Question

15) Which of the following corred h e n ie for indirect labor com A) Indirect labor costs are products and are a s incurred B) Indirect labor costs are period costs and are expenses incurred C) Indirect labor costs are period costs and are ned when the manufactured products D) Indirect labor costs are products and re d when the manufactured product is sold 16) Matthew's Fish Fry has a monthly target operating income of 57200 Variable expenses are 60 of sales and monthly fixed expenses are $1,800. What is Matthew's operating leverage factor at the target level of operating income? A) 1.25 B) 0.75 C) 0.80 D) 5.00 17) The Quadrangle Fabrication Plant suffered a fire incident at the beginning of the year which resulted in loss of including the accounting records. Some data for the year were retrieved and extracts from it are shown below: Total manufacturing overhead estimated at the beginning of the year $105,840 Total direct labor costs estimated at the beginning of the year $186,000 Total direct labor hours estimated at the beginning of the year 3,600 direct labor houts Total machine hours estimated at the beginning of the year 9,000 machine hours Actual manufacturing overhead costs for the year $99,760 Actual direct labor costs for the year $142,000 Actual direct labor hours for the year 2,950 direct labor houts 10,000 machine houts Actual machine hours for the year The company's manufacturing overhead allocation is based on the number of machine hours. What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year? (Round your intermediate calculations to two decimal places) A) $60,977 B) $152,417 C) $86,730 D) $117,600 18) Palmer's Gourmet Chocolates produces and sells assorted boxed chocolates. The unit selling price is $50, unit variable costs are $25, and total fixed costs are $2,000. What are breakeven sales in dollars? A) $80 B) $2,000 C) $1,333 D) $4,000

Answer 1

Answers to all MCQ,s

15. Option B

Reason : in the cost sheet we have prime costs which is made up of 3 elements i.e 1. Direct materials,2. Direct labour and 3. direct overheads which is dirrectly associated with the product and its manufacturing or we can say that the product cannot be made or created if we donot have the DM, DL or DOH. examples can be for making a shoe we need leather as direct material and a labour to create it and also some tools or place where only shoes will be made this is makes our prime cost which does not contain any indirect item. and hence all items in prime cost are called Product costs.

whereas,

any indirect iem that is in a factory there are multiple product production is going on and to monitor all of the different productions one single manager is appointed . this is known as indirect cost which has to be allocated later as per departments or stores. these costs are period cost and are expensed as and in the period in which they are incurred.

16. OPTION A i.e 1.25

REASON : Given,

operating income: $7200

Fixed cost :$1800

and variable cost are 60% of sales.

to find operating leverage :

FORMULA: EBIT(earnings before interest and tax) + Fixed cost / EBIT

therefore, $7,200+$1800/$7200 = 1.25

17. OPTION D i.e. $ 1,17,600

Reason : we know that the company's manufacturing overheads alocation is based on machine hours...

so the amount of manufacturing oerhead cost allocated to work in progress inventory during the year is

total manufacturing overheads beggining of the year ......................105840...(a)

total machine hours estimated at the beg of the year............9000..(b)

Therefore, (a)/ (b)= 105840/9000= 11.76 i.e $1,17,600

18. OPTION D i.e. $4000

Reason :GIVEN : Sales per unit: $50

Variable cost per unit :$25

Total Fixed costs: $2000

find Break even sales:

Formula for BEP: Total fixed costs/ PV ratio

i.e PV ratio =Contribution/sales *100 (p.u) = SP-VC= Contribution

i.e 50-25=25= contribution

PV Ratio= 25/50*100= 50%

BEP= $2000/50%= $4000