Solved by verified expert :1) What is the best way to handle manufacturing overhead costs
in order to get the most timely job cost information?
A. The company should add actual manufacturing overhead costs to
jobs as soon as the overhead costs are incurred.
B. The company should determine an allocation rate as soon as
the actual costs are known, and then apply manufacturing overhead to jobs.
C. The company should apply overhead using an estimated rate
throughout the year. D. The company should account for only the direct
production costs.
2) At the end of the year, manufacturing overhead has been
overapplied. What occurred to create this situation?
A. The company incurred more manufacturing overhead costs than
the manufacturing overhead assigned to jobs
B. The actual manufacturing overhead costs were less than the
manufacturing overhead assigned to jobs
C. The company incurred more total job costs than the amount
budgeted for the job
D. Estimated manufacturing overhead was less than actual
manufacturing overhead costs
3) Luca Company overapplied manufacturing overhead during 2006.
Which one of the following is part of the year end entry to dispose of the
overapplied amount assuming the amount is material
A. A decrease to work in process inventory
B. A decrease to applied overhead
C. An increase to finished goods
D. An increase to cost of goods sold
4) Which of the following would be accounted for using a job
order cost system?
A. The production of textbooks
B. The production of town homes
C. The pasteurization of milk
D. The production of cans of spinach
5) Which one of the following is NEVER part of recording the
issuance of raw materials in a job order cost system?
A. Debit Manufacturing Overhead
B. Debit Finished Goods Inventory
C. Debit Work in Process Inventory
D. Credit Raw Materials Inventory
Finished Goods Inventory is debited when goods are transferred
from work in process to finished goods, not when raw materials are issued for a
job.
6. What is unique about the flow of costs in a job order cost
system?
A. It involves accumulating material, labor, and manufacturing
overhead costs as they are incurred in order to determine the job cost
B. Each job is costed separately in a Work in Process subsidiary
ledger
C. Job costs cannot be measured until all overhead costs are
determined
D. There are no costs remaining in Work in Process at year end
7) Which one of the following costs would be included in
manufacturing overhead of a lawn mower manufacturer?
A. The cost of the fuel lines that run from the motor to the gas
tank
B. The cost of the wheels
C. Depreciation on the testing equipment
D. The wages earned by motor assemblers
Depreciation on testing equipment would be included in
manufacturing overhead because it is indirectly associated with the finished
product.
8) What broad functions do the management of an organization
perform?
A. Planning, directing, and controlling
B. Directing, manufacturing, and controlling
C. Planning, directing, and selling
D. Planning, manufacturing, and controlling
9) Which of the following represents the correct order in which
inventories are reported on a manufacturer’s balance sheet?
A. Work in process, finished goods raw materials
B. Raw materials, work in process, finished goods
C. Finished goods, work in process, raw materials
D. Work in process, raw materials, finished goods
10) In traditional costing systems, overhead is generally
applied based on
A. machine hours
B. direct labor
C. direct material dollars
D. units of production
11) An activity that has a direct cause-effect relationship with
the resources consumed is a(n)
A. overhead rate
B. product activity
C. cost driver
D. cost pool
12) A well-designed activity-based costing system starts with
A. computing the activity-based overhead rate
B. analyzing the activities performed to manufacture a product
C. identifying the activity-cost pools
D. assigning manufacturing overhead costs for each activity cost
pool to products
13) Which of the following factors would suggest a switch to
activity-based costing?
A. Overhead costs constitute a significant portion of total
costs
B. Production managers use data provided by the existing system.
C. Product lines similar in volume and manufacturing complexity
D. The manufacturing process has been stable
14) All of the following statements are correct EXCEPT that
A. the objective of installing ABC in service firms is different
than it is in a manufacturing firm
B. the general approach to identifying activities and activity
cost pools is the same in a service company as in a manufacturing company
C. activity-based costing has been widely adopted in service
industries
D. a larger proportion of overhead costs are company-wide costs
in service industries
15) What sometimes makes implementation of activity-based
costing difficult in service industries is
A. identifying activities, activity cost plus, and cost drivers
B. attempting to reduce or eliminate nonvalue-added activities
C. the labeling of activities as value-added
D. that a larger proportion of overhead costs are company-wide
costs
16) One of Astro Company’s activity cost pools is machine
setups, with estimated overhead of $150,000. Astro produces sparklers (400
setups) and lighters (600 setups). How much of the machine setup cost pool
should be assigned to sparklers?
