waste generated.
d. All of the above.
6. (LO.2) When estimating unit selling prices for use in allocating joint production costs, which of the following should be considered?
a. Competitor prices
b. Consumers sensitivity to price changes
c. Costs
d. All of the above
7. (LO.3) All of the following are common monetary measures for allocating joint costs to joint products except:
a. approximated net realizable value at split-off.
b. gross margin at split-off.
c. net realizable value at split-off.
d. sales value at split-off.
8. (LO.3) LS Company manufactures two products, Product L and Product S in a joint process. The joint (common) costs incurred are $420,000 for a standard production run that generates 180,000 units of L and 120,000 units of S. Product L sells for $2.40 per unit while Product S sells for $3.90 per unit. Assuming both products are sold at the split-off point, the amount of joint cost of each production run allocated to Product L on a net realizable value (NRV) basis is:
a. $252,000.
b. $218,400.
c. $201,600.
d. $168,000.
9. (LO.3) Products A and B are manufactured in a joint process. The joint (common) costs incurred are $252,000 for a standard production run that generates 108,000 gallons of Product A which sells for $2.40 per gallon and 72,000 gallons of Product B which sells for $3.90 per gallon. If no additional costs are incurred after the split-off point, the amount of joint cost of each production run allocated to Product B on a physical measure basis is:
a. $100,800.
b. $140,000.
c. $151,200.
d. $280,800.
10. (LO.3) Products X and Y are manufactured in a joint process. The joint (common) costs incurred are $420,000 for a standard production run that generates 180,000 gallons of Product X which sells for $2.40 per gallon and 120,000 gallons of Product Y which sells for $3.90 per gallon. If additional processing costs beyond the split-off point are $1.40 per gallon for Product X and $0.90 per gallon for Product Y, the amount of joint cost allocated to Product Y on a net realizable value basis is:
a. $280,000.
b. $252,000.
c. $168,000.
d. $140,000.
11. (LO.3) M Company incurs $10,000,000 in joint costs for its three products. The company
estimates the products production, final selling price, and separate costs after split-off as follows:

Estimated Estimated
Product Production Selling Price Separate Cost
Product A 3,000 $2,000 $200
Product B 2,400 $3,000 $500
Product C 1,200 $1,500 $100

How much of the joint costs should be allocated to Product A under the approximated net realizable value at split-off? (Note: round percentages to zero decimal places.)
a. $4,600,000
b. $4,100,000
c. $1,300,000
d. None of the above
12. (LO.4) P Inc. always generates a certain amount of waste due to the nature of its production activities regardless of which products it is producing at the time. After production in a recent month, the company sold $200 of scrap. Which of the following is the correct entry to record the sale of the scrap using the realized value approach?
a. Cash 200
Manufacturing Overhead 200
b. Cash 200
Finished Goods 200
c. Cash 200
Scrap Inventory 200
d. Cash 200
Work in Process 200
13. (LO.4) Select the incorrect statement concerning the accounting for by-product and scrap.
a. Reducing joint cost by the NRV of the by-product/scrap is the traditional method used to account for such goods.
b. Regardless of whether a company uses the NRV or the realized value approach, the specific method used to account for by-product should be established before the joint cost is allocated
to the joint products.
c. Two common methods used to account for by-products are the NRV approach and the realized value approach.
d. Under the realized value approach, the estimated selling price of the by-product is recognized prior its actual sale.
14. (LO.5) Not-for-profit organizatio

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