1) The following information pertains to the Braun Company for March:
Using the four-variance method of factory overhead variance analysis, what is the fixed
overhead production-volume variance?
A.$1,200 favorable
B.$1,800 unfavorable
C.$3,000 favorable
D.$1,200 unfavorable
2) If a company using the adjusted sales value method to assign joint costs produces
two products, A and B, from a joint process, and B requires additional processing after
the split-off in order to be salable, how is the joint cost allocated to B determined?
A.The costs of the additional processing are ignored in allocating joint costs
B.The costs of the additional processing are subtracted from the joint costs allocated to
B
C.The relative sales value used to allocate the joint cost are determined after the costs
of further processing are subtracted from the ultimate sales value of B
D.None of these are correct
3) When a manufacturing company has a highly automated manufacturing plant, what
is probably the most appropriate basis of applying factory overhead costs to work in
process?
A.Machine hours
B.Cost of materials used
C.Direct labor hours
D.Direct labor dollars
4) To effectively use variances to improve operations, management should take the
following steps except:
A.Taking appropriate action to follow up on variances
B.Breaking down the total variance by usage and price
C.Adding variances together to determine the impact on financial statements
D.Analyzing cause and effect of both favorable and unfavorable variances
5) Information concerning the materials used in the Mixing Department in October is as
follows:
If the ending work-in-process inventory is 50% complete, using the average cost
method, what was the materials cost in Work in Process at October 31?
A.$2,644
B.$2,700
C.$4,330
D.$4,811
6) For a factory worker, all of the following are charged to Factory Overhead except:
A.the shift premium paid because the worker works the graveyard shift
B.the payroll taxes related to direct labor time
C.the overtime premium paid as a result of a rush job stipulated by the customer
contract
D.the make-up guarantee paid because the employee did not reach the quota set forth in
a modified wage plan
7) The degree to which a product or service satisfies customer needs is:
A.design quality
B.service quality
C.conformance quality
D.process quality
8) Julia Industries produces cookware. The master budget called for production of
75,000 units this year. The budget at that level of production follows:
Due to the popularity of cooking shows on television, Julia Industries now estimates
sales will be 80,000 units. What is budgeted operating income at this level?
A.$185,000
B.$160,000
C.$230,000
D.$167,500
9) Segment profitability analysis may be used to evaluate the profitability of:
A.Divisions
B.Sales territories
C.Product lines
D.All of these are correct
10) Consider the following information about the Gumm Company:
Budgeted fixed costs are $550,000. The weighted-average unit contribution margin is:
A.$2.25
B.$3.25
C.$2.20
D.$2.30
11) The Owens Company uses the machine hour method of applying factory overhead
to production. The budgeted factory overhead last year was $200,000, and there were
40,000 machine hours budgeted. Job 84 was started and completed during the period.
Direct materials costing $900 were incurred. Twenty-five direct labor hours were
worked at a cost of $350, and 40 machine hours were incurred. What was the cost of
Job 84?
A.$1,450
B.$1,375
C.$1,250
D.$1,290
12) The following accounts are maintained by the Sprague Manufacturing Company in
its general ledger: Materials, Work in Process, Factory Overhead, and Accounts
Payable. The materials account had a debit balance of $40,000 on November 1 . A
summary of material transactions for November shows:
a. Prepare journal entries to record the materials transactions.
b. Post the journal entries to T-accounts.
c. What is the balance of the materials account on November 30?
13) The employee who is responsible for preparing purchase requisitions is most likely
the:
A.Storeroom keeper
B.Purchasing agent
C.Production supervisor
D.Receiving clerk
14) Materials are added at the end of the process in a company’s curing department, the
second stage of the production cycle. The following information is available for the
month of July:
Under the cost accounting system, the costs incurred on the lost units are absorbed by
the remaining good units. Using the average cost method, what are the equivalent units
for the materials unit cost calculation?
A.210,000
B.195,000
C.250,000
D.235,000
15) The Kluesner Company started the month of June with 3,000 units in process which
were 60% completed. The company started 25,000 units during June, and at the end of
the month had 2,500 units on hand which were 40% completed. The number of units
transferred to finished goods during June was:
A.25,000
B.28,500
C.24,500
D.25,500
16) All of the following could be included in the cost of a product located in the final
production department of a multi-step process except:
A.The costs of materials, labor and overhead identifiable with that department
B.Marketing and distribution costs
C.The costs of service departments that have been allocated to production departments
D.The costs of prior production departments
17) The fixed overhead application rate is a function of a predetermined “normal”
activity level. If standard hours allowed for good output equal this “normal” activity
level for a given period, the production-volume variance will be:
A.Zero
B.Favorable
C.Unfavorable
D.Either favorable or unfavorable depending on the budgeted overhead
18) The practice of accepting a selling price when there is excess capacity, as long as it
exceeds variable cost is called:
A.Contribution pricing
B.Differential pricing
C.Capacity pricing
D.Special pricing
19) When evaluating profitability of a segment, costs that would disappear if the
company eliminated the segment are called:
A.Direct costs
B.Common costs
C.Indirect costs
D.Fixed costs
20) If a company receives a larger quantity of goods than had been ordered and keeps
the excess for future use, a(n)______________ is prepared to notify the vendor of the
amount of increase to accounts payable in the invoice.
