____ 1. Period costs would include
a. direct labor.
b. direct materials.
c. indirect manufacturing costs.
d. selling and administrative costs.
____ 2. Manufacturing costs are typically classified
as
a. product costs or period costs.
b. direct materials or direct labor.
c. direct materials, direct labor, or
manufacturing overhead.
d. direct materials, direct labor, or selling
and administrative.
____ 3. A debit balance in the Manufacturing Overhead
account at the end of an interim month means that
a. the balance should be reported as a current
liability in the monthly balance sheet.
b. corrective action by management is necessary.
c. overhead has been underapplied.
d. cost of goods sold should be credited on the
monthly income statement.
____ 4. In a job order cost system, which of the
following accounts is not a control account?
a. Raw Materials Inventory
b. Factory Labor
c. Finished Goods Inventory
d. Manufacturing Overhead
____ 5. In the current assets section of the balance
sheet, manufacturing inventories are listed in the following order:
a. raw materials, work in process, finished
goods.
b. finished goods, work in process, raw
materials.
c. work in process, finished goods, raw
materials.
d. finished goods, raw materials, work in
process.
The following data should be used for questions
6-9:
Raw
materials inventory, January 1 $ 10,000
Raw
materials inventory, December 31 15,000
Work
in process, January 1 9,000
Work
in process, December 31 5,000
Finished
goods, January 1 16,000
Finished
goods, December 31 20,000
Raw
materials purchases 600,000
Direct
labor 230,000
Factory
utilities 75,000
Indirect
labor 25,000
Factory
depreciation 200,000
Selling
and administrative expenses 210,000
____ 6. Direct materials used is
a. $630,000.
b. $610,000.
c. $600,000.
d. $595,000.
____ 7. Assume your answer to question 6 above is
$600,000. Total manufacturing costs equal
a. $1,130,000.
b. $1,127,000.
c. $1,030,000.
d. $1,340,000.
____ 8. Assume your answer to question 7 above is
$1,100,000. Cost of goods manufactured equals
a. $1,096,000.
b. $1,097,000.
c. $1,104,000.
d. $1,109,000.
____ 9. Assume your answer to question 8 is
$1,120,000. The cost of goods sold is
a. $1,123,000.
b. $1,104,000.
c. $1,116,000.
d. $1,124,000.
____ 10. A company’s break-even point can be decreased
by decreasing
a. the contribution margin ratio.
b. the contribution margin.
c. the selling price.
d. variable costs per unit.
____ 11. Brooke Company desires net income of $720,000
when it has $2,000,000 of fixed costs and variable costs of 60% of sales.
Contribution margin equals
a. $6,800,000.
b. $2,720,000.
c. $1,280,000.
d. $1,200,000.
____ 12. Fixed costs
a. increase in total as total production
increases.
b. decrease in total as production decreases.
c. decrease per unit as total production
decreases.
d. increase per unit as total production
decreases.
____ 13. Assume October is the high volume month for a
toy manufacturer and July is the low volume month. The following total
production costs and volume levels have been recorded:
Total Costs
Volume
October
$30,000
6,000
July
$12,000
2,000
Compute
the total fixed costs.
a. $18,000.
b. $3,000.
c. $9,000.
d. $6,000.
____ 14. A relevant cost
a. is a sunk cost.
b. is a past cost.
c. must be a future cost.
d. is an opportunity cost.
____ 15. What term is commonly used to describe the
concept whereby the cost of manufactured products is composed of direct
materials cost, direct labor cost, and fixed and variable factory overhead
cost?
a. standard costing.
b. variable costing.
c. absorption costing.
d. direct costing.
____ 16. Which of the following is included in the cost
of goods manufactured under absorption costing but notunder variable costing?
a. direct materials.
b. variable factory overhead.
c. fixed factory overhead.
d. direct labor.
____ 17. Which of the following would not be deducted in determining the
contribution margin under variable costing?
a. direct labor.
b. sales commissions.
c. sales office depreciation based using the
straight-line method.
d. variable factory overhead.
____ 18. Under absorption costing, which of the
following costs would not be included
in finished goods inventory?
a. hourly wages of assembly workers.
b. overtime wages paid factory workers.
c. advertising costs for a clothing
manufacturer.
d. depreciation on factory equipment.
____ 19. Under variable costing, which of the following costs
would notbe included in finished goods inventory?
a. hourly wages of assembly workers.
b. direct material costs.
c. fixed factory overhead cost.
d. variable factory overhead cost.
