1) Lawrence and Louis Law Firm uses activity-based costing to determine the costs of
its cases. Information about costs follow:
The Laurel case required 60 professional hours, 20 of which were partner hours, and
labor costs totaled $10,000. If direct costs relating to the case were $1,000, what were
the total costs of the Laurel case?
A.$23,000
B.$25,500
C.$21,500
D.$15,500
2) In a process cost system, the cost attributable to abnormal losses that occur due to
unexpected circumstances such as machine operator error should be assigned to:
A.Ending work in process inventory
B.Cost of goods manufactured and ending work in process inventory in the ratio of
units worked on during the period to units remaining in work in process inventory
C.A separate loss account in order to highlight production inefficiencies
D.Cost of good manufactured (transferred out)
3) When preparing a flexible budget for factory overhead costs, what will occur to fixed
costs (on a per-unit basis) as production increases?
A.Fixed costs per unit will increase
B.Fixed costs are not considered in flexible budgeting
C.Fixed costs per unit will decrease
D.Fixed costs per unit will remain unchanged
4) Mountain Company produced 20,000 blankets in June to be sold during the holiday
season. The manufacturing costs were:
Management has decided that the mark-on percentage necessary to cover the products
share of selling and administrative expenses and to earn a satisfactory profit is 30%.
The selling price per blanket should be:
A.$12.00
B.$15.60
C.$23.60
D.$31.20
5) Boyles Body Shop repairs automobiles that have been involved in collisions. Its
budget information follows:
Since all of Boyles technicians are paid the same rate, Boyle allocates overhead to jobs
based on direct labor hours. Paul Evans brought his car to Boyle for fender repair. It
took 5 hours and the new parts for the job totaled $200. What was the total cost of the
Evans job?
A.$375
B.$200
C.$250
D.$325
6) A major disadvantage of the high-low 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
7) In creating a balanced scorecard, the rate of employee turnover would belong to
which category of performance measures?
A.Learning and Growth
B.Internal Business Processes
C.Customer
D.Financial
8) At a plant where car doors were manufactured, all of the following would be
classified as direct labor except:
A.Machinists
B.Assembly workers
C.Maintenance personnel
D.Painters
9) Kale Corporation’s budgeted fixed factory overhead costs are $25,000 per month plus
a variable factory overhead rate of $8.00 per direct labor hour. The standard direct labor
hours allowed for November production were 10,000. An analysis of the factory
overhead indicates that in November Kale had a favorable flexible-budget variance of
$1,500 and an unfavorable production-volume variance of $500. Kale uses a
two-variance analysis of overhead variances.
The actual factory overhead incurred in October is:
A.$105,500
B.$104,500
C.$106,500
D.$103,500
10) A receiving report would include all of the following information except:
A.What the shipment contained
B.The purchase order number
C.The customer
D.The date the materials were received
11) Characteristics of ideal standards include all of the following except:
A.They generally give rise to unfavorable variances
B.They may cause personnel to become discouraged
C.They take into account normal waste and spoilage
D.They provide a maximum objective for which to strive to improve efficiency
12) Jim Davis Company processes hogs into three products, chops, bacon and sausage.
Production and selling price data follow:
Hogs are processed in the Processing Department. From the split-off point, bacon is
smoked, sliced and packaged in the Bacon Department. The cost incurred for these
processes was $100,000. In addition, sausage was ground and formed into patties in the
Sausage Department after the split-off. This process cost $60,000.
Required:
a) If joint processing costs were $1,500,000, calculate the total cost of each product
using the adjusted sales value method.
b) Prepare the journal entries to 1> record the joint processing and movement of
product out of the Processing Department after the split off, and 2> record the
additional processing and completion of the bacon and sausage.
13) The entry to apply factory overhead to jobs includes:
A.a debit to Applied Factory Overhead
B.a debit to Work in Process
C.a credit to Work in Process
D.a debit to Cost of Goods Sold
14) Perry Companys flexible budget for 25,000 units shows $75,000 and $25,000 in
variable and fixed costs, respectively. At 30,000 units, the flexible budget would show:
A.Variable costs of $100,000 and fixed costs of $25,000
B.Variable costs of $90,000 and fixed costs of $30,000
C.Variable costs of $75,000 and fixed costs of $30,000
D.Variable costs of $90,000 and fixed costs of $25,000
15) The following information pertains to William Company:
What is the entry to record the direct labor cost and variances?
