SOLUTIONS MANUAL Frank Wood’s Business Accounting 1 & 2 ELEVENTH EDITION Frank Wood BSc(Econ), FCA and Alan Sangster BA, MSc, CertTESOL, CA

Contribution margin means: A)what remains from total sales after deducting fixed expenses. B)what remains from total sales after deducting cost of goods sold. C)the sum of cost of goods sold and variable expenses. D)what remains from total sales after deducting all variable expenses.

Answer: what remains from total sales after deducting all variable expenses.

sunk cost is: A)a cost which may be saved by not adopting an alternative. B)a cost which may be shifted to the future with little or no effect on current operations. C)a cost which cannot be avoided because it has already been incurred. D)a cost which does not entail any dollar outlay but which is relevant to the decision-making process.

Answer: a cost which cannot be avoided because it has already been incurred.

Departmental overhead rates are generally preferred to plant-wide overhead rates when: A) the activities of the various departments in the plant are not homogeneous. B) the activities of the various departments in the plant are homogeneous. C) most of the overhead costs are fixed. D) all departments in the plant are heavily automated.

Answer: A) the activities of the various departments in the plant are not homogeneous.

On the Schedule of Cost of Goods Manufactured, the final Cost of Goods Manufactured figure represents: A)the amount of cost charged to Work in Process during the period. B)the amount of cost transferred from Finished Goods to Cost of Goods Sold during the period. C)the amount of cost placed into production during the period. D)the amount of cost of goods completed during the current year whether they were started before or during the current year.

Answer: D)the amount of cost of goods completed during the current year whether they were started before or during the current year.

Overapplied manufacturing overhead means that: A)the applied manufacturing overhead cost was less than the actual manufacturing overhead cost. B)the applied manufacturing overhead cost was greater than the actual manufacturing overhead cost. C)the estimated manufacturing overhead cost was less than the actual manufacturing overhead cost. D)the estimated manufacturing overhead cost was less than the applied manufacturing overhead cost.

Answer: the applied manufacturing overhead cost was greater than the actual manufacturing overhead cost.

Buker Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine-hours 74,000 Estimated variable manufacturing overhead $7.67 per machine hour Estimated total fixed manufacturing overhead $1,630,960 The predetermined overhead rate for the recently completed year was closest to: A) $22.04 B) $29.59 C) $7.67 D) $29.71 D) $29.71 Estimated total manufacturing overhead = $1,630,960 + ($7.67 per machine-hour × 74,000 machine-hours) = $2,198,540Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $2,198,540 ÷ 74,000 machine-hours = $29.71 per machine-hour

Answer: D) $29.71 Estimated total manufacturing overhead = $1,630,960 + ($7.67 per machine-hour × 74,000 machine-hours) = $2,198,540Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $2,198,540 ÷ 74,000 machine-hours = $29.71 per machine-hour

Hibshman Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 10,000 machine-hours. The estimated variable manufacturing overhead was $6.82 per machine-hour and the estimated total fixed manufacturing overhead was $230,200. The predetermined overhead rate for the recently completed year was closest to: A) $29.84 per machine-hour B) $23.15 per machine-hour C) $23.02 per machine-hour D) $6.82 per machine-hour

Answer: A) $29.84 Estimated total manufacturing overhead = $230,200 + ($6.82 per machine-hour × 10,000 machine-hours) = $298,400Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $298,400 ÷ 10,000 machine-hours = $29.84 per machine-hour