A. $60,000
B. $90,000
C. $150,000
D. $75,000
17) Poodle Company manufactures two products, Mini A and Maxi B.
Poodle’s overhead costs consist of setting up machines, $800,000;
machining, $1,800,000; and inspecting, $600,000. Information on
the two products is:
Overhead applied to Mini A using activity-based costing is
A. $1,536,000
B. $1,664,000
C. $1,920,000
D. $1,200,000
18) Poodle Company manufactures two products, Mini A and Maxi B.
Poodle’s overhead costs consist of setting up machines, $800,000; machining,
$1,800,000; and inspecting, $600,000. Information on the two products is:
Overhead applied to Maxi B using activity-based costing is
A. $1,536,000
B. $1,664,000
C. $2,000,000
D. $1,280,000
19) Seran Company has contacted Truckel Inc. with an offer to
sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets,
variable costs are $11 per unit. Fixed costs are $12 per unit; however, $5 per
unit is avoidable. Should Truckel make or buy the wickets?
A. Buy; savings = $10,000
B. Make; savings = $20,000
C. Make; savings = $10,000
D. Buy; savings = $25,000
20) Rosen, Inc. has 10,000 obsolete calculators, which are
carried in inventory at a cost of $20,000. If the calculators are scrapped,
they can be sold for $1.10 each (for parts). If they are repackaged, at a cost
of $15,000, they could be sold to toy stores for $2.50 per unit.
What alternative should be chosen, and why?
A. Repackage; revenue is $5,000 greater than cost
B. Scrap; incremental loss is $9,000
C. Repackage; receive profit of $10,000
D. Scrap; profit is $1,000 greater
21) The cost to produce Part A was $10 per unit in 2005. During
2006, it has increased to $11 per unit. In 2006, Supplier Company has offered
to supply Part A for $9 per unit. For the make-or-buy decision
A. incremental costs are $1 per unit
B. net relevant costs are $1 per unit
C. differential costs are $2 per unit
D. incremental revenues are $2 per unit
22) Hartley, Inc. has one product with a selling price per unit
of $200, the unit variable cost is $75, and the total monthly fixed costs are
$300,000. How much is Hartley’s contribution margin ratio?
A. 37.5%
B. 150%
C. 266.6%
D. 62.5%.
23. Which statement describes a fixed cost?
A. The amount per unit varies depending on the activity level
B. It varies in total at every level of activity
C. It remains the same per unit regardless of activity level
D. Its total varies proportionally to the level of activity
24) Disney’s variable costs are 30% of sales. The company is
contemplating an advertising campaign that will cost $22,000. If sales are
expected to increase $40,000, by how much will the company’s net income
increase?
A. $28,000
B. $18,000
C. $6,000
D. $12,000
25) Variable costing
A. is required under GAAP
B. is used for external reporting purposes
C. is also known as full costing
D. treats fixed manufacturing overhead as a period cost
26) Which cost is NOT charged to the product under variable
costing?
A. Direct labor
B. Direct materials
C. Fixed manufacturing overhead
D. Variable manufacturing overhead
27) Orbach Company sells its product for $40 per unit. During
2005, it produced 60,000 units and sold 50,000 units (there was no beginning
inventory). Costs per unit are: direct materials $10, direct labor $6, and
variable overhead $2. Fixed costs are: $480,000 manufacturing overhead, and
$60,000 selling and administrative expenses. The per unit manufacturing cost
under absorption costing is
A. $18
B. $16
C. $27
D. $26
28) Which of the following is NOT considered an advantage of
using standard costs?
A. Standard costs can be useful in setting prices for finished
goods
B. Standard costs can reduce clerical costs
C. Standard costs can make employees “cost-conscious.”
D. Standard costs can be used as a means of finding fault with
performance
29) The difference between a budget and a standard is that
A. a budget expresses management’s plans, while a standard
reflects what actually happened
B. standards are excluded from the cost accounting system,
whereas budgets are generally incorporated into the cost accounting system
C. a budget expresses a total amount while a standard expresses
a unit amount
D. a budget expresses what costs were, while a standard
expresses what costs should be
30) If a company is concerned with the potential negative
effects of establishing standards, they should
A. offer wage incentives to those meeting standards
B. set tight standards in order to motivate people
C. not employ any standards
D. set loose standards that are easy to fulfill
31) The per-unit standards for direct materials are 2 gallons at
$4 per gallon. Last month, 11,200 gallons of direct materials that actually
cost $42,400 were used to produce 6,000 units of product. The direct materials
quantity variance for last month was
A. $2,400 favorable
B. $5,600 unfavorable
C. $3,200 unfavorable
D. $3,200 favorable
32) The standard number of hours that should have been worked
for the output attained is 8,000 direct labor hours and the actual number
of direct labor hours worked was 8,400. If the direct labor
price variance was $8,400 unfavorable, and the standard rate of pay was $18 per
direct labor hour, what was the actual rate of pay for direct labor?
