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Question(s) / Instruction(s):


1) At the end of the year, manufacturing overhead has been overapplied. What occurred to create this situation?
A. The company incurred more total job costs than the amount budgeted for the job.
B. The actual manufacturing overhead costs were less than the manufacturing overhead assigned to jobs.
C. Estimated manufacturing overhead was less than actual manufacturing overhead costs.
D. The company incurred more manufacturing overhead costs than the manufacturing overhead assigned to jobs.

2) 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. An increase to finished goods
B. An increase to cost of goods sold
C. A decrease to applied overhead
D. A decrease to work in process inventory

3) Why is factory overhead applied to products and jobs by manufacturing companies?
A. Total actual overhead costs can never be accurately determined for production.
B. It provides a more accurate cost of the job or products being processed.
C. Because indirect costs are easy to trace to products and jobs.
D. It allows managers more timely determination of product costs during the manufacturing process.

4) In a job order cost accounting system, the Work in Process account is
A. closed at year end
B. a control account
C. a period cost
D. an expense

5) Which one of the following is an important feature of a job order cost system?
A. Each must be completed before a new product order is accepted.
B. Each job uses similar processes to produce.
C. Each consists of features which distinguish it from the next.
D. Each job has characteristics similar to the next.

6) Which of the following represents the two basic types of cost accounting systems?
A. Job order and process cost systems
B. Job order and batch systems
C. Job order and job accumulation systems
D. Process cost and batch systems

7) Which of the following represents the correct order in which inventories are reported on a manufacturer’s balance sheet?
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. Work in process, raw materials, finished goods

8) Which one of the following is indirect labor considered?
A. Product cost
B. Period cost
C. Nonmanufacturing cost
D. Raw material cost

9) Which of the following is an element of manufacturing overhead?
A. Factory workers wages
B. Plant manager’s salary
C. Components used in calculators during production
D. Flour used in manufactured cake mixes

10) Which of the following is NOT typical of traditional costing systems?
A. Use of a single predetermined overhead rate
B. Assumption of correlation between direct labor and incurrence of overhead cost
C. Use of direct labor hours or direct labor cost to assign overhead
D. Use of multiple cost drivers to allocate overhead

11) An activity that has a direct cause-effect relationship with the resources consumed is a(n)
A. cost driver
B. overhead rate
C. cost pool
D. product activity

12) A well-designed activity-based costing system starts with
A. identifying the activity-cost pools
B. computing the activity-based overhead rate
C. assigning manufacturing overhead costs for each activity cost pool to products
D. analyzing the activities performed to manufacture a product

13) What sometimes makes implementation of activity-based costing difficult in service industries is
A. the labeling of activities as value-added
B. identifying activities, activity cost plus, and cost drivers
C. that a larger proportion of overhead costs are company-wide costs
D. attempting to reduce or eliminate nonvalue-added activities

14) Which of the following is a nonvalue-added activity?
A. Engineering design
B. Machining
C. Inspection
D. Packaging

15) Each of the following is a limitation of activity-based costing EXCEPT
A. It can be expensive to use.
B. It is more complex than traditional costing.
C. More cost pools are used.
D. Some arbitrary allocations continue.

16) 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:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using activity-based costing is
A. $1,200,000
B. $1,536,000
C. $1,664,000
D. $1,920,000

17) Which of the following factors would suggest a switch to activity-based costing?
A. Production managers use data provided by the existing system.
B. The manufacturing process has been stable.
C. Product lines similar in volume and manufacturing complexity.
D. Overhead costs constitute a significant portion of total costs.

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:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Maxi B using traditional costing using direct labor hours is
A. $2,000,000
B. $1,670,000
C. $1,280,000
D. $1,536,000

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. Make; savings = $10,000
B. Make; savings = $20,000
C. Buy; savings = $25,000
D. Buy; savings = $10,000

20) 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
A. $80,000
B. $70,000
C. $0
D. $10,000

21) 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; receive profit of $10,000.
B. Scrap; incremental loss is $9,000.
C. Scrap; profit is $1,000 greater.
D. Repackage; revenue is $5,000 greater than cost.

22) 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. $6,000
B. $12,000
C. $18,000
D. $28,000

23) 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?
A. It should sell an equal quantity of both.
B. Selling either results in the same additional income for the company
C. Beer
D. Wine

24) 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. 266.6%
B. 37.5%
C. 150%.
D. 62.5%.

25) Which cost is charged to the product under variable costing?
A. Fixed administrative expenses
B. Fixed manufacturing overhead
C. Variable administrative expenses
D. Variable manufacturing overhead

26) 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. $27
B. $18
C. $26
D. $16

27) Which cost is NOT charged to the product under variable costing?
A. Fixed manufacturing overhead
B. Direct labor
C. Variable manufacturing overhead
D. Direct materials

28) If standard costs are incorporated into the accounting system,
A. approval of the stockholders is required
B. it can eliminate the need for the budgeting process
C. the accounting system will produce information which is less relevant than the historical cost accounting system
D. it may simplify the costing of inventories and reduce clerical costs

29) The difference between a budget and a standard is that
A. standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system
B. a budget expresses management's plans, while a standard reflects what actually happened
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) A standard cost is
A. the historical cost of producing a product last year
B. a cost which is paid for a group of similar products
C. a predetermined cost
D. the average cost in an industry

31) 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
A. $500 favorable
B. $400 unfavorable
C. $500 unfavorable
D. $400 favorable

32) 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

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. $4,000
B. $1,000
C. $3,000
D. $2,000

34) Which of the following statements is FALSE?
A. The overhead volume variance is favorable if standard hours allowed for output is greater than the standard hours at normal capacity.
B. The overhead volume variance indicates whether plant facilities were used efficiently during the period.
C. The overhead volume variance relates solely to fixed costs.
D. The costs that cause the overhead volume variance are usually controllable costs.

35) The overhead volume variance relates only to
A. all manufacturing costs
B. variable overhead costs
C. both variable and fixed overhead costs
D. fixed overhead costs

36) If the standard hours allowed are less than the standard hours at normal capacity, the volume variance
A. will be greater than the controllable variance
B. will be unfavorable
C. will be favorable
D. cannot be calculated

37) 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?
A. $0
B. $50,000
C. $10,000
D. $30,000

38) 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?
A. 19,000
B. 19,100
C. 21,000
D. 18,900

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. $42,350
B. $63,525
C. $63,000
D. $57,525

40) Prices are set by the competitive market when
A. a product is not easily distinguished from competing products
B. a company can effectively differentiate its product from others
C. there are no other producers capable of manufacturing a similar item
D. the product is specially made for a customer

41) In cost-plus pricing, the markup percentage is computed by dividing the desired ROI per unit by the
A. variable cost per unit
B. total manufacturing cost per unit
C. total cost per unit
D. fixed cost per unit

42) The cost-plus pricing approach's major advantage is
A. it can be used to determine a product’s target cost
B. that sales volume has no effect on per unit costs
C. it is simple to compute
D. it considers customer demand

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