14. Costs that are incurred as part of the manufacturing process but are not cle
ID: 2487615 • Letter: 1
Question
14. Costs that are incurred as part of the manufacturing process but are not clearly associated with specific units of product or batches of production, including all manufacturing costs other than direct material and direct labor costs, are called A. Administrative expenses. B. Nonmanufacturing costs. C. Sunk costs. D. Factory overhead. E. Preproduction costs. 15. Managerial accounting is different from financial accounting in that: A. Managerial accounting is more focused on the organization as a whole and financial accounting is more focused on subdivisions of the organization. B. Managerial accounting never includes nonmonetary information. C. Managerial accounting includes many projections and estimates whereas financial accounting has a minimum of predictions. D. Managerial accounting is used extensively by investors, whereas financial accounting is used only by creditors. E. Managerial accounting is mainly used to set stock prices. 16. Product A requires five machine hours per unit to be produced, Product B requires only three machine hours per unit, and the company's productive capacity is limited to 240,000 machine hours. Product A sells for $16 per unit and has variable costs of $6 per unit. Product B sells for $12 per unit and has variable costs of $5 per unit. Assuming the company can sell as many units of either product as it produces, the company should: A. Produce only Product A. B. Produce only Product B C. Produce equal amounts of A and B. D. Produce A and B in the ratio of 62.5% A to 37.5% B. E. Produce A and B in the ratio of40% A and 60% B. 17. An opportunity cost is: A. An uncontrollable cost. B. A cost of potential benefit lost. C. A change in the cost of a component. D. A direct cost. E. A sunk cost.Explanation / Answer
14./
COST THAT ARE INCURRED AS A PARTOF THE MANUFACTURINGF PROCESS BUT ARE NOT CLEARLY ASSOCIATED WITH SPECIFICFIC UNIT OF PRODUCT OR BATCHES OF PRODUCTION INCLUDING ALL MANUFACTURING COST OTHER THAN MATERIAL AND DIRECT LABOUR COST ARE CALLED FACTORY OVERHEAD COST.
15./
MANAGERIAL ACCOUNTING IS DIFFRENT FROM THE FINANCIAL ACCOUNTING IN THATMANAGERIAL ACCOUNTING INCLUDES MANY PROJECTION AND EASTIMATES WHERE AS FINANCIAL ACCOUNTING HAS A MINIMUM PROJECTION.
16./
CONTRIBUTION PER UNIT OF A ($16 - $6) = $10
CONTRIBUTION PER MACHINE HOUR ($10 / 5) = $2
CONTRIBUTION PER UNIT OF B ($12 - $5) = $7
CONTRIBUTION PER MACHINE HOUR ($7 / 3) = $2.33
AS THE CONTRIBUTION PER LIMITING FACTOR I;E MACHINE HOUR OF PRODUCT B IS MORE ONLY PRODUCT B SHOULD BE PRODUCED.
17./
OPPERTUNITY COST IS A COST OF POTENTIAL BENIFIT LOST.
18./
OVERHEAD COST
= DEPERICATION EXPENSES + FACTORY UTILITES
= $133000 +$105000
= $238000
19./
A FIXED COST DOES NOT CHANGE WITH THE CHANGE IN VOLUMEOF ACTIVITY WITHIN THE RELEVENT RANGE.
20./
PAY BACK PERIOD, INTERNAL RATE OF RETURN AND NET PRESENT VALUE METHOD USE CASH FLOW AS A MESUREMENT BASIS.
21./
CAPITAL BUDGETING DECESSION USUALLY INVOLVES ANALYSIS OF INVESTMENT WITH CERTAIN OUTCOMES ONLY
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