1) Stan is the manager of a division that has been struggling lately. It is budget time and
Stan feels he is under the gun to do well next year. As such, he is building slack into his
budget. How will he handle estimates of revenues and expenses?
Revenues Expenses
A. Overestimate Overestimate
B. Overestimate Underestimate
C. Underestimate Underestimate
D. Underestimate Overestimate
2) Harrison Carter, who is classified as direct labor, earns $800 per week and is entitled
to three weeks of vacation and 10 holidays each year. How much should be accrued for
his vacation each week?
A.$85.11
B.$46.15
C.$48.98
D.$76.92
3) Which of the following firms is least likely to use process costing?
A.A yogurt manufacturer
B.A refiner of petroleum products
C.A machine tool manufacturer
D.A manufacturer of concrete products
4) Which of the following is not likely to have caused a materials price variance?
A.The vendor from whom we always bought component XYZ closed and we found a
new one
B.One of the workers inadvertently cut several pieces of steel to the wrong length
C.We started using a higher grade of lumber in our process
D.Higher oil prices have increased the costs of shipping the ingredients to us
5) Stanley Company adds materials at the beginning of the process in Department M.
Data concerning the materials used in the March production follows:
Using the average cost method, the equivalent units for the materials unit cost
calculation are:
A.38,000
B.51,000
C.55,000
D.37,000
6) 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. If Evans was charged $500,
what was the percentage of profit to the selling price?
A.35%
B.60%
C.50%
D.25%
7) The following data were taken from Mansfield Merchandisers on January 31:
What was the Cost of goods sold in January?
A.$585,000
B.$650,000
C.$620,000
D.$535,000
8) Carrying costs would include all of the following except:
A.Warehouse rent
B.Inspection employees wages
C.Losses due to obsolescence
D.Property taxes
9) Conformance quality measures:
A.how many products are manufactured without defects
B.how well the product or service performs relative to its intended design
C.how much quality processes are improved
D.how well the product or service satisfies customer needs
10) The following inventory data relate to the Anaheim Ltd.:
Revenues and costs for the period:
Prepare journal entries for the following, making any necessary computations:
a. Purchase of materials on account
b. Issuance of materials into production
c. Transfer the cost of completed work to Finished Goods
d. Record the sale of the goods on account and the related cost of goods sold.
11) Anderson Compounds produces two industrial chemical compounds, Gorp and
Gumm, from the same process, which last year, cost $240,000. Anderson produced
20,000 pounds of Gorp, which sells for $60 per gallon and 60,000 gallons of Gumm,
which sells for $30 per gallon. After the split-off point, Gorp required additional
processing costing $300,000 to make it salable. Using the adjusted sales method, what
is the completed cost of Gorp?
A.$300,000
B.$380,000
C.$520,000
D.$540,000
12) Spencer Company had overapplied factory overhead of $5,000 last year. Which of
the following statements is not true?
A.A higher level of production may have been achieved than budgeted for
B.The Work in Process account was overcharged for the costs of factory overhead
incurred during the period
C.The actual factory overhead expenses may have been less than budgeted for the
operating level achieved
D.Assuming the amount is not material enough to distort net income, Cost of Goods
Sold should be increased by this amount
13) If a company follows a practice of isolating variances at the earliest point in time,
what would be the appropriate time to isolate and recognize a direct material price
variance?
A.When material is purchased
B.When material is used in production
C.When purchase order is originated
D.When material is issued
14) Under normal circumstances, a purchasing manager who buys poor quality
materials because they were cheaper could potentially be responsible for causing all of
the following variances except a(n):
A.Favorable purchase price variance
B.Unfavorable materials quantity variance
C.Unfavorable purchase price variance
D.Unfavorable labor efficiency variance
15) Consider the income statement for Bayless Company:
What is the break-even point in sales dollars (rounded to the nearest dollar)?