____ 20. Under variable costing, which of the following
costs would be included in finished goods inventory?
a. hourly wages of assembly workers.
b. utilities expense for corporate headquarters.
c. sales commissions.
d. fixed factory overhead cost.
____ 21. Under variable costing, which of the following
costs would be included in finished goods inventory?
a. advertising costs.
b. salary of CEO.
c. wages of carpenters in furniture factory.
d. rent on corporate headquarters.
____ 22. The amount of income under absorption costing
will be less than the amount of income under variable costing when units
manufactured
a. exceed units sold.
b. equal units sold.
c. are less than units sold.
d. are equal to or greater than units sold.
____ 23. The
amount of income under absorption costing will be more than the amount of
income under variable costing when units manufactured
a. exceed units sold.
b. equal units sold.
c. are less than units sold.
d. are equal to or greater than units sold.
____ 24. Cost-plus pricing means that:
a. selling price = fixed costs + (markup
percentage X variable costs)
b. selling price = cost + (markup
percentage X cost).
c. selling price = variable costs +
(markup percentage X fixed costs).
d. selling price = cost + (markup
percentage X variable costs).
____ 25. Rusty Company is considering developing a new
product. The company has gathered the
following information on this product:
Expected total unit cost
$20
Estimated investment for new product
$700,000
Desired ROI
5%
Expected number of units to be
produced and sold
1,000
The
desired selling price given this information is:
a. $35.
b. $50.
c. $15.
d. $55.
____ 26. Rusty Company is considering developing a new
product. The company has gathered the
following information on this product:
Expected total unit cost
$20
Estimated investment for new product
$700,000
Desired ROI
5%
Expected number of units to be
produced and sold
1,000
The
desired markup percentage is:
a. 275%.
b. 75%.
c. 175%.
d. 100%.
____ 27. The following information is provided by
Bullet Corporation for a new product it recently introduced:
Total unit cost
$50
Desired ROI per unit
$20
Target selling price
$70
What would be Bullet Corporation’s
percentage markup on cost?
a. 40%.
b. 71%.
c. 29%.
d. 60%.
____ 28. Target costing assumes
a. the market price is known and works to
achieve an acceptable cost.
b. the cost is known and works to achieve an
acceptable market price.
c. the desired profit is known and works to
achieve an acceptable market price.
d. the desired profit is known and works to
achieve an acceptable cost.
____ 29. The Molding Division of White Corporation
manufactures plastic molds and then sells them to customers for $80 per unit.
Its variable cost is $30 per unit, and its fixed cost per unit is $10. Management would like the Molding Division to
transfer 15,000 of these molds to another division within the company at a
price of $45. The Molding Division is
operating at full capacity. What is the
minimum transfer price the Molding Division should accept?
a. $45.
b. $40.
c. $80.
d. $50.
____ 30. The Molding Division of White Corporation
manufactures plastic molds and then sells them to customers for $80 per unit.
Its variable cost is $30 per unit, and its fixed cost per unit is $10. Management would like the Molding Division to
transfer 15,000 of these molds to another division within the company at a
price of $45. The Molding Division has
available capacity to produce the 15,000 units for the other division. What is the minimum transfer price the
Molding Division should accept?
a. $40.
b. $30.
c. $45.
d. $80.
____ 31. HIT Company provides the following cost
information related to its production of its primary product:
Per unit
Variable manufacturing cost
$40
Fixed manufacturing cost
$40
Variable selling and administrative
expenses
$10
Fixed selling and administrative
expenses
$12
Desired ROI per unit
$14
What
is its markup percentage assuming that HIT Company uses absorption costing?
a. 27.5%.
b. 17.5%.
c. 45%.
d. 260%.
___ 32. Looker Hats is planning to sell 600 felt hats, and 700 will be
produced during
June. Each hat requires ½ yard of felt and
¼ 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?
a. $3,000
b. $48,000
c. $3,500
d.
$2,400
____ 33. Orr Corporation’s manufacturing costs for August when production was
800
units appears
below:
Direct
material
$10 per unit
Direct
labor
$4,800
Variable
overhead
4,000
Factory
depreciation
3,000
Factory
supervisory salaries
2,000
Other fixed factory costs
1,000
How much is the budgeted manufacturing
cost for a month when 900 units
are produced?
a.
$23,800
b.
$18,900
c.
$24,900
d. $25,650
____ 34. Lewis Production is
planning to sell 220 boxes of bricks and produce 200
boxes of bricks during May. Each box of
bricks requires 20 pounds of brick
mix and a half hour of direct labor.
