James Madison University - College of Business



Prologue and Chapter 1 Multiple ChoicePrologue:Managerial accounting differs from financial accounting in that managerial accountingIs used primarily by external decision makers.Is required by Generally Accepted Accounting Principles (GAAP).Tends to report on the company as a whole rather than segments of the company. Is focused on the future. Chapter 1:Which of the following is NOT a variable cost? Cost of coffee used at a local coffee storeShipping costs for Monthly rent for a law firm Sales commissions at a car dealershipHourly wages paid to sales clerks at StaplesWhich of the following is NOT a direct cost of the JCPenney’s men’s department in the JCPenney’s Harrisonburg department store? Cost of men’s clothing Manager of the men’s department Cost of shoes on the mannequins in the men’s department Cost of hangers used to display the clothing in the storeBelow are some of Toyota’s (an automotive manufacturer) costs to manufacture a car:Depreciation of robotic assembly line equipmentAutomobile engineSteering wheelWages of assembly line worker Sales persons salary Assembly line supervisor Classify the costs above by direct materials, direct labor and manufacturing overhead (note: not all the costs may fall into these three categories). Direct LaborDirect MaterialsManufacturing Overheada.IVII, IIII, VIb.IV, VII, IIII, VIc.IVII, IIII, V, VId.IVIII, III, VIProduct costs are: Expensed in the period in which they are incurred on the income statementRecorded as an asset on the balance sheet until the product is soldDirect materials, direct labor and manufacturing overhead Both B & C FrameIt manufactures picture frames. Below are costs from FrameIt’s June records. What is FrameIt’s total manufacturing overhead costs in June? Oil for manufacturing equipment?$50Wood for frames?$55,000Salary of the company’s president?$30,000Interest expense$2,500Factory supervisor’s salary?$20,000Depreciation expense on the company car used by the sales team$3,000Factory janitor’s salary$5,000Factory depreciation expense$8,000Glue for picture frames$300$32,700$33,000$33,350$35,850Below are the costs for a dairy processing company for the month of July. What is the company’s total period costs? Cost of milk purchased from local dairy farmers$500,000Depreciation on the computer of the salesperson$300Property tax on the dairy processing plant$10,000Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores$20,000The CEO’s salary$90,000Depreciation on refrigerated trucks used to collect raw milk from local dairy farmers$25,000Plastic gallon containers in which milk is packaged$50,000Research and development on improving milk pasteurization process$40,000Radio advertising for the Company’s products$4,000Wages paid to the machine operators the at dairy processing plant?$35,000$ 154,300$ 164,300$ 144,300 $ 150,300$ 134,300Use the following information to answer questions 8 – 10Martha’s Quilt Shop sells homemade quilts. Martha buys the quilts from local artisans for $300 each and sells them in her shop for $500 each. Martha pays a sales commission of 4% of sales revenue to her sales staff. Martha pays $6,000 in rent each month and pays $1,900 per month in payroll expenses in addition to the sales commissions. Martha sold 250 quilts in March. What is Martha’s Quilt Shop’s gross margin for March? $45,000$50,000$37,100 $42,100 What is Martha’s Quilt Shop’s contribution margin for March? $45,000$50,000$37,100 $42,100 Martha’s Quilt Shop prepares her income statement using both the traditional method and the contribution margin method. What is Martha’s Quilt Shop’s March net income under these two methods? Traditional MethodContribution Margin Method$50,000$45,000$37,100$37,100$42,100$37,100$45,000$50,000Which of the following is false about the high-low method? A weakness of this method is that it is based on only two data points.The slope found from this method represents the variable cost per unit.Selection of the high and low data points should be based on cost, not on the activity level.It yields an equation for a straight line connecting the high and low data points with the fixed costs being the point where the line starts on the y-axis.Which of the following is false? Scatter plot graphs should be prepared to determine if there is a relationship between cost and activity.If a scatter plot graphs data points fall in a linear pattern, it suggests a weak relationship exists between cost and level of activity. The lease squares regression analysis is the most accurate method when compared to the visual fit and high low methods but is the hardest to calculate by hand. When creating a scatter plot graph, the level of activity should be on the x-axis while cost should be plotted on the y-axis. ................
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