18) A unit cost is computed by dividing total cost by the number of units. Answer: TRUE
Diff: 1
Objective: 4
AACSB: Analytical thinking
19) A unit cost is also called an average cost. Answer: TRUE
Diff: 1
Objective: 4
AACSB: Analytical thinking
20) Samiera, Inc., reports the following information for September sales: Sales $60,000 Variable costs 12,000 Fixed costs 16,000 Operating income $ 32,000 Promotional expenses for September were $1,000.
Required:
If sales double in October, what is the impact on the variable costs?
Answer: The variable costs also double up to $12,000 × 2 = $24,000. Promotional expenses are variable costs and are already included in $12,000.
Diff: 2
Objective: 4
AACSB: Analytical thinking
21) Glass House Manufacturing currently produces 1,000 glasses per month. The following per unit data for thousand apply for sales to regular customers: Direct materials $250 Direct manufacturing labor 40 Variable manufacturing overhead 70 Fixed manufacturing overhead 50 Total manufacturing costs $410 The plant has capacity for 2,000 glasses. Plant supervisor's salary is $15,000.
Required:
a. What is the total cost of producing 1,000 glasses? b. What is the total cost of producing 1,500 glasses?
c. What is the per unit cost when producing 1,500 glasses? Answer:
a. [($250 + $40 + $70) × 1,000 units] + ($50 × 1,000 units) = $410,000
Plant supervisor's salary is already included in fixed manufacturing overhead hence not added. b. [($250 + $40 + $70) × 1,500 units] + $50,000 = $590,000 c. $590,000 / 1,500 = $393.33 per unit
Diff: 2
Objective: 4
AACSB: Application of knowledge
25
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22) During 2015, Fly High Corporation incurred manufacturing expenses of $200,000 to produce 40,000 finished units. It was determined that 35,000 units were sold by November end while 5,000 units remained in ending inventory. The storage cost for December is $0.5 per unit. Required:
a. What is the cost of producing one unit?
b. What is the amount that will be reported on the income statement for cost of goods sold? c. What is the cost incurred for storing the inventory? Answer:
a. $2000,000 / 40,000 = $5
b. 35,000 units × $5 = $175,000 c. 5,000 units × $0.5 = $2,500
Diff: 2
Objective: 4
AACSB: Application of knowledge
Objective 2.5
1) Pederson Company reported the following: Manufacturing costs $2,000,000 Units manufactured 50,000 Units sold 47,000 units sold for $75 per unit Beginning inventory 0 units
What is the amount of gross profit margin? A) $1,750,000 B) $3,525,000 C) $5,405,000 D) $1,645,000 Answer: D
Explanation: D) 47,000 × ($75 - ($2,000,000 / $50,000)) = $1,645,000
Diff: 3
Objective: 5
AACSB: Application of knowledge
2) ________ sector companies purchase materials and components and convert them into finished goods. A) Merchandising B) Service
C) Manufacturing D) Professional Answer: C
Diff: 1
Objective: 5
AACSB: Analytical thinking
26
Copyright ? 2015 Pearson Education, Inc.
3) Merchandising-sectors ________.
A) purchase and then sell tangible products without changing their basic form B) provide intangible products
C) purchase materials and components and convert them into finished goods D) purchase and then sell tangible products by changing their basic form Answer: A
Diff: 1
Objective: 5
AACSB: Analytical thinking
4) Service-sector companies ________. A) provide intangible products
B) purchase and then sell tangible products without changing their basic form C) purchase and then sell tangible products by changing their basic form
D) purchase materials and components and convert them into finished goods Answer: A
Diff: 1
Objective: 5
AACSB: Analytical thinking
5) Wages paid to machine operators on an assembly line are classified as a ________. A) direct material cost
B) direct manufacturing labor cost C) manufacturing overhead cost D) period cost Answer: B
Diff: 1
Objective: 5
AACSB: Analytical thinking
6) The following information pertains to Alleigh's Mannequins: Manufacturing costs $1,500,000 Units manufactured 30,000 Units sold 29,500 units sold for $85 per unit Beginning inventory 0 units
What is the amount of gross margin? A) $1,475,000 B) $1,500,000 C) $2,507,500 D) $1,032,500 Answer: D
Explanation: D) 29,500 × ($85 - ($1,500,000 / $30,000)) = $1,032,500
Diff: 3
Objective: 5
AACSB: Analytical thinking
27
Copyright ? 2015 Pearson Education, Inc.
7) Which of the following companies is part of the service sector of our economy? A) Target
B) Ernst & Young C) Nokia
D) Amazon.com Answer: B
Diff: 1
Objective: 5
AACSB: Application of knowledge
8) Which of the following companies is part of the merchandising sector of our economy? A) Jaguar
B) Hewlett Packard C) Arrow Electronics
D) Michael Toback Accounting Firm Answer: C
Diff: 1
Objective: 5
AACSB: Application of knowledge
9) Which of the following companies is part of the manufacturing sector of our economy? A) Nike
B) Barnes & Noble C) Corvette Law Firm
D) Sears, Roebuck, and Company Answer: A
Diff: 1
Objective: 5
AACSB: Application of knowledge
10) Yahoo, an Internet search firm, would be classified as a(n) ________. A) manufacturing-sector company B) merchandising-sector company C) service-sector company D) financial services Answer: C
Diff: 1
Objective: 5
AACSB: Application of knowledge
11) Service-sector companies report ________.
A) work-in-process inventory, and finished goods inventory accounts B) only finished goods inventory
C) direct materials inventory, work-in-process inventory, and finished goods inventory accounts D) no inventory accounts Answer: D
Diff: 1
Objective: 5
AACSB: Analytical thinking
28
Copyright ? 2015 Pearson Education, Inc.