Brick mix costs $5 per 100 pounds and
employees of the company are paid $12.00 per hour. Manufacturing overhead
is applied at a rate of 120% of direct labor costs. Lewis
Production has 600
pounds of brick mix in beginning
inventory and wants to have 800 pounds of brick mix in ending inventory. What
is the total amount to be budgeted for manufacturing overhead for the month?
a. $1,440
b. $2,880
c. $2,400
d. $1,200
____ 35. Hargrow, Inc. makes
and sells a single product, buckets. It takes 30 ounces of
plastic to make one bucket. Budgeted production of buckets for the next
three
months is as follows: August 90,000 units, September 75,000 units,
October
65,000 buckets. The company wants to maintain monthly ending inventories
of
plastic equal to 10% of the following month’s production needs. On
August
31st, 195,000
ounces of plastic were on hand. The cost of plastic is $0.03 per
ounce. How much is the ending
inventory of plastic to be reported on
the company’s balance sheet at September 30?
a.
$195,000
b. $5,850
c. $6,750
d. $7,500
____ 36. Razmataz
Company makes and sells umbrellas. The company is in the process
of preparing its Selling and
Administrative Expense Budget for the last half of
the year.
The following budget data are available:
Item
Variable Cost Per
Unit Sold
Monthly Fixed
Cost
Sales commissions
$0.60
$3,000
Shipping
$1.20
Advertising
$0.30
Depreciation on office equipment
$4,000
Other operating expenses
$0.35
$34,000
Expenses
are paid in the month incurred. If the company has budgeted to sell 2,000
umbrellas in October, how much is the total budgeted variable selling and
administrative expenses for October?
a.
$41,000
b. $4,600
c. $45,900
d. $4,900
____37. Which one of the following
is a similarity of both a job order and a process
cost system?
a. They
both track direct materials and direct labor, but not manufacturing overhead.
b. They both track conversion costs, but not
materials.
c. They
both track the same three manufacturing cost elements – direct materials,
direct labor, and manufacturing overhead.
d. They both are used for the same type of
inventory production items.
____ 38. How are costs assigned
in a process cost system?
a.
To
only one work in process account
b.
To
work in process and finished goods inventory
c.
To
work in process, finished goods, and cost of goods sold
d.
To
multiple work in process accounts
____39. Schiller Company has unit costs of $5 for
materials and $15 for conversion costs.
There are 4,200 units in ending work in process which are 25% complete as to
conversion costs, and fully complete as to materials cost. How much is the
total cost assignable to the ending work in process inventory if the weighted
average method is used?
a.
$36,750
b.
$84,000
c.
$21,000
d.
$15,750
____40. Which of the following is a characteristic
of products that are mass-produced in
continuous fashion?
a. They
are grouped in batches.
b. They
are produced all in one process.
c. Each
batch of costs is accumulated in a separate cost of goods sold account.
d. The
products are identical or very similar in nature.
____41. For which one of the following would a
process cost system most likely be
used?
a. Custom
furniture
b. Potato
chips
c. Motion
pictures
d. Cruise
ships
____42. The functions of management
in an organization are
a. planning, controlling, and decision making.
b. planning, directing and motivating, and
controlling.
c. directing and motivating, controlling, and
decision making.
d. directing and motivating, planning, and
decision making.
____43. The major activities of managerial accounting
include all of the following except
a. providing a basis for controlling costs by
comparing actual results with planned objectives.
b. preparing financial statements designed
primarily for stockholders and creditors.
c. preparing internal reports for management.
d. determining the behavior of costs as activity
levels change.
____44. A job order cost system would most likely be
used by a(n)
a. cement manufacturer.
b. paint manufacturer.
c. specialty printing company.
d. automobile manufacturer.
____45. The formula for computing a predetermined
overhead rate is
a. estimated annual overhead costs ÷ estimated
annual operating activity.
b. estimated annual overhead costs ÷ actual
annual operating activity.
c. actual annual overhead costs ÷ actual annual
operating activity.
d. actual annual overhead costs ÷ estimated
annual operating activity.
____46. An example of a period cost, as opposed to a
product cost, is
a. factory utilities.
b. wages of factory workers.
c. salesmen’s commissions.
d. depreciation on the factory building.
____47. When production costs are debited to Work in
Process Inventory, accounts that may be credited are
a. Raw Materials Inventory, Factory Labor, and
Manufacturing Overhead.
b. Accounts Payable, Factory Wages Payable, and
Accumulated Depreciation.
c. Raw Materials Inventory, Factory Labor, and
Finished Goods Inventory.
d. Manufacturing Overhead, Factory Labor, and
Cost of Goods Sold.
