- Cramer's, Inc., is a wholesale distributor of a unique business software application. The company's traditional income statement for the month follows:
Cramer's, Inc.
Traditional Format Income Statement
For the Month Ended July 31
Sales $58,000
Cost of goods sold 34,000
Gross margin 24,000
Selling and administrative expenses:
Selling $12,600
Administrative 8,200 20,800
Net operating income $3,200
A total of $3,800 of the selling expenses and $1,400 of the administrative expenses are variable; the remainder are fixed. What is the company's contribution margin?
$18,800
- Which of the following would be considered an indirect cost?
The cost of wood for the production of furniture
Lubricants for a machine
Manager's salary
Wages for servers in a restaurant
Lubricants for a machine
- Which of the following would be considered a direct cost?
Manager's salary
The cost of wood for the production of furniture
Wages for servers in a restaurant
Lubricants for a machine
The cost of wood for the production of furniture
- The cost of quality training is an example of...
prevention cost
- The cost of warranty repairs is an example of...
external failure cost
- You are given the following information about Ozark:
Year 1 Year 2
Sales $50,000 $62,500
Quality Training Costs $2,000 $1,750
Inspections $1,000 $1,500
Reliability Testing $625 $625
Warranty Repairs $1,750 $1,875
Cost of Field Services $1,125 $885
What happened to the inspection costs?
Remained unchanged as a percentage of sales
Increased from Year 1 to Year 2, but decreased as a percentage of sales
Decreased from Year 1 to Year 2
Increased from Year 1 to Year 2 both in total amount and as a percentage of sales
Increased from Year 1 to Year 2 both in total amount and as a percentage of sales
- You are given the following information about Ozark:
Year 1 Year 2
Sales $54,000 $67,500
Quality Training Costs $2,160 $1,890
Inspections $1,080 $1,620
Reliability Testing $675 $675
Warranty Repairs $1,890 $2,025
Cost of Field Services $1,125 $945
What happened to the total quality costs?
Remained unchanged as a percentage of sales
Increased from Year 1 to Year 2, but decreased as a percentage of sales
Decreased from Year 1 to Year 2
Increased from Year 1 to Year 2 both in total amount and as a percentage of sales
Increased from Year 1 to Year 2, but decreased as a percentage of sales
- Which of the following statements is (are) true?
A. Companies that produce many different products or services would use job-order costing systems.
B. Job-order costing systems cannot be used by service firms.
C. Costs are traced to departments and then allocated to units of product when job-order costing is used.
incorrect
D. All of the above.
A. Companies that produce many different products or services would use job-order costing systems.
- In a job-order costing system, the basic document for accumulating costs for a specific job is:
the labor time ticket
the Work in Process inventory account
the job cost sheet
the materials requisition form
the job cost sheet
- Harrington Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on machine hours in the Machining Department and on direct labor cost in the Assembly Department. At the beginning of the year, the company made the following estimates:
Machining Assembly
Direct labor hours 19,000 12,000
Direct labor cost $ 22,000 $15,000
Machine hours 3,000 1,000
Manufacturing overhead $30,000 $33,000
What predetermined overhead rates would be used in the Machining and the Assembly Department, respectively?
$10.00 and 45.45%
$15.00 and 45.45%
$15.00 and 115.15%
$10.00 and 220.00%
$10.00 and 220.00%