A.credit memorandum
B.return shipping order
C.debit memorandum
D.additional purchase order
21) Which of the following correctly demonstrates the comparison of the four-variance
method of factory overhead analysis to the two-variance method of factory overhead
analysis?
A.The sum of the fixed and variable spending and variable efficiency variances in the
four-variance method is equal to the production-volume variance in the two-variance
method
B.The sum of the fixed production-volume and variable efficiency variances in the
four-variance method is equal to the production-volume variance in the two-variance
method
C.The fixed production-volume variance in the four-variance method is equal to the
production-volume variance in the two-variance method
D.The sum of the fixed spending and fixed production-volume variances in the
four-variance method is equal to the production-volume variance in the two-variance
method
22) Klug Industries adds materials at the beginning of the process in the molding
department, which is the first of two stages of its production cycle. Information
concerning the materials used in the molding department in August follows:
Using the FIFO method, what is the materials cost of the work in process at August 31
(rounded to nearest dollar)?
A.$28,000
B.$29,400
C.$29,639
D.$25,358
23) Hoctor Industries wishes to determine the profitability of its products and asks the
cost accountant to make a comparative analysis of sales, cost of sales and distribution
costs of each product for the year. The accountant gathers the following information
which will be useful in preparing the analysis:
Advertising expenses total $100,000, with 60% being expended to advertise the Deluxe
model. The representatives commissions are 5% and 7% for the standard and deluxe
models, respectively. The sales managers salary of $50,000 is allocated evenly between
products. Other miscellaneous selling costs are estimated to be $6 per order received.
(a) Compute the selling cost per unit.
(b) Prepare an analysis for Hoctor Industries that will show in comparative form the
income derived from the sale of each unit for the year.
24) Variable overhead costs include all of the following except:
A.Electricity to power machinery
B.Factory supplies
C.Rental of factory building
D.Small tools
25) Which of the following is most likely to be considered an indirect material in the
manufacture of a sofa?
A.Lumber
B.Glue
C.Fabric
D.Foam rubber
26) Woodside Company manufactures tables with vinyl tops. The standard material cost
for the vinyl used per Style-R table is $7.20 based on 8 square feet of vinyl at a cost of
$.90 per square foot. A production run of 1,000 tables in January resulted in usage of
8,300 square feet of vinyl at a cost of $.85 per square foot, a total cost of $7,055. The
materials quantity variance resulting from the above production run was:
A.$255 favorable
B.$255 unfavorable
C.$270 unfavorable
D.$270 favorable
27) Brown Company incurred cost of $17,000 for material, $13,000 for labor, and
$16,000 for factory overhead. There was no beginning or ending work in process. 5,000
units were completed and transferred out. The unit cost for material is:
A.$3.40
B.$2.60
C.$9.20
D.$3.20
28) Which of the following is most likely to be considered a service department in a
manufacturing plant?
A.Assembly
B.Maintenance
C.Finishing
D.Fabrication
29) Product testing is an example of which type of cost on a cost of quality report?
A.Prevention
B.Appraisal
C.Internal failure
D.External failure
30) In a factory, all of the following would be considered service departments except:
A.Inspection and Packing
B.Assembly
C.Power
D.Human Resources
31) Fixed factory overhead costs include:
A.Property taxes
B.Plant managers salary
C.Factory insurance
D.All of the these are correct
32) Hebert & Co. CPAs anticipates that partners will bill 2,000 professional hours,
managers will bill 7,500 professional hours and staff accountants will bill 25,000
professional hours. Billing rates are $250, $150 and $75 for partners, managers and
staff accountants, respectively, and salary rates are $100, $60 and $30 for partners,
managers and staff accountants, respectively. What is Hebert & Co.s budgeted
professional labor cost?
A.$3,500,000
B.$2,070,000
C.$2,500,000
D.$1,400,000
33) Megerle Motors manufactures specialty motors for the medical industry and uses a
job order cost system. During its first month of operations, the following selected
transactions took place:
a. Materials purchased on account $25,000
b. Materials issued to the factory:
Job A25 $ 3,300
Job B43 2,500
Job C89 4,700
Job D52 6,200
For general use in the factory 1,200
c. Factory wages and salaries earned and distributed:
Job A25 $ 2,400
Job B43 4,300
Job C89 5,600
Job D52 3,800
For general work in the factory 2,900
d. Miscellaneous factory overhead costs on account $ 4,500
e. Depreciation of factory machinery $ 2,100
f. Factory overhead allocated as follows:
Job A25 $ 2,500
Job B43 3,000
Job C89 2,800
Job D52 2,400
g. Jobs A25, B43 and C89 completed
h. Jobs A25 and B43 shipped to the customer and billed $45,000
Required:
1> Compute the cost of each job.
2> Determine the ending balances in materials, work in process, finished goods and
cost of goods sold by preparing the necessary T- accounts and record the transactions in
them.