A. $15 per direct labor hour
B. $18 per direct labor hour
C. $19 per direct labor hour
D. $17 per direct labor hour
33) The total variance is $10,000. The total materials variance
is $4,000. The total labor variance is twice the total overhead variance. What
is the total overhead variance?
A. $2,000
B. $4,000
C. $3,000
D. $1,000
34) Manufacturing overhead costs are applied to work in process
on the basis of
A. standard hours allowed
B. actual overhead costs incurred
C. ratio of actual variable to fixed costs
D. actual hours worked
35) The overhead volume variance relates only to
A. variable overhead costs
B. both variable and fixed overhead costs
C. all manufacturing costs
D. fixed overhead costs
36) If the standard hours allowed are less than the standard
hours at normal capacity
37) Gottberg Mugs is planning to sell 2,000 mugs and produce
2,200 mugs during April. Each mug requires 2 pounds of resin and a half hour of
direct labor. Resin costs $1 per pound and employees of the company are paid
$12.50 per hour. Manufacturing overhead is applied at a rate of 120% of direct
labor costs. Gottberg has 2,000 pounds of resin in beginning inventory and
wants to have 2,400 pounds in ending inventory. How much is the total amount of
budgeted direct labor for April?
38) Lewis Hats is planning to sell 600 straw hats. Each hat
requires a half pound of straw and a quarter hour of direct labor. Straw costs
$0.20 per pound and employees of the company are paid $22 per hour. Lewis has
80 pounds of straw and 40 hats in beginning inventory and wants to have 50
pounds of straw and 60 hats in ending inventory. How many units should Lewis
Hats produce in April?
A. 600
B. 580
C. 630
D. 620
39) At January 1, 2004, Barry, Inc. has beginning inventory of
4,000 widgets. Barry estimates it will sell 35,000 units during the first
quarter of 2004 with a 10% increase in sales each quarter. Barry’s policy is to
maintain an ending inventory equal to 25% of the next quarter’s sales. Each
widget costs $1 and is sold for $1.50. How much is budgeted sales revenue for
the third quarter of 2004?
A. $57,525
B. $63,525
C. $42,350
D. $63,000
40) In most cases, prices are set by the
A. customers
B. largest competitor
C. selling company
D. competitive market
41) A company must price its product to cover its costs and earn
a reasonable profit in
A. all cases
B. its early years
C. the long run
D. the short run
42) The cost-plus pricing approach’s major advantage is
A. it considers customer demand
B. that sales volume has no effect on per unit costs
C. it is simple to compute
D. it can be used to determine a product’s target cost
43) What does cost accounting measure, record, and report
A. Future costs
B. Product costs
C. Managerial accounting decisions
D. Manufacturing processes
44) Why is factory overhead applied to products and jobs by
manufacturing companies?
45) In a job order cost accounting system, the Work in Process
account is
A. a period cost
B. a control account
C. closed at year end
D. an expense
46) Managerial accounting
A. is governed by generally accepted accounting principles
B. places emphasis on special-purpose information
C. is concerned with costing products
D. pertains to the entity as a whole and is highly aggregated
47) A well-designed activity-based costing system starts with
48) Which of the following is a value-added activity?
A. Machinery repair
B. Inventory storage
C. Engineering design
D. Inspections
49) Which of the following is a nonvalue-added activity?
A. Machining
B. Inspection
C. Engineering design
D. Packaging
50) Each of the following is a limitation of activity-based
costing EXCEPT
A. It is more complex than traditional costing
B. More cost pools are used
C. It can be expensive to use
D. Some arbitrary allocations continue
51) Ace Company sells office chairs with a selling price of $25
and a contribution margin per unit of $15. It takes 3 machine hours to produce
one chair. How much is the contribution margin per unit of limited resource?
