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 ACC 349 FINAL EXAM 3

1) 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


2) When a job is completed, what happens to the cost of the job?

A. It is removed from work in process and included in cost of goods sold.
B. It is removed from work in process and included in finished goods.
C. It is removed from finished goods and included in cost of goods sold.
D. It is removed from materials inventory and included in work in process.


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) Which of the following would be accounted for using a job order cost system?

A. The pasteurization of milk
B. The production of cans of spinach
C. The production of town homes
D. The production of textbooks


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 has characteristics similar to the next.
C. Each consists of features which distinguish it from the next.
D. Each job uses similar processes to produce.


6) 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


7) Which of the following is an element of manufacturing overhead?

A. Factory workers wages
B. Flour used in manufactured cake mixes
C. Components used in calculators during production
D. Plant manager’s salary


8) What broad functions do the management of an organization perform?

A. Directing, manufacturing, and controlling
B. Planning, manufacturing, and controlling
C. Planning, directing, and controlling
D. Planning, directing, and selling


9) Which one of the following costs would be included in manufacturing overhead of a lawn mower manufacturer?

A. The cost of the wheels
B. The wages earned by motor assemblers
C. The cost of the fuel lines that run from the motor to the gas tank
D. Depreciation on the testing equipment

10) A well-designed activity-based costing system starts with


A. identifying the activity-cost pools
B. analyzing the activities performed to manufacture a product
C. computing the activity-based overhead rate
D. assigning manufacturing overhead costs for each activity cost pool to products


11) Which would be an appropriate cost driver for the ordering and receiving activity cost pool?

A. Machine setups
B. Inspections
C. Purchase orders
D. Machine hours


12) In traditional costing systems, overhead is generally applied based on


A. direct labor
B. units of production
C. machine hours
D. direct material dollars

13) What sometimes makes implementation of activity-based costing difficult in service industries is

A. the labeling of activities as value-added
B. attempting to reduce or eliminate nonvalue-added activities
C. identifying activities, activity cost plus, and cost drivers
D. that a larger proportion of overhead costs are company-wide costs


14) Which of the following factors would suggest a switch to activity-based costing?

A. Product lines similar in volume and manufacturing complexity.
B. Production managers use data provided by the existing system.
C. Overhead costs constitute a significant portion of total costs.
D. The manufacturing process has been stable.


15) All of the following statements are correct EXCEPT that

A. activity-based costing has been widely adopted in service industries
B. a larger proportion of overhead costs are company-wide costs in service industries
C. the objective of installing ABC in service firms is different than it is in a manufacturing firm
D. the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company


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 traditional costing using direct labor hours is

A. $1,200,000
B. $1,670,000
C. $1,536,000
D. $1,920,000


17) Which of the following factors would suggest a switch to activity-based costing?


A. Product lines similar in volume and manufacturing complexity.
B. The manufacturing process has been stable.
C. Overhead costs constitute a significant portion of total costs.
D. Production managers use data provided by the existing system.


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 Mini A using activity-based costing is

A. $1,200,000
B. $1,664,000
C. $1,536,000
D. $1,920,000

19) 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 revenues are $2 per unit
B. net relevant costs are $1 per unit
C. incremental costs are $1 per unit
D. differential costs are $2 per unit


20) 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. $5
B. $45
C. $3.33
D. $10


21) 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. $0
B. $70,000
C. $10,000
D. $80,000


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. $18,000
B. $12,000
C. $20,000
D. $6,000


23) Which statement describes a fixed cost?

A. It varies in total at every level of activity.
B. Its total varies proportionally to the level of activity.
C. The amount per unit varies depending on the activity level.
D. It remains the same per unit regardless of activity level.


24) Which one of the following is required in order for an activity base to be useful in cost behavior analysis?

A. The activity level should be an approved GAAP activity base.
B. There should be a correlation between changes in the level of activity and changes in costs.
C. The activity should always be a fixed amount.
D. The activity should always be based on the number of units produced.


25) Which cost is NOT charged to the product under absorption costing?

A. Direct materials
B. Variable manufacturing overhead
C. Direct labor
D. Fixed administrative expenses


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 variable costing is

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


27) Which cost is NOT charged to the product under variable costing?

A. Direct materials
B. Variable manufacturing overhead
C. Direct labor
D. Fixed manufacturing overhead


28) Which of the following is NOT considered an advantage of using standard costs?

A. Standard costs can reduce clerical costs.
B. Standard costs can be useful in setting prices for finished goods.
C. Standard costs can be used as a means of finding fault with performance.
D. Standard costs can make employees "cost-conscious."


29) A standard cost is

A. a cost which is paid for a group of similar products
B. the average cost in an industry
C. a predetermined cost
D. the historical cost of producing a product last year


30) If standard costs are incorporated into the accounting system,

A. it may simplify the costing of inventories and reduce clerical costs
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. approval of the stockholders is required


31) 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. $1,000
B. $2,000
C. $3,000
D. $4,000


32) 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. $400 unfavorable
B. $400 favorable
C. $500 unfavorable
D. $500 favorable


33) 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. $17 per direct labor hour
B. $15 per direct labor hour
C. $19 per direct labor hour
D. $18 per direct labor hour


34) The overhead controllable variance is calculated as the difference between actual overhead costs incurred and the budgeted

A. overhead costs for the standard hours allowed
B. overhead costs applied to the product
C. overhead costs at the normal level of activity
D. fixed overhead costs


35) Which of the following statements is FALSE?

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


36) The overhead volume variance relates only to

A. variable overhead costs
B. fixed overhead costs
C. both variable and fixed overhead costs
D. all manufacturing costs

37) 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?

A. $3,000
B. $48,000
C. $3,500
D. $2,400


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. 18,900
B. 21,000
C. 19,100
D. 19,000


39) 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?

A. $12,500
B. $13,750
C. $25,000
D. $27,500


40) In cost-plus pricing, the target selling price is computed as

A. variable cost per unit + desired ROI per unit
B. fixed cost per unit + desired ROI per unit
C. total unit cost + desired ROI per unit
D. variable cost per unit + fixed manufacturing cost per unit + desired ROI per unit


41) In most cases, prices are set by the

A. customers
B. competitive market
C. largest competitor
D. selling company


42) In cost-plus pricing, the markup percentage is computed by dividing the desired ROI per unit by the

A. fixed cost per unit
B. variable cost per unit
C. total cost per unit
D. total manufacturing cost per unit 

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