A.$264,063
B.$92,308
C.$160,000
D.$240,000
16) Daktari Enterprises Schedule of Earnings and Payroll Taxes for April is as follows:
Assuming overhead is a result of the random scheduling of jobs, the entry to record and
distribute the employers payroll taxes would include:
A.A debit to Factory Overhead for 14,950
B.A debit to FICA Expense of $10,560
C.A credit to Payroll of $132,000
D.A debit to Work in Process for $11,050
17) Regina Manufacturing uses the FIFO method of process costing. The production
report for the Curing Department, where the materials are added at the beginning of the
period, for September was as follows:
The number of equivalent units for conversion costs during the period was:
A.13,500
B.16,500
C.12,300
D.14,700
18) Inventory accounts for a manufacturer include all of the following except:
A.Merchandise Inventory
B.Finished Goods
C.Work in Process
D.Materials
19) Consider the income statement for Pickbury Farm:
At what sales level does Pickbury achieve net income of $100,000?
A.$700,000
B.$600,000
C.$300,000
D.$530,000
20) The production report for Glenway Company for February contained the following
information:
Work in process, beginning of the month – 3,500 units; 1 / 5 completed
Units completed and transferred to finished goods – 25,000
Work in process, end of month – 4,000 units; 1 / 4 completed
Production costs for the month were: materials – $25,325; labor – $20,175; overhead –
$38,950. Costs in beginning work in process were $5,250.
What is the cost per equivalent unit?
A.$3.45
B.$3.59
C.$3.20
D.$3.25
21) An analysis of total labor costs into work in process and factory overhead
components is recorded on a(n):
A.Labor cost summary
B.Payroll record
C.Individual production report
D.Employee earnings record
22) The Blue Saints Band is holding a concert in Toronto. Fixed costs relating to
staging a concert are $350,000. Variable costs per patron are $5.00. The selling price for
a tickets $25.00. The Blue Saints Band has sold 23,000 tickets so far.
At the current level of sales, what is the margin of safety in dollars?
A.$137,500
B.$87,500
C.$180,000
D.$115,000
23) Net income reported under variable costing will exceed net income reported under
absorption costing for a given period if:
A.Production equals sales for that period
B.Production exceeds sales for that period
C.Sales exceed production for that period
D.The variable overhead exceeds the fixed overhead
24) Howard Corporation has two production departments. Curing has 12,000 units in
process at the beginning of the period, 3 / 4 complete. During the period, 45,000 units
were received from Crushing, 48,000 units were transferred to Finished Goods, and
9,000 units were in process at the end of the period, 2/ 3 complete. Cost information
was as follows:
a. Determine the unit cost for the month in Curing.
b. Determine the total cost of the products transferred to Finished Goods.
c. Determine the total cost of the ending Work in Process inventory.
25) Order costs would include all of the following except:
A.Receiving clerks wages
B.Storeroom keepers wages
C.Purchasing departments telephone bill
D.Transportation in
26) Which of the following is not true about backflush costing?
A.Different companies may choose different trigger points
B.Production costs are attached to products as they move through work in process
C.A single account is used for raw and in-process materials because materials are issued
to production when received from the supplier
D.Direct labor is usually insignificant in a highly automated system, so is not cost
effective to account for it separately
27) When selecting a method of inventory costing, a company must consider all of the
following except:
A.federal and state income tax regulations
B.current economic conditions
C.the flow of materials
D.its rate of inventory turnover
28) The following information is available for the month of August from the Second
department of the Twigg Corporation:
Materials are added at the end of the process in the Second department. Using the
average cost method, what are the equivalent units of production for materials and
conversion costs for the month of August?