A. $3.33
B. $45
C. $10
D. $5
52) Walton, Inc. is unsure of whether to sell its product
assembled or unassembled. The unit cost of the unassembled product is $16,
while the cost of assembling each unit is estimated at $17. Unassembled units
can be sold for $55, while assembled units could be sold for $71 per unit. What
decision should Walton make?
53) Which cost is charged to the product under variable costing?
54) Which of the following statements is FALSE?
55) If standard costs are incorporated into the accounting
system
system
56) A standard cost is
57) The per-unit standards for direct labor are 2 direct labor
hours at $12 per hour. If in producing 2,400 units, the actual direct labor
cost
was $51,200 for 4,000 direct labor hours worked, the total
direct labor variance is
A. $6,400 favorable
B. $6,400 unfavorable
C. $1,920 unfavorable
D. $4,000 unfavorable
58) If the standard hours allowed are less than the standard
hours at normal capacity, the volume variance
A. will be favorable
B. will be greater than the controllable variance
C. cannot be calculated
D. will be unfavorable
59) Which of the following statements is FALSE?
60) Looker Hats is planning to sell 600 felt hats, and 700 will
be produced during June. Each hat requires a half yard of felt and a quarter
hour of direct labor. Felt costs $3.00 per yard and employees of the company
are paid $20 per hour. How much is the total amount of budgeted direct labor
for June?
61) In cost-plus pricing, the markup percentage is computed by
dividing the desired ROI per unit by the
62) Which would be an appropriate cost driver for the ordering
and receiving activity cost pool?
63) The first step in activity-based costing is to
64) Which one of the following is required in order for an
activity base to be useful in cost behavior analysis?
65) Which cost is NOT charged to the product under absorption
costing?
A. Fixed administrative expenses
B. Variable manufacturing overhead
C. Direct labor
D. Direct materials
66) A company developed the following per-unit standards for its
product: 2 pounds of direct materials at $6 per pound. Last month, 2,000 pounds
of direct materials were purchased for $11,400. The direct materials price
variance for last month was
A. $600 unfavorable
B. $11,400 favorable
C. $300 favorable
D. $600 favorable
67) The standard rate of pay is $5 per direct labor hour. If the
actual direct labor payroll was $19,600 for 4,000 direct labor hours worked,
the direct labor price (rate) variance is
68) Waco’s Widgets plans to sell 22,000 widgets during May,
19,000 units in June, and 20,000 during July. Waco keeps 10% of the next
month’s sales as ending inventory. How many units should Waco produce during
June?
69) In cost-plus pricing, the target selling price is computed
as
70) Which one of the following is an important feature of a job
order cost system?
71) Which of the following represents the two basic types of
cost accounting systems?
72) Which one of the following is indirect labor considered?
73) Which of the following is an element of manufacturing
overhead?
74) Which of the following is NOT typical of traditional costing
systems?
75) Max Company uses 10,000 units of Part A in producing its
products. A supplier offers to make Part A for $7. Max Company has relevant
costs of $8 a unit to manufacture Part A. If there is excess capacity, the
opportunity cost of buying Part A from the supplier is
76) H55 Company sells two products, beer and wine. Beer has a 10
percent profit margin and wine has a 12 percent profit margin. Beer has a 27
percent contribution margin and wine has a 25 percent contribution margin. If
other factors are equal, which product should H55 push to customers?
77) During December, the capital budget indicates a $280,000
purchase of equipment. The ending November cash balance is budgeted to be
$40,000. Cash receipts are $840,000, and cash disbursements are $610,000 during
December. The company wants to maintain a minimum cash balance of $20,000. What
is the minimum cash loan that must be planned to be borrowed from the bank
during December?
78) Prices are set by the competitive market when
79) The standards and rules that are recognized as a general
guide for financial reporting are called __________.
80) Hess, Inc. sells a single product with a contribution margin
of $12 per unit and fixed costs of $74,400 and sales for the current year of
$100,000. How much is Hess’s break even point?
81) In what situations will a static budget be most effective in
evaluating a manager’s effectiveness?
82) The primary purpose of the statement of cash flows is to
__________.
83) The category that is generally considered to be the best
measure of a company’s ability to continue as a going concern is
84) Of the items below, the one that appears first on the
statement of cash flows is
85) Which of the following transactions does not affect cash
during a period?
86) One of Lara Dole Company’s activity cost pools is machine
setups, with estimated overhead of $300,000. Dole produces flares (400 setups)
and health packs (600 setups). How much of the machine setup cost pool should
be assigned to flares?
87) As compared to a high-volume product, a low-volume product