34) The journal entry to record undamaged direct materials returned to the storeroom
would be:
A.Debit – Materials
Credit – Finished Goods
B.Debit – Factory Overhead
Credit – Work in Process
C.Debit – Materials
Credit – Factory Overhead
D.Debit – Materials
35) Which of the following is not true about quality costs?
A.Lost sales resulting from quality problems would be classified as external failure
costs
B.If a company is doing a good job in prevention activities, appraisal costs should be
minimal
C.It is generally less expensive if a defective good is shipped to a customer than if the
defect is detected prior to shipment
D.Generally, if a company devotes resources to prevention, its appraisal, internal failure
and external failure costs should decline
36) Kater Company manufactures shelving units. The company receives pre-cut wood,
drills holes in the wood so that movable shelves may be installed, then assembles and
paint the units. Classify each of the following items of factory overhead as either fixed
or variable cost.
a. Janitorial service (an outside service, not company employees)
b. Supervisor of the Drilling Department
c. Oil used to lubricate drill press machines
d. Propane for forklift trucks used to move the material from the Drilling Department to
the Assembly Department
e. Natural gas used to heat the plant
f. Security guard
g. Drill bits used in the drilling department
h. Insurance on factory building
i. Electricity to power drill press machines
j. Rent of factory building
37) The following data refer to various annual costs relating to the inventory of a
single-product company that requires 10,000 units per year:
What is the annual carrying cost per unit?
A.$ .21
B.$ .29
C.$ .34
D.$ .44
38) The Benchley Company uses metal grates when assembling appliances. Information
as to balances on hand, purchases, and requisitions of the grates is given in the
following table.
If a perpetual inventory record of the metal grates is maintained on a FIFO basis, what
costs are assigned to the 150 units in ending inventory?
A.150 units @ $3.40
B.15 units @ $3.40 and 135 units @ $3.24
C.150 units @ $2.80
D.15 units @ $3.40 and 135 units @ $2.80
39) Joel Williams works at Allentown Company where he assembles components for
small appliances and earns $16 per hour with time-an-a-half for overtime. During the
week ended July 25, Joel worked 43 hours as follows:
The amount of Joels wages that will be charged to the Work in Process account,
assuming that the overtime worked was due to a rush order on the FASB job is:
A.$560
B.$608
C.$584
D.$680
40) James Corporation uses a standard cost system and recognizes the materials
purchase price variance at the time materials are purchased. Information for raw
materials for the month of December follows:
What is the entry to record material usage?
A.Work in process 6,270
Materials quantity variance 330
Materials 6,600
B.Work in process 6,270
Materials quantity variance 330
Materials 5,940
C.Work in process 6,300
Materials quantity variance 350
Materials 6,650
D.Work in process 5,940
41) Howard Poster Incorporated had 12,000 units of work in process in Department A
on October 1 . These units were 60 percent complete as to conversion costs. Materials
are added in the beginning of the process. During the month of October, 38,000 units
were started and 40,000 units were completed. Howard had 10,000 units of work in
process on October 31 . These units were 75 percent complete as to conversion costs.
1> Compute the equivalent units for materials and conversion costs for the month of
October using the FIFO method.
2> Using the average cost method determine the equivalent units for materials and
conversion costs for the month of October.
42) The materials account of the Lankford Company reflected the following changes
during January:
Assuming that Lankford Company maintains perpetual inventory records, calculate the
cost of the ending inventory at January 31 and the cost of the units issued in January
using the FIFO method.
43) Santorini Ltd. has accumulated the following data over a six-month period:
44) Westwood Gear, Inc., recently received a special order to manufacture 10,000 units
for a Canadian company. This order specified that the selling price per unit should not
exceed $50. Since the order was received without the effort of the sales department, no
commission would be paid. However, an export handling charge of $5 per unit would
be incurred. Management anticipates that acceptance of the order will have no effect on
other sales.
The company is now operating at 80 percent of capacity, or 80,000 units, and expects to
continue at this level for the coming year without the Canadian order. Unit costs based
on estimated actual capacity for the coming year include:
Prepare an analysis showing the effect on profits if the special order is accepted by the
company. Based on your analysis, should the order be filled, and why?
45) The following data were taken from the general ledger of Data Corp., a retailer of
computers and accessories:
Compute the cost of goods sold for the month of August.
46) Asia, Inc., 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 August, 20–:
Prepare a cost of production summary for each department for the month.
47) Wernke Company has the following totals from its operating budgets for
November:
Prepare a budgeted income statement for the month of November assuming a 30%
income tax rate.
48) Information for Milton, Inc. in July for the Finishing Department, the second stage
of the production cycle, is as follows:
Material costs are added at the end of the process. The ending work in process is 40%
complete as to conversion costs. Ignoring any transferred in costs, how would the total
costs accounted for be distributed using the average cost method?
49) Using the data presented below, determine the figures that should be inserted in the
blank spaces.
50) The following data were taken from the general ledger and other data of Price
Fabricators on July 31:
Compute the cost of goods sold for Price Fabricators, selecting the appropriate items
from the list provided.