A.Payroll 30,000
Labor rate variance 500
Labor efficiency variance 2,500
Accrued payroll 33,000
B.Work in process 27,000
Labor rate variance 500
Labor efficiency variance 2,500
Payroll 30,000
C.Work in process 30,000
Payroll 30,000
D.Work in process 27,000
16) Victoria is a budget analyst at Young Industries. She used the least squares
regression method to separate the plants monthly utilities cost into its fixed and variable
components. The results were as follows:
Y = 3,250 + .054 X
X = the number of units produced
R2 = .892
Based on these results, the December budget for plant utilities cost if Young Industries
plans to produce 100,000 units in that month would be:
A.$5,400
B.$8,650
C.$3,250
D.$8,920
17) During April, Hisch Company incurred the following costs on Job A42 for the
manufacture of 400 bookcases:
If the defects resulted from the exacting specifications of the order, what is the journal
entry needed to record the rework costs?
A.Work in Process 420
Materials 150
Payroll 90
Factory Overhead 180
B.Materials 150
Payroll 90
Factory Overhead 180
Work in Process 420
C.Factory Overhead 420
Materials 150
Payroll 90
Factory Overhead 180
D.Spoiled Goods Inventory 420
18) The following information is available for the month of April from the First
department of the Armque Corporation:
Materials are added in the beginning of the process in the First department. Using the
first-in, first-out method, what are the equivalent units of production for the month of
April?
A.250,000259,000
B.340,000259,000
C.280,000271,000
D.250,000271,000
19) Which of the following should be included in computing a revenue budget for a
professional services firm?
A.Wage rates
B.Predetermined overhead rate
C.Billing rate
D.Direct costs
20) Under a modified wage plan, an employee working an eight-hour day earns $.40 for
each finished unit and is guaranteed $20 per hour as a minimum wage. At what level
should the daily quota be set?
A.160 units
B.400 units
C.500 units
D.640 units
21) Standard costing will produce the same income before extraordinary items as actual
costing when standard cost variances are assigned to:
A.Work in process and finished goods inventories
B.An income or expense account
C.Cost of goods sold and inventories
D.Cost of goods sold
22) The following data pertains to Western Companys materials inventory:
What is Western Companys EOQ?
A.4,000 pounds
B.800 pounds
C.400 pounds
D.200 pounds
23) Listed below are steps of purchasing and receiving materials:
1> The receiving clerk prepares a receiving report.
2> Purchase requisitions are prepared to notify the purchasing agent that additional
materials are needed.
3> The purchase of merchandise is recorded by the accounting department.
4> The purchasing agent completes a purchase order.
In which order would these events typically happen?
A.4, 2, 3, 1
B.2, 4, 3, 1
C.2, 4, 1, 3
D.4, 2, 1, 3
24) When preparing the flexible budget for factory overhead, variable costs may
include all but the following:
A.insurance
B.shop supplies
C.electricity to run the machines
D.repair costs
25) The Bisset Corporation uses Raw Material A in a manufacturing process.
Information as to balances on hand, purchases, and requisitions of Raw Material A is
given in the following table.
Raw Material A
If a perpetual inventory record of Raw Material A is maintained on a FIFO basis, 200
units on hand on August 18 will consist of:
A.100 units @ $1.40, 80 units @ $1.55 and 20 units @ $1.62
B.100 units @ $1.55 and 100 units @ $1.62
C.150 units @ $1.62 and 50 units @ $1.55
D.200 units @ $1.55
26) The following information pertains to Genie Company:
What is the entry to record the direct materials cost and variances, assuming that the
price variance is recorded when the materials are put into production?
A.Materials 12,000
Materials price variance 2,000
Accounts payable 13,000
B.Work in process 12,000
Materials quantity variance 1,000
Materials price variance 2,000
Materials 11,000
C.Work in process 11,000
Materials price variance 2,000
Materials 13,000
D.Work in process 12,000
27) If two or more products share a common process before they are separated, the joint
costs should be allocated in a manner that:
A.Assigns a proportionate amount of the total cost to each product equitably
B.Maximizes total earnings
C.Minimizes variations in a unit of production cost
D.Does not introduce an element of estimation into the process of accumulating costs
for each product
28) The data below relate to the month of April for Monroe, Inc., which uses a standard
cost system and a two-variance analysis of factory overhead:
What was Monroe’s flexible-budget variance for April?
A.$1,100 favorable
B.$1,100 unfavorable
C.$575 favorable
D.$575 unfavorable
29) All of the following are characteristics of hourly wage plans except:
A.They provide no extra recognition for doing more than the minimum required
B.They are easy to apply
C.They establish a definite rate per hour for each employee
D.They encourage employees to sacrifice quality in order to maximize earnings
30) Walters and Witt, a law firm, is analyzing the profitability of its cases. During the
year, the firm represented the Umberg Company in numerous routine legal issues, for
which it charged a monthly retainer fee of $2,500. Budget information for the firm
follows:
Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.