____48. Variable costs, as activity increases, will
a. decrease per unit.
b. increase per unit.
c. remain constant per unit.
d. decrease in total.
____49. A cost that increases in total, but not proportionately with increases in
the activity level, is a(n)
a. mixed cost.
b. variable cost.
c. fixed cost.
d. unusual fixed cost.
____50. Given the following costs for Bently Company,
classify each cost as either variable, fixed, or mixed.
Total
Cost at
2,000
Units 3,000 Units
Cost
A $12,900 $19,350
Cost
B 12,300 16,650
Cost
C 13,000 13,000
a. Cost A and Cost B are variable; Cost C is
fixed.
b. Cost A is variable; Cost B is mixed; Cost C
is fixed.
c. Cost A and Cost B are mixed; Cost C is fixed.
d. Cost A is mixed; Cost B is variable; Cost C
is fixed.
____ 51. The assumptions that underlie basic CVP
analysis include all of the following except
a. when more than one product is sold, total
sales will be in a constant sales mix.
b. all costs can be classified as variable or
fixed with reasonable accuracy.
c. the behavior of both costs and revenues is
linear throughout the relevant
range.
d. all of the above are assumptions.
____ 52. Brooke Company desires net income of $720,000
when it has $2,000,000 of fixed costs and variable costs of 60% of sales.
Required sales equals
a. $3,200,000.
b. $6,800,000.
c. $5,000,000.
d. $4,533,333.
____
53. Grant Company estimates
its sales at 80,000 units in the first quarter and that
sales
will increase by 8,000 units each quarter over the year. They have, and
desire,
a 25% ending inventory of finished goods. Each unit sells for $25. 40%
of
the sales are for cash. 70% of the credit customers pay within the quarter.
The
remainder is received in the quarter following sale. Cash collections for
the
third quarter are budgeted at
a. $1,356,000.
b. $1,968,000.
c. $2,364,000.
d. $2,736,000.
____ 54. At
January 1, 2006, Jake, Inc. has beginning inventory of 3,000 surfboards.
Jake estimates
it will sell 14,000 units during the first quarter of 2006 with a
10% increase
in sales each quarter. Jake’s policy is
to maintain an ending
inventory
equal to 20% of the next quarter’s sales.
Each surfboard costs $140
and is sold
for $200. How many units should Jake
produce during the first
quarter of
2006?
a. 14,080
b. 14,000
c. 16,800
d. 14,200
____ 55. Nunnally Manufacturing Company has furnished the
following information
which occurred during May:
Accounts Payable balance at April 30
$ 29,000
Purchases on account during May
150,000
Cash payments for materials purchased in April
29,000
Cash payments for materials purchased in May
135,000
The accounts payable account is
used only for direct materials. How much will
Nunnally
report as accounts payable on the balance sheet at the end of May?
a. $21,000
b. $103,000
c. $8,000
d. $15,000
____ 56. Harrah Company provided the following information for the month of
October:
Beginning cash balance
$ 35,000
Cash receipts
460,000
Cash disbursements 485,000
Harrah’s
policy is to keep a minimum end of the month cash balance of $30,000. How much will Harrah’s need to borrow during
October?
a. $20,000
b. $25,000
c. $10,000
d. $0
____ 57. Each
production worker can produce 4 wooden chairs per hour. During the
month
of June, Chairs, Inc. has forecasted sales of 100,000 chairs. The beginning
inventory was 10,000 chairs, and desired ending inventory is 2,500 chairs. How
many hours of direct labor must be budgeted to meet production needs?
a. 25,375
b. 25,000
c. 23,125
d. 24,625
____ 58.
Zargus Company began the month of June with 650 units in beginning work
in
process, 11,400 units started into production, and 500 units in ending
work in
process that are 30% completed. How many units were transferred out
during
June?
a.
11,550
b.
12,050
c.
11,900
d.
11,250
____
59. The Cutting Department’s output
during the period consists of 12,000 units
completed and transferred out, and 3,000 units in ending work in process
that
were 45% complete as to materials and conversion costs. Beginning
inventory
was 1,500 units that were 25% complete as to materials and conversion
costs.
How many units were started during the period?
a. 15,000
b. 16,500
c. 13,500
d. 12,000
____60. The Cutting Department’s output during the
period consists of 12,000 units
completed
and transferred out, and 3,000 units in ending work in process that were 45%
complete as to materials and conversion costs. Beginning inventory was 1,500 units
that were 25% complete as to materials and conversion costs. Under the weighted
average method, what are the equivalent units of production for materials?
a. 15,000
b. 13,350
c. 13,500
d.
14,475
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