1) Thomas Company uses a standard cost system and recognizes the materials purchase
price variance at the time materials are purchased. Information for raw materials for
Product RBI for the month of October follows:
What is the materials quantity variance?
A.$175 unfavorable
B.$165 unfavorable
C.$175 favorable
D.$165 favorable
2) Amounts from all of the following budgets feed into the pro-forma income statement
except the:
A.Capital expenditures budget
B.Factory overhead budget
C.Direct materials budget
D.Sales budget
3) Bradley Inc. has the capacity to make 100,000 windows. Bradley is currently
operating at 100% capacity. The windows usually sell for $20.00 each. Costs for each
window follow:
The Army has offered to buy 10,000 windows for $12.00 each for barracks. Bradley
should:
A.Reject the offer because it currently does not have enough capacity to accept the
order
B.Reject the order because the company will lose $20,000 on the order
C.Accept the offer because the company will realize $20,000 in additional contribution
margin
D.Accept the offer because the company will realize $40,000 in additional contribution
margin
4) If the fixed costs related to a product increase while variable costs and sales price
remain constant, what will happen to (1) contribution margin and (2) break-even point?
A.UnchangedUnchanged
B.UnchangedIncrease
C.IncreaseDecrease
D.DecreaseIncrease
5) On a cost of quality report, scrap and spoilage are repairs on defective equipment are
examples of:
A.appraisal costs
B.external failure costs
C.internal failure costs
D.prevention costs
6) The following information is available for the month of August from the First
department of the Twigg Corporation:
Materials are added in the beginning of the process in the First department. Using the
average cost method, what are the equivalent units of production for the month of
August?
A.192,000240,000
B.190,000192,000
C.240,000208,000
D.240,000192,000
7) In creating a balanced scorecard, the number of customer complaints would belong
to which category of performance measures?
A.Learning and Growth
B.Internal Business Processes
C.Customer
D.Financial
8) If over- or underapplied factory overhead would materially distort net income if the
entire amount was charged to Cost of Goods Sold, it should be:
A.Carried forward in the overhead control account from year to year
B.Eliminated by changing the predetermined factory overhead rate in subsequent years
C.Apportioned among the work in process inventory, the finished goods inventory, and
the cost of goods sold
D.Treated as a special gain or loss occurring during the year
9) Flexible budgeting is a reporting system wherein the:
A.Budget shows estimated costs at different levels of production volume
B.Budget standards may be adjusted at will
C.Reporting dates vary according to the levels of activity reported upon
D.Statements included in the budget report vary from period to period
10) Examples of service businesses that would use job order costing would include all
of the following except:
A.an accounting firm that has audit clients of various sizes and complexities
B.a quick oil change shop that offers only basic maintenance services
C.an automotive body repair shop specializing in collision repair
D.a high end salon offering hair, manicure and spa services
11) In the three-variance method of factory overhead analysis, what standard cost
variance represents the difference between actual factory overhead incurred and
budgeted factory overhead based on actual hours worked?
A.Production-volume variance
B.Efficiency variance
C.Spending variance
D.Quantity variance
12) Marley Company hired a consultant to help improve its operations. The consultants
report stated that Marleys inventory levels are excessive and cited several negative
consequences to Marley as a result. Which of the following was not cited in the report?
A.Possible other uses for working capital now tied up in inventory
B.Production stoppages due to parts not being available
C.Higher property taxes and insurance costs
D.Large quantities of obsolete materials
13) Which of the following costs would be included in factory overhead in the
manufacture of a students desk?
A.The wages of the operator of the machine that bends the metal legs of the desk into
shape
B.The wages of the forklift operator who moves desks from one manufacturing station
to the next
C.The cost of the plastic used to form the writing surface
D.The wages of the worker who assembles the components
14) Norman Industries began operations on January 1 and produces a single product
that sells for $15.00 per unit. Standard capacity is 50,000 units per year. During the
year, 50,000 units were produced and 40,000 units were sold. There was no inventory at
the beginning of the year. Manufacturing costs and selling and administrative expenses
follow:
There were no variances from the standard variable costs. Any under- or overapplied
overhead is written off directly at year end as an adjustment to cost of goods sold.
a. In presenting inventory on the balance sheet at December 31, what is the unit cost
under absorption costing?
b. In presenting inventory on the balance sheet at December 31, what is the unit cost
under variable costing?
c. What is the net income for the year under absorption costing?
d. What is the net income for the year under direct costing?
e. What is the cost of the ending inventory under absorption costing?
f. What is the cost of the ending inventory under variable costing?