Actual time spent for the Umberg cases follows:
Walters and Witt uses activity-based costing to determine the cost of its cases. With a
consultants help, the firm has developed the following information about cost pools:
(a) Compute the budgeted rate per unit of cost driver for each cost pool.
(b) Using activity-based costing, compute the cost of the Umberg work this year.
(c) Compute the profit that Walters and Witt had on the Umberg work this year.
31) A manufacturer generally wants to set a standard that:
A.Can be achieved only under the most efficient operating conditions
B.Is high enough to provide motivation and promote efficiency, but is still attainable
C.Makes no allowance for normal was or spoilage
D.None of these is correct
32) Moreland Corporation manufactures bells and whistles. In June, 6,000 bells were
completed on Job Order No. BX46. On final inspection, 400 bells were rejected and
transferred to the spoiled goods inventory to be sold at $.50 each.
Costs recorded on Job Order No. BX46 follow:
Prepare the journal entries to record the following:
a. Charges for materials, labor, and factory overhead for Job Order No. BX46
b. Cost of the spoiled work, the transfer of the cost of the good toys to Finished Goods,
and the sale of the imperfect toys, if the loss on spoilage is charged to all jobs worked
on during the period
c. Cost of the spoiled work, the transfer of the cost of the good bells to Finished Goods,
and the sale of the imperfect ones, if the loss on spoilage is to be charged to Job Order
No. BX46 only. (Round the new unit cost to the nearest whole cent, and assume part b,
above, has not occurred.)
33) The absolute maximum number of units that would be possible under the best
conceivable operating conditions is a description of which type of manufacturing
capacity?
A.Practical
B.Theoretical
C.Currently attainable (expected)
D.Normal
34) Daniel LLC incurred cost of $43,000 for material, $26,000 for labor, and $23,000
for factory overhead. There was no beginning or ending work in process. 5,000 units
were completed and transferred out. The cost per unit is:
A.$8.60
B.$5.20
C.$18.40
D.$4.60
35) Jacobson Fabrication produces laundry machines. Its sales last year were
$8,000,000. The following costs were identified as being related to quality:
Required:
1> Prepare a Cost of Quality Report for Jacobson for last year.
2> Based on the Cost of Quality Report prepared, what suggestions would you offer to
Jacobson to improve its quality?
36) Pinecroft Company manufactures one product that requires 4 hours of machining
direct labor and 3 hours of assembly direct labor. The standard labor rate is $20.00 per
direct labor hour in the Machining Department and $16.00 per direct labor hour in the
Assembly Department. The product has forecasted sales of 3,000 units in July. The
estimated finished goods inventory at July 1 is 300 units and the desired ending
inventory at July 31 is 400 units.
(1) Prepare a production budget for the month of July.
(2) Prepare a direct labor budget for the month of July.
37) Dean Corporation has two service departments, Power and Maintenance, and two
production departments, Painting and Polishing. The following data have been
estimated for next years operations:
Requirements:
(1) Identify which service department would you use kilowatt hours to allocate service
costs, and which you would use square footage to allocate service costs.
(2) Distribute the service department costs using the direct distribution method.
(3) Prepare the journal entries to distribute the costs of the service departments to the
production departments given the results of your calculations.
38) A traditional break-even chart is illustrated below:
Identify each letter on the above chart, using the proper terminology.
39) Kircher Clothing, Inc. manufactures two styles of jackets: standard, which sell for
$45, and waterproof, which sell for $60. The jackets are sold in three regions: East,
West and North. Waterproof jackets account for 20% of the sales in the East Region,
25% in the West Region and 30% in the North Region. Forecasted total sales next year
are 35,000, 30,000 and 50,000 in the East, West and North Regions, respectively.
Prepare a sales budget for Kircher Clothing, Inc. for next year.
40) Listed below are various costs from the Cost of Quality reports from various
companies:
Identify each cost as a prevention cost, appraisal cost, internal failure cost or external
failure cost.
41) The standard annual capacity of Jones and Smith Company is 25,000 units per
month. Two units can be machined in one hour. The flexible budget for factory
overhead at this volume follows:
In June, actual production was 22,000 units and actual factory overhead incurred was
$258,000.
(1) Calculate the standard application rates for fixed and variable overhead at the
standard level of volume in relation to units and machine hours.
(2) Calculate the amount of factory overhead allowed for the actual volume of
production in June and the variance between the actual and budgeted factory overhead.
42) The Outdoor Manufacturing Company produces sporting equipment. The company
maintains a single raw materials inventory account for both direct and indirect
materials. The following information came from the factory ledger accounts for
December:
Compute the cost of direct materials used during the month of December.
43) Terrell Corporation manufactures Products X, Y, and Z from a joint process.
Additional information is as follows:
Assuming that joint costs are allocated using the relative sales value at split-off
approach, what was the sales value at split off for Product X?