Arch Associates reports the following comparative balance sheets and income statement information.

When would a sales variance be listed as favorable?

Multiple Choice

None of these answers are correct.


When actual sales are equal to budgeted or expected sales


When actual sales are less than budgeted or expected sales


When actual sales exceed budgeted or expected sales Correct
Answer
When actual sales exceed budgeted or expected sales Correct
Explanation
Favorable sales variances occur when actual sales are greater than expected sales. Unfavorable sales variances occur when actual sales are less than expected sales.

All of the following costs are accumulated in the Work in Process Inventory account except:

Multiple Choice

direct labor costs.


manufacturing overhead costs.


direct material costs.


depreciation on factory equipment. Correct
Answer
depreciation on factory equipment. Correct
Explanation
When direct materials are placed in production, the cost is added to the Work in Process Inventory account. Because direct labor is also used to make products, the cost is added to the Work in Process Inventory account. Estimated overhead costs are applied (assigned) to the Work in Process Inventory account at the time goods are produced.

Arch Associates reports the following comparative balance sheets and income statement information.

 


The amount of cash collected from customers during Year 2 was:

Multiple Choice

$90,000. Correct

$94,000.


$86,000.


$98,000.
Answer
$90,000. Correct

Explanation
Beginning balance + Revenue recognized on account − Cash collections from customers = Ending balance
$5,200 + $94,000 − Cash collections from customers = $9,200
Cash collections from customers = $5,200 + $94,000 − $9,200 = $90,000

Wu Company incurred $48,600 of fixed cost and $59,400 of variable cost when 2,200 units of product were made and sold.

If the company's volume doubles, the total cost per unit will:

Multiple Choice
stay the same.
decrease.Correct
increase but will not double.
double as well.

Answer
decrease. Correct
Explanation
Current cost per unit:
Total cost per unit = (Fixed cost + Variable cost) ÷ Number of units
Total cost per unit = ($48,600 + $59,400) ÷ 2,200 units   = $49.09 per unit
Cost per unit when volume doubles:
Total cost per unit = [$48,600 + ($59,400 × 2)] ÷ (2,200 units  × 2) = $38.05 per unit

Financial reporting standards require that joint costs:

Multiple Choice
Be assigned to the product produced in the largest quantity.
Be treated as a period cost and expensed immediately.
Be allocated to the two or more joint products. Correct
Be assigned to the product with the highest sales value.
Answer
Be allocated to the two or more joint products. Correct