A.192,000160,000
B.160,000192,000
C.160,000208,000
D.240,000192,000
29) A cost driver is:
A.An overhead or activity rate
B.A basis used to allocate each of the activity cost pools
C.The estimated cost of each activity pool
D.Used only to allocate non-volume-related costs
30) Unit cost information is important for making all of the following marketing
decisions except:
A.Determining the selling price of a product
B.Bidding on contracts
C.Determining the amount of advertising needed to promote the product
D.Determining the amount of profit that each product earns
31) Dover Enterprises has two products, Chalk V and Alabaster X, that come from a
joint process, blending. Alabaster X undergoes additional curing after the split-off
before it can be sold. The entry to account for the movement of products from the
blending department is:
A.Debit – Finished Goods
Credit – Work in Process – Blending
B.Debit – Finished Goods
Debit – Work in Process – Curing
Credit – Work in Process – Blending
C.Debit – Work in Process – Curing
Credit – Work in Process – Blending
D.Debit – Work in Process – Curing
32) The Lorenzo Printing Company has two production departments (printing and
binding) and three service departments (power generation, factory maintenance, and
human resources). A summary of costs and other data for each department, prior to
allocation of service department costs for the year ended April 30, appears below.
The costs of the power generation department, factory maintenance department, and
human resources are allocated on the basis of kilowatt hours, square footage occupied,
and number of employees, respectively.
Assuming that Lucas elects to distribute service department costs to production
departments using the direct distribution method, the amount of human resources
department costs that would be allocated to the printing department would be (round all
final calculations to the nearest dollar):
A.$15,000
B.$12,000
C.$16,000
D.$18,000
33) Cleese Company currently purchases a finished part from Idle Company, but is
considering using it excess capacity to make the part. Normal capacity is 20,000 hours,
but Cleese is currently running at 17,000 hours. Details about budgeted factory
overhead follow:
Direct costs to manufacture 1,000 parts in-house would be:
The relevant unit cost Cleese should use to decide whether to make or buy the part is:
A.$31.00
B.$24.50
C.$27.00
D.$26.00
34) Selected data concerning the past fiscal year’s operations (000’s omitted) of the
Stanley Manufacturing Company are presented below:
Assuming Stanley does not use indirect materials, the cost of materials purchased
during the year amounted to:
A.$455
B.$450
C.$365
D.$360
35) Domino Consulting has two departments, Information Technology Consulting and
General Business Consulting. The firm has Partners, Senior Consultants and Junior
Consultants in each department. The firm is preparing its budgets for the upcoming
year.
The controller received the following information from the marketing department about
anticipated demand for the firms products in the upcoming year:
The controller then worked with the human resources department to determine the
following information about staffing and salary rates for each department:
The controller has also determined that in order to be profitable, billing rates should be
three times the amount paid to employees. The marketing department has determined
that billing rates computed on that basis are comparable to what other consulting firms
charge.
(a)Prepare a revenue budget for Domino Consulting Company.
(b)Prepare a labor budget for Domino Consulting Company.
36) The form prepared by the purchasing agent and sent to the vendor to obtain
materials is known as a:
A.Materials requisition
B.Purchase requisition
C.Purchase order
D.Vendor’s invoice
37) The following inventory data relate to the Reta Company:
Revenues and costs for the period:
Compute the following for the year:
a. Direct materials purchased
b. Direct labor costs incurred
c. Cost of goods sold
d. Gross profit
38) Harmony Company has accrued payroll costs of $50,000 for the period May 28 – 31
as follows:
Other Information:
(a) The FICA rate is 8% of the first $100,000 of wages. None of the employees has
reached this maximum.
(b) The company is responsible for state and federal unemployment taxes on the first
$8,000 of wages. All of the employees have previously reached this maximum.
(c) Payroll taxes are spread over all jobs.
What entry would be necessary to accrue payroll taxes for the period of May 28 – 31?
A.Factory Overhead 4,000
FICA Tax Payable 4,000
B.Payroll Tax Expense – Sales 400
Payroll Tax Expense – Administrative 400
Work in Process 3,200
FICA Tax Payable 4,000
C.Payroll Tax Expense 4,000
FICA Tax Payable 4,000
D.Payroll Tax Expense – Sales 400