1) A debit balance in the direct materials price variance indicates the standard cost of
materials was less than the actual cost of materials.
2) Total fixed costs can be expressed as y = vx, where y = total variable cost, v =
variable cost per unit of activity, and x = volume of activity.
3) The main driver of indirect costs for service firms is usually labor hours.
4) Generally accepted accounting principles (GAAP) mandate that manufacturing
overhead must be treated as an inventoriable product cost for financial reporting
purposes.
5) The accounting department for a convenience store chain is likely to be considered a
cost center.
6) The “averaging method” is a method that may be used to separate mixed costs into
fixed and variable components.
7) Lean thinking typically focuses on strengthening supply-chain management.
8) If a company has 6,000 units that are 60% complete, the equivalent unit figure is
3,600.
9) The entry to transfer sold goods includes a debit to finished goods inventory.
10) Relevant range is the range of activity (volume) over which total fixed costs and
variable costs per unit can be assumed to remain the same.
11) The operating leverage factor indicates the percentage change in operating income
that will occur from a 5% change in volume.
12) In a process costing system, costs flow into finished goods inventory only from the
work in process inventory of the last process.
13) The allocation base selected for each department should be the cost driver of the
costs in the departmental overhead pool.
14) When a company uses the direct method to present the statement of cash flows,
depreciation expense must be added to net income to reconcile to net cash provided by
operating activities.
15) If a company uses departmental overhead allocation rates, then the amount of
manufacturing overhead allocated to the job is equal to the plantwide overhead rate
multiplied by the actual use of the cost allocation base.
16) Total direct materials = $67,500, and there is no beginning WIP inventory. Units
completed are 15,000 with no ending work in process inventory. The cost per unit is
$4.50.
17) The two basic types of product costing systems are
A) department and plant
B) FIFO and weighted-average
C) variable and process
D) job and process
18) Perfect Pigments has 3,500 gallons of paint in WIP inventory, with 80% of
materials already added. What are equivalent units in ending WIP inventory for
materials if the paint is 50% through the process?
A) 2,800
B) 1,750
C) 0
D) 1,050
19) Using a base year as 100% and expressing other years as a percentage of the base
year is an example of
A) trend analysis
B) vertical analysis
C) horizontal analysis
D) benchmarking
20) At Panther Company, materials are added at the beginning of the process and
conversion costs are added uniformly.
The total cost of units transferred out to finished goods is closest to
A) $ 909,450
B) $1,004,625
C) $ 350,450
D) $1,151,100
21) Potter & Weasley Company had the following activities, estimated indirect activity
costs, and allocation bases:
Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
What is the cost per driver unit for the correspondence activity?
A) $8.00
B) $1.75
C) $29.63
D) $32.00
22) Use the appropriate letter(s) to indicate if the following costs would be found on the
income statement of a
A.service company
B.merchandising company
C.manufacturing company
You may use more than one letter for each answer.
____Revenue
____Salaries expense
____Customer service expense
____Cost of goods manufactured
____Cost of goods sold
23) The percentage of market share would be an example of measuring which
perspective?
A) Financial
B) Internal business
C) Customer
D) Learning and growth
24) The Davidson Corporation produces clocks. According to company standards, it
should take 2 hours of direct labor to produce a clock. Davidson’s standard labor cost is
$19 per hour. During June, Thomas produced 6,200 stopwatches and used 13,500 hours
of direct labor at a total cost of $260,000. What is Thomas’ direct labor rate variance for
June?
A) $1,607 favorable
B) $1,607 unfavorable
C) $3,500 favorable
D) $3,500 unfavorable
25) “Total cost of product or service” is best described as which of the following?
A) Benefits foregone by choosing a particular alternative course of action
B) A factor that restricts production or sales of a product
C) Costs that were incurred in the past and can not be changed
D) All costs incurred along the value chain in connection with the product or service
26) Each month, Burrel Incorporated produces 500 units of a product that has unit
variable costs of $17.00. Total fixed costs for the month are $4,375. A special sales
order is received for 200 units of the product at a price of $20 per unit. In deciding to
accept or reject the special sales order, it is appropriate to consider the
A) new fixed cost per unit of $6.25
B) current fixed cost per unit of $8.75
C) difference between the offered price and the variable cost per unit
D) difference between the two fixed costs per unit, or $2.50
27) Cost of goods sold is debited and finished goods inventory is credited for
A) purchase of goods on account
B) transfer of goods to the finished goods storeroom
C) transfer of materials into work in process inventory
D) the sale of goods to a customer
28) In the flow of costs, which of the following comes last?
A) Finished goods inventory
B) Cost of goods sold
C) Raw materials inventory
D) Work in process inventory
29) What term represents the total variable cost component in the equation: y = vx + f?
A) f
B) v
C) vx
D) y
30) Bernard Corporation gathered the following information for the year just ended:
During the year, Bernard produced and sold 50,000 units of product at a selling price of
$9.00 per unit. There was no beginning inventory of product at the start of the year.
What is the contribution margin for the year?
A) $126,000
B) $310,000
C) $450,000
D) $266,000
31) The ________ capital budgeting model considers both profitability and the time
value of money.
A) payback
B) net present value
C) accounting rate of return
D) Both a and c are correct
32) The cost to rework a defective product before it is shipped out from the factory
would be classified as which cost of quality category?
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
33) Selected financial data for the Photocopies Division of Elizabeth’s Business
Machines is as follows:
What is the Photocopier Division’s return on investment?
A) 5.15%
B) 30.00%
C) 75.00%
D) 250.00%
34) The ________ department would most likely be responsible for a “direct labor
efficiency variance.”
A) marketing
B) production
C) purchasing
D) personnel
35) Pitt Company is evaluating two possible investments in depreciable plant assets.
The company uses the straight-line method of depreciation. The following information
is available:
How long is the payback period for Investment B?
A) 3.63 years
B) 4.00 years
C) 2.40 years
D) 10.67 years
36) The following information relates to Woolf Unlimited for the past two years.
What is the times-interest-earned ratio for the current year?
A) 3.71 times
B) 13.00 times
C) 2.30 times
D) 1.75 times
37) External parties receive information about past performance from
A) planning reports
B) budget reports
C) financial accounting reports
D) managerial accounting reports
38) Maintenance costs at Wilmington Manufacturing over the past six months are listed
in the following table.
Using the high-low method, what would the variable maintenance cost per machine
hour be?
A) $1.25
B) $0.80
C) $0.87
D) $0.88
39) If manufacturing overhead has been overallocated during the period, and most of
the jobs produced have been sold, then
A) cost of goods sold should be increased
B) cost of goods sold should be decreased
C) finished goods inventory should be increased
D) work in process inventory should be decreased
40) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Which of the following accounts is credited for
manufacturing overhead?
A) WIP inventory-molding
B) WIP inventory-finishing
C) Manufacturing Overhead
D) WIP inventory-coloring
41) According to the Sarbanes-Oxley Act, who is responsible for establishing and
maintaining internal controls over financial reporting?
A) The CEO and CFO
B) The internal auditors
C) The external auditors
D) The SEC
42) Ready Company adds direct materials at the beginning of the process and adds
conversion costs throughout the process. Data for the finishing department follows:
The total number of physical units for which we have to account is
A) 41,000
B) 61,000
C) 67,000
D) 55,000