1) In a four-variance method analyzing factory overhead, the fixed factory overhead
production-volume variance measures:
A.The difference between the actual fixed factory overhead and budgeted fixed factory
overhead
B.The difference between actual fixed factory overhead and the amount of fixed factory
overhead applied to production
C.The difference between budgeted fixed factory overhead and the amount of fixed
factory overhead applied to production
D.The difference between the actual hours and standard hours allowed multiplied by the
standard fixed factory overhead rate
2) The Shawshank Manufacturing Co. uses a job order cost system of accounting. The
following information was taken from the books of the company after all posting had
been completed at the end of January:
a. Prepare the journal entries to allocate the costs of materials, labor, and factory
overhead to each job and to transfer the costs of jobs completed to Finished Goods.
b. Compute the total production cost of each job.
c. Compute the unit cost of each job.
d. Compute the selling price per unit for each job, assuming a mark-on percentage of 40
percent.
3) Which of the following is not a requirement of budgeting?
A.Goals must be realistic and possible to attain
B.There must be accountability for actual results
C.Management must clearly define its objectives
D.The budget must not be changed under any circumstances
4) In job order costing, the basic document for accumulating the cost of each job is the:
A.Job cost sheet
B.Requisition sheet
C.Purchase order
D.Invoice
5) Activity-based costing may be used to charge selling and administrative expenses to:
A.types of products sold
B.sales offices
C.sales persons
D.All of the above
6) Skeeter Company produces 100,000 insect repellent devices each day, and the
average number of units in work in process is 150,000, with an average value of
$300,000. The average annual carrying cost percentage is 30%.
a. Determine the throughput time.
b. Compute the annual carrying cost.
c. If the same daily output can be achieved while reducing the work in process by 40%,
determine the new throughput time.
d. Compute the annual carrying cost given the information in requirement c.
7) The method of distributing service department costs to production departments that
takes into consideration that service departments not only may provide service to but
also may receive service from other service departments is the:
A.Direct distribution method
B.Sequential distribution method
C.Service department distribution method
D.Reciprocal method
8) All of the following methods may be used to account for the revenue from scrap
sales except:
A.Credit Factory Overhead, if the scrap cannot be identified with a specific job
B.Credit Materials, if the scrap would have been able to be recycled
C.Credit Work in Process, if the scrap is identified with a specific job
D.Credit Scrap Revenue, which is included in the Other Income section of the income
statement
9) Western Industries pays employees on a weekly basis on Tuesday for the week ended
the previous Friday. Employees compensation is earned evenly each day over a 5-day
work week. This year, April 30 fell on Thursday. Payroll costs for the week ended May
1 follow:
Excluding payroll taxes, how much of the accrued payroll at April 30 should be charged
to Factory Overhead?
A.$17,500
B.$26,000
C.$14,000
D.$34,000
10) In creating a balanced scorecard, the number of quality defects would belong to
which category of performance measures?
A.Learning and Growth
B.Internal Business Processes
C.Customer
D.Financial
11) Cooper Company had overapplied factory overhead of $2,000 last year. Assuming
the amount was considered small enough not to materially distort net income, the
entries needed to close factory overhead are:
A.Factory Overhead 2,000
Applied Factory Overhead 2,000
Applied Factory Overhead 2,000
Cost of Goods Sold 2,000
B.Factory Overhead 2,000
Under- and Overapplied
Factory Overhead 2,000
Cost of Goods Sold 2,000
Under- and Overapplied
Factory Overhead 2,000
C.Factory Overhead 2,000
Under- and Overapplied
Factory Overhead 2,000
Under- and Overapplied Factory
Overhead 2,000
Cost of Goods Sold 2,000
D.Factory Overhead 2,000
12) Toshlin issues financial statements June 30th. If payroll was $30,000 through June
30th and wages were to be paid on July 5, what is the correct journal entry on June
30th?
Assume FIT = 15%, FICA = 8%, SUTA = 6%, FUTA = 1%,
A.No entry is required
B.Payroll 30,000
Wages Payable 30,000
C.Payroll 30,000
Federal Income Tax 4,500
FICA Taxes Payable 2,400
Wages Payable 23,100
D.Payroll 30,000
13) Under a job order system of cost accounting, the dollar amount of the entry to
transfer inventory from Work in Process to Finished Goods is the sum of the costs
charged to all jobs:
A.In process during the period
B.Completed and sold during the period
C.Completed during the period
D.Started in process during the period
14) Factory overhead would include:
A.Wages of office clerk
B.Sales managers salary
C.Supervisors salary
D.Tax accountants salary
15) Which of the following statements about service departments and their costs is not
true?
A.Service departments rarely provide services to other service departments
B.Some service departments may be able to precisely measure the services it provides
to other departments
C.Service department costs should be included in total product costs
D.Allocation of service department costs should be made on an equitable basis
16) Baker Company has a standard and flexible budgeting system and uses a
two-variance analysis of factory overhead. Selected data for the June production
activity follows:
The production-volume variance for June is:
A.$1,500favorable
B.$1,500 unfavorable
C.$2,000 favorable
D.$2,000 unfavorable
17) Hunter and Quinn Collision Repair uses activity-based costing to determine the
costs of its cases. Information about costs follow:
Seths car was repaired after he was involved in a rear-end collision. The repair involved
3 hours of machine time, 5 hours of labor at $30 per hour, and the rear of the car was
repainted. How much overhead was assigned to Seths repair job?
A.$2,000
B.$941
C.$990
D.$840
18) Flexible budgeting is a reporting system wherein the:
A.Statements included in the budget report vary from period to period
B.Budget standards may be adjusted at will
C.Reporting dates vary according to the levels of activity reported upon
D.Planned level of activity is adjusted to the actual level of activity before the budget
comparison report is prepared
19) Consider the following cost of production summary for Carrigan Products for May.
a. Prepare the journal entries to record the production activity.
b. Prepare the Statement of Cost of Goods Manufactured for May.
