1) Which of the following is not a key element of the Sarbanes Oxley Act to improve
corporate governance?
A.The establishment of the Public Company Accounting Oversight Board
B.Requiring a companys annual report to contain an internal control report that includes
managements opinion on the effectiveness of internal control
C.Severe criminal penalties for retaliation against whistleblowers
D.Requiring that the companys performance reports are prepared in accordance with
generally accepted accounting principles
2) Sherpa Manufacturing has the following income statement for 6,000 units:
(a) At what sales volume (in sales dollars) does Sherpa break even?
(b) At what sales volume (in units) does Sherpa break even?
(c) Given the income statement above, compute the margin of safety.
(d) What level of sales volume must be attained to reach net income of $200,000?
(e) What level of sales volume must be attained to reach net income of $180,000,
assuming Sherpa had to pay income taxes at a rate of 40%?
3) The production report for Marck Company included the following information for
August:
How many units were in process at the beginning of the month?
A.1,700
B.1,000
C.4,400
D.5,400
4) The January performance report for cab no. 52 of Teris Taxi Service was as follows:
(A) Possible reason(s) for the variance in the drivers wages could be:
A.A new driver was assigned to cab no. 52 on January 5, replacing one who retired after
30 years of service
B.The cab was in the shop for repairs for a few days
C.Business was slow so cab no. 52 was idled for two days
D.All of the above are possible reasons
5) A true process costing system could make use of each of the following except:
A.Predetermined factory overhead rates
B.Individual jobs
C.Cost centers
D.General ledger control accounts
6) A plan for timing acquisitions of buildings, equipment or other significant assets is
a(n):
A.budget balance sheet
B.capital expenditures budget
C.asset budget
D.financing budget
7) If the selling price and the variable cost per unit both increase 10 percent and fixed
costs do not change, what is the effect on the contribution margin per unit and the
contribution margin ratio?
A.Contribution margin per unit and the contribution margin ratio both remain
unchanged
B.Contribution margin per unit and the contribution margin ratio both increase
C.Contribution margin per unit increases and the contribution margin ratio decreases
D.Contribution margin per unit increases and the contribution ratio remains unchanged
8) 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 LIFO basis, the
September 6 issue will consist of:
A.80 units @ $1.55, 20 units @ $1.62 and 10 units @ $1.40
B.110 units @ $1.55
C.50 units @1.55 and 60 units @ 1.62
D.20 units @ $1.62 and 90 units @ $1.55
9) 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.
How many tickets does the Blue Saints Band need to sell to achieve net income of
$75,000.
A.21,250
B.14,000
C.17,500
D.17,000
10) What costs are treated as product costs under direct costing?
A.Only direct costs
B.Only variable manufacturing costs
C.All variable costs
D.All variable and fixed manufacturing costs
11) Information from the operating budgets of Roswell Fabricators follows:
If Northwests income tax rate is 40%, what is the budgeted net income?
A.$246,000
B.$126,000
C.$410,000
D.$186,000
12) Which of the following costs would not be included in factory overhead in the
manufacture of a students desk?
A.The oil used to maintain the machinery
B.The salary of the supervisor of the Assembly department
C.The metal used to form the legs of the desk
D.The wages of personnel who perform inspections of incoming materials
13) A basic tenet of variable costing is that fixed overhead costs should be currently
expensed. What is the basic rationale behind this procedure?
A.Fixed overhead costs will occur whether or not production occurs and so it presents a
clearer picture of how changes in production volume affect costs and income
B.Fixed overhead costs are generally immaterial in amount and the cost of assigning the
amounts to specific products would outweigh the benefits
C.Allocation of fixed overhead costs is arbitrary at best and could lead to erroneous
decisions by management
D.Fixed overhead costs