(TCO A) The variable portion of advertising costs is a

Conversion YES… Period NO.

Conversion YES …. Period YES.

Conversion NO…. Period YES.

Conversion NO…. Period NO.

Question 2. Question
: (TCO A) The costs of staffing and operating the
accounting department at Central Hospital would be considered by the Department
of Surgery to be

direct costs.

sunk costs.

incremental costs.

None of the above

Question 3. Question
: (TCO A) Property taxes on a company’s factory
building would be classified as a(n)

sunk cost.

opportunity cost.

period cost.

variable cost.

manufacturing cost.


Question 4. Question
: (TCO A) When the activity
level is expected to increase within the relevant range, what effects would be
anticipated with respect to each of the following?

Fixed cost per unit Variable cost per unit

Increase No change

Increase Increase

Decrease No change

No change Increase

Question 5. Question
: (TCO F) Which of the following statements is true?

I. Overhead application may be made slowly as a job is
worked on.

II. Overhead application may be made in a single application
at the time of completion of the job.

III. Overhead application should be made to any job not
completed at year end in order to properly value the work in process inventory.

Only statement I is true.

Only statement II is true.

Both statements I and II are true.

Statements I, II, and III are all true.

Question 6. Question
: (TCO F) Under a job-order costing system, the product
being manufactured

is homogeneous.

passes from one manufacturing department to
the next before being completed.

can be custom manufactured.

has a unit cost that is easy to calculate by
dividing total production costs by the units produced.

Question 7. Question
: (TCO F) Equivalent units for a process costing system
using the FIFO method would be equal to

units completed during the period, plus
equivalent units in the ending work-in-process inventory.

units started and completed during the
period, plus equivalent units in the ending work-in-process inventory.

units completed during the period and
transferred out.

units started and completed during the
period, plus equivalent units in the ending work-in-process inventory, plus
work needed to complete units in the beginning work-in-process inventory.

Question 8. Question
: (TCO B) The contribution margin equals

sales – expenses.

sales – cost of goods sold.

sales – variable costs.

sales – fixed costs.

Question 9. Question
: (TCO B) To obtain the break-even point in terms of
dollar sales, total fixed expenses are divided by which of the following?

Student Answer: Variable expense per unit

Variable expense per unit/Selling price per

Fixed expense per unit

(Selling price per unit – Variable expense
per unit) /Selling price per unit.

Question 10. Question
: (TCO E) Under variable costing

Student Answer: net operating income will tend to move up and
down in response to changes in levels of production.

inventory costs will be lower than under
absorption costing.

net operating income will tend to vary
inversely with production changes.

net operating income will always be higher
than under absorption costing.

for the just-completed year.


Purchases of raw materials $170

Direct labor

Manufacturing overhead $220

Administrative expenses $180

Selling expenses $140

Raw materials inventory, beginning $70

Raw materials inventory, ending $80

Work-in-process inventory, beginning $30

Work-in-process inventory, ending $20

Finished goods inventory, beginning $100

Finished goods inventory, ending $70

Required: Prepare a Schedule of Cost of Goods Manufactured
statement in the text box below.

Question 2. Question
: (TCO F) The Indiana Company
manufactures a product that goes through three processing departments.
Information relating to activity in the first department during June is given

Percentage completed

Units Materials Conversion

Work in process, June 1 70,000 65% 45%

Work in process, Jun 30 60,000 75% 65%

The department started 290,000 units into production during
the month and transferred 300,000 completed units to the next department.

Required: Compute the equivalent units of production for the
first department for June, assuming that the company uses the weighted-average
method of accounting for units and costs.

Question 3. Question
: (TCO B) A tile manufacturer
has supplied the following data:

Boxes of tile produced and sold 625,000

Sales revenue

Variable manufacturing expense $1,720,000

Fixed manufacturing expense

Variable selling and admin expense $152,000

Fixed selling and admin expense $133,000

Net operating income


a. Calculate the company’s unit contribution margin.

b. Calculate the company’s contribution margin ratio.

c. If the company increases its unit sales volume by 5%
without increasing its fixed expenses, what would the company’s net operating
income be?

Points Received: 20 of 25


Question 4. Question
: (TCO E) Lehne
Company, which has only one product, has provided the following data concerning
its most recent month of operations:

Selling price
$ 125

Units in beginning inventory 600

Units oroduced 3000

Units sold 3500

Units in ending inventory 100

Variable costs per unit:

Direct materials
$ 15

Direct labor
$ 50

Variable manufacturing overhead $ 8

Variable selling and admin
$ 12

Fixed costs:

Fixed manufacturing overhead
$ 75,000

Fixed selling and admin
$ 20,000

The company produces the same number of units every month,
although the sales in units vary from month to month. The company’s variable
costs per unit and total fixed costs have been constant from month to month.


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

b. What is the unit product cost for the month under
absorption costing?

c. Prepare an income statement for the month using the
variable costing method.

d. Prepare an income statement for the month using the
absorption costing method.