20) Glandorf Controls produces furnaces at several plants. The business is seasonal and
cyclical in nature. The accountant for the Marion plant uses flexible budgeting to help
the plant management control operations. Data for Marion follows:
a. Compute the fixed and variable factory overhead application rates per unit of
production.
b. Assuming Glandorf uses the two-variance method of analyzing factory overhead,
compute the two overhead variances.
c. Prepare a flexible budget performance report for January comparing actual and
budgeted costs of all cost elements for the actual activity for the month.
d. Prove the factory overhead budget variance from the above report.
21) An example of a distribution cost that can be directly assigned to selling activity
would be:
A.Advertising costs
B.Commissions
C.Sales managers salary
D.Telephone expenses
22) Consider the budget information for Bert and Ernie Design firm:
Bert and Ernie decide there are two cost pools, design support, which is assigned to jobs
based on the number of rooms redone, and facilities costs, which is assigned to jobs
based on the number of professional labor hours. The design support cost pool includes
design equipment depreciation and samples and books. The lease expense and utilities
are considered facilities costs.
What is the budgeted rate per cost driver for facilities costs?
A.$17.50
B.$1.05
C.$.70
D.$37.50
23) You have been hired by Thompson Waterfall Manufacturing. Your first task is
examine different distribution methods for applying factory overhead to the various
production orders that are processed during a year.
The following information was taken from the annual budget:
24) What is the purpose of the following journal entry?
DR Payroll
CR FICA Taxes Payable
CR Employee Income Tax Payable
CR Wages Payable
A.To record payroll for the period
B.To accrue payroll at the end of the period
C.To record payroll taxes for the period
D.To distribute payroll for the period
25) Elgin Company’s budgeted fixed factory overhead costs are $50,000 per month plus
a variable factory overhead rate of $4.00 per direct labor hour. The standard direct labor
hours allowed for October production were 20,000. An analysis of the factory overhead
indicates that in October, Elgin had an unfavorable flexible-budget variance of $1,500
and a favorable production-volume variance of $500. Elgin uses a two-variance
analysis of overhead variances.
The applied factory overhead in October is:
A.$129,500
B.$128,000
C.$130,000
D.$130,500
26) Nutt Industries electricity costs and machine hours over a six-month period follow:
Using the high-low method, what is the formula that can be used to estimate electricity
costs at different levels of volume?
A.Electricity costs = $2,800 + ($1.00 x number of machine hours)
B.Electricity costs = $2,600 + ($1.00 x number of machine hours)
C.Electricity costs = $400 + ($1.67 x number of machine hours)
D.Electricity costs = $3,600 + ($.60 x number of machine hours)
27) The level of production that is used by most firms for budget development because
it represents a logical balance between maximum production capacity and the capacity
demanded by actual sales volume is:
A.practical capacity
B.theoretical capacity
C.budgeted capacity
D.normal capacity
28) Information on Shonda Company’s factory overhead costs follows:
What is the net factory overhead variance?
A.$4,500 unfavorable
B.$4,500 favorable
C.$2,500 unfavorable
D.$2,500 favorable
29) Ashley Corp. had finished goods inventory of $50,000 and $60,000 at April 1 and
April 30, respectively, and cost of goods manufactured of $175,000 in April. Cost of
goods sold in April was:
A.$165,000
B.$175,000
C.$185,000
D.$225,000
30) In a standard cost system,when the materials price variance is recorded at the time
the material is purchased, the materials purchase price variance is obtained by
multiplying the:
A.Actual price by the difference between actual quantity purchased and standard
quantity used
B.Actual quantity purchased by the difference between actual price and standard price
C.Standard price by the difference between standard quantity purchased and standard
quantity used
D.Standard quantity purchased by the difference between actual price and standard
price
31) Department B had 1,000 units in beginning work-in-process which had transferred
in costs of $2,500 from Department A associated with them. During the period, 12,000
more units having costs of $36,000 were transferred in to Department B from
Department A. What is the unit cost for the period of costs transferred from Department
A.
A.$2.00
B.$2.75
C.$2.96
D.$3.00
32) The method of distributing service department costs to production departments
which distributes service department costs regressively to other service departments,
and then to production departments is the:
A.Direct distribution method
B.Sequential distribution method
C.Service department distribution method
D.Reciprocal method
33) The Reddog Company predicts that 3,200 units of material will be used during the
year. The expected daily usage is 15 units, there is an expected lead time of 10 days,
and there is a safety stock of 200 units. The material is expected to cost $4 per unit. It is
estimated that it will cost $25 to place each order. The annual carrying cost is $1 per
unit.
a. Compute the order point.
b. Determine the most economical order quantity by use of the formula.
c. Compute the total cost of ordering and carrying at the EOQ point.
34) Which of the following characteristics applies to process costing?
A.Differentiated products are provided on a special order basis
B.Cost are accumulated by department
C.Cost are accumulated by jobs
D.Direct labor workers must keep detailed records as to the jobs on which they worked
35) Gordon Products manufactures one product in two departments on a continuous
basis and uses the average cost method of process cost accounting. The following
information was reported for the month of May, 20–:
a) Prepare a cost of production summary for Department A for the month.
b) Prepare a cost of production summary for Department B for the month.
c) Prepare the journal entries to record production.
36) Which of the following is a more descriptive term of the type of cost accounting
often called “direct costing”?
A.Prime costing
B.Out-of-pocket costing
C.Variable costing
D.Relevant costing