AFM481 Lecture 6: chapter 2.2

18. To calculate budgeted direct labor costs, multiply thenumber of units to be produced by the number of projected directlabor hours. Next, multiply that total by the average direct costper hour.

True

False

22. A flexible budget summarizes revenues and costs for variouslevels of sales volume within a relevant range.

True

False

29. A cost variance measures the difference in quantities ofactual inputs used and the standard quantity of inputs allowed forthe actual number of units produced.

True

False

32. Unfavorable variances are subtracted from each other toarrive at a favorable variance.

True

False

34. A direct labor cost variance is unfavorable if the employerpays workers more per hour than budgeted.

True

False

36. In a standard cost system, the manufacturing overheadallocated to production equals the standard overhead allocationrate multiplied by the standard quantity of the allocation baseallowed for expected output.

True

False

37. The direct materials cost and efficiency variances make upthe total direct materials variance.

True

False

41. Which of the following statements is true of absorptioncosting?

A) It considers variable selling and administrative costs asproduct costs.

B) It considers fixed selling and administrative costs asproduct costs.

C) It considers fixed manufacturing overhead cost as productcosts.

D) It considers variable manufacturing overhead cost as periodcosts.

42) Which of the following is true of the traditional format ofthe income statement?

A) It is prepared under the variable costing method.

B) It shows contribution margin as a line item.

C) It is not allowed under GAAP.

D) It is prepared under the absorption method.

43) Unit product cost calculations using absorption costing donot include ________.

A) fixed manufacturing overhead

B) variable manufacturing overhead

C) variable selling and administrative costs

D) direct materials

85. Provide responses to the following questions regarding thediscount rate.

Question? Your response

What does the discount rate represent?

What are other names for the discount rate?

Is the following statement true? Discuss the reason for yourresponse. "The higher the risk, the lower the discount rate."

1. The following is a listof various costs of producing T-shirts. Classify each cost aseither a variable, fixed, or mixed cost for units produced andsold.

2. Copper Hillsmanufactures laser printers within a relevant range of productionof 70,000 to 100,000 printers per year. The following partiallycompleted manufacturing cost schedule has been prepared:

Complete the preceding cost schedule, identifying each cost bythe appropriate letter (a) through (o).

3. For the current year ending April 30, HaleyCompany expects fixed costs of $60,000, a unit variable cost of$70, and anticipated break-even of 1,715 sales units.

Round your answer to the nearest whole number.

4. Currently, the unitselling price is $50, the variable cost, $34, and the total fixedcosts, $108,000. A proposal is being evaluated to increase theselling price to $54.

5. For the coming year,Reve Company estimates fixed costs at $109,000, the unit variablecost at $21, and the unit selling price at $85. Determine (a) thebreak-even point in units of sales, (b) the unit sales required torealize operating income of $150,000 and (c) the probable operatingincome if sales total $500,000.

Round units to the nearest whole number and percentage to onedecimal place.

1. Which of the following statements is NOT true about costs perunitwithin the relevant range?

A. Fixed costs decrease in proportion to increases involume.

B. Mixed costs decrease but not in direct proportion toincreases in volume.

C. Variable costs stay constant with changes in volume.

D. Curvilinear costs stay constant with changes in volume.

2. How would the equation for total costs be written using thefollowing? y = total costs v = variable cost per unit of activity x= volume of activity f = total fixed costs

A. y = xv

B. y = xv + f

C. y = xf

D. y = f

3. A utility bill consisting of a monthly base, plus an addedamount based on usage, is classified as a:

A. fixed cost.

B. mixed cost.

C. curvilinear cost.

D. variable cost.

4. A company is analyzing its mixed costs. During July, itsbusiest month, a company had total labor hours of 14,000 and totalcosts of $40,000. During February, its slowest month, the companyhad labor hours of 8,000 and total costs of $25,000. The company isplanning for 12,000 direct labor hours next April. How many dollarsshould the company budget for fixed costsduring April?

A. $5,000

B. $6,000

C. $35,000

D. $36,000

5. A company is analyzing its mixed costs. During July, itsbusiest month, a company had total labor hours of 14,000 and totalcosts of $40,000. During February, its slowest month, the companyhad labor hours of 8,000 and total costs of $25,000. The company isplanning for 12,000 direct labor hours next April. How many dollarsshould the company budget for total costsduring April?

A. $5,000

B. $6,000

C. $30,000

D. $35,000

6. Which of the following statements is true regardingregression analysis?

A. Regression analysis considers all of the data points fordetermining the line that best fits the data so is usually moreaccurate than the high-low method.

B. Regression analysis helps generate a statistic, called theR-square, which tells how well the line fits the data points.

C. Regression analysis helps managers implement activity-basedcosting systems.

D. All of the above are true.

7. The difference between absorption costing and variablecosting is:

A. the treatment of fixed MOH.

B. the timing with which fixed MOH is expensed.

C. both of the above are differences.

D. none of the above are differences.

8. Which of the following is NOT true regarding an incomestatement organized according to the contribution marginapproach?

A. The contribution margin income statement is organized by costbehavior.

B. Operating income will always be the same as operating incomein a traditional income statement regardless of changes ininventory levels.

C. All fixed costs, including fixed MOH, are expensed below thecontribution margin line.

D. The contribution margin is equal to sales revenue minusvariable expenses.