15) The inventory method which results in the prices paid for the earliest purchases
being assigned to inventory on hand at the end of the period is:
A.First-in, first-out
B.Last-in, first-out
C.Last-in, last-out
D.Moving average
16) Information concerning the materials used in the Blending Department in
November is as follows:
If the ending work-in-process inventory is 75% complete, using the average cost
method, what was the materials cost in Work in Process at November 30?
A.$7,852
B.$8,280
C.$6,120
D.$7,317
17) A major disadvantage of the scattergraph method of analyzing cost behavior is:
A.It bases its solution on only two observations
B.It results in its analyzed cost being treated as either fixed or variable, based on which
type of behavior it more closely resembles
C.Two persons could draw different lines through the data points
D.It enables non-representative points, called outliers, to be identified
18) The term “prime cost” refers to:
A.The sum of direct labor costs and all factory overhead costs
B.The sum of direct material costs and direct labor costs
C.All costs associated with manufacturing other than direct labor costs and direct
material costs
D.Manufacturing costs incurred to produce units of output
19) Information concerning Department A of Ali Company for the month of June is as
follows:
All materials are added at the beginning of the process. Using the average cost method,
the cost (rounded to two places) per equivalent unit for materials for June is:
A.$0.74
B.$0.90
C.$0.77
D.$0.78
20) The cost of an equivalent unit is equal to:
A.A unit of work in process inventory
B.The amount of cost necessary to start a unit of production into work in process
C.The cost necessary to complete one unit of production
D.A unit of work in process inventory
21) Nolan Company has two segments: Audio and Video. Sales for the Audio Segment
were $500,000, and variable costs were 40% of sales. The Video Segment also had sales
of $500,000, but variable costs were 60% of sales. Fixed costs directly traceable to the
Audio and Video segments were $150,000 and $120,000, respectively. Common fixed
costs of $200,000 were arbitrarily allocated equally to each segment.
What was the segment margin of the Video Segment.
A.$200,000
B.$80,000
C.$(20,000)
D.$150,000
22) In a three-variance method of factory overhead analysis, the variance that indicates
that the volume of production was more or less than budgeted is the:
A.Quantity variance
B.Production-volume variance
C.Spending variance
D.Efficiency variance
23) Kami company manufactures engine components. During the previous month, the
Company manufactured 12,000 units of Component XRB for Job 3524 and incurred the
following unit costs:
When the units were tested after production, 300 units did not meet specifications and
needed further polishing work. The unit cost of correcting the defects was:
a. Prepare the journal entries to record the cost to correct the defective work under each
of the following scenarios:
b. Under Scenario 2 above, calculate the cost per unit of Job 3524 .
24) Idle time should be treated as follows:
A.It should be recorded along with the reason for it, and charged to Factory Overhead
B.It should be charged to the job from which the employee took a break
C.It should be documented and the employee should not be paid for that time
D.It should be allocated to the various manufacturing departments and the supervisors
should decide how to handle it
25) The process of setting unrealistically low budgeting goals in an effort to make only
average performance look good is (a):
A.safe budget
B.normal budget
C.budget cushion
D.budget slack
26) Which of the following items of cost would be least likely to appear on a
performance report based on responsibility accounting for the supervisor of an
assembly line in a large manufacturing situation?
A.Direct labor
B.Indirect materials
C.Selling expenses
D.Repairs and maintenance
27) Hicks and Greene, a CPA firm that uses job order costing, is analyzing the
profitability of its audits. During the year, the firm audited the Esterline Company, for
which it charged $20,000. Budget information for the firm follows:
Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.
Budgeted and actual time for the Esterline audit follows:
In addition, the firm incurred $2,320 in travel costs related to Esterline, but the firm had
budgeted for $2,500 of direct costs.
(a) Assuming that Hicks and Greene allocates overhead to jobs using direct labor cost
as the cost driver, compute the predetermined overhead rate.
(b) Compute the cost of the Esterline audit.
(c) Prepare a cost performance report for the Esterline audit.
(d) Compute the profit that Hicks and Greene had on the Esterline audit.
