Choose the CORRECT answer, Show work. 1. Which of the following is never include

Question

Choose the CORRECT answer, Show work.

1.

Which of the following is never included in product cost?

a. overhead

b. direct materials

c. variable selling expense

c. fixed factory overhead

e. direct labor


2.

Fixed costs that are jointly caused by two or more segments are

a. direct fixed costs.

b. common fixed costs.

c. total fixed costs.

d. avoidable fixed expenses.

e. traceable fixed expenses.

3.
Division A had ROI of 15% last year. The manager of Division A is considering an additional investment for the coming year. What step will the manager likely choose to take?

a. accept the investment as long as it provides positive operating income

b. accept the investment as long as its ROI is positive

c. reject the investment if it returns more than 15% ROI

d. reject the investment if it returns less than 15% ROI

e. reject the investment if it returns an ROI equal to 15%


4.
Last year, Delbert Company produced 10,000 units and sold 9,000 units at a price of $9. Costs for last year were as follows:
Direct materials $10,000
Direct labor 15,000
Variable factory overhead 5,000
Fixed factory overhead 20,000
Variable selling expense 7,200
Fixed selling expense 5,000
Fixed administrative expense 12,000


Fixed factory overhead is applied based on expected production. Last year, Delbert expected to produce 10,000 units.

Assuming that beginning inventory was zero, what is the value of ending inventory under absorption costing?

a. $3,000

b. $2,000

c. $5,000

d. $3,720

e. $5,720

5.
Assuming that beginning inventory was zero, what is the value of ending inventory under variable costing?

a. $3,000

b. $2,000

c. $5,000

d. $3,720

e. $5,720

6.
What is operating income for last year under absorption costing?
a. $36,000

b. $12,520

c. $11,800

d. $11,300

e. $45,000

7.
What is operating income for last year under variable costing?

a. $11,800

b. $9,000

c. $9,800

d. $6,800

e. $12,520

Explanation / Answer

1. Answer: C. Variable selling expense 2. Answer: B. Common fixed costs 3. Answer: B. Accept the investment as long as its ROI is positive. 4. Answer: C. $5,000 Direct material per unit                                                = $1 Direct labor per unit                                                    = 1.5 Variable manufacturing overhead per unit                    = 0.5 Fixed manufacturing overhead per unit                         = 2 Total cost per unit                                                       = 5 Ending inventory value ($5 x 1,000)                            = $5,000 5. Answer: A. $3,000 Direct material per unit                                      = $1.0 Direct labor per unit                                          =1.5 Variable manufacturing overhead per unit           =0.5 Total cost per unit                                              = 3.0 Ending inventory value ($3 x 1,000)                   = $3,000 6. Answer: B. $12,520 Sales                                                       $81,000 Less cost of goods sold ($5 x 9,000)         45,000 Gross margin                                              36,000 Less selling and administrative expenses: Selling expenses                                          11,480 Administrative expenses                               12,000 Net income                                                  $12,520 7. Answer: E. $12,520 The operating will not change here, since it will be equal under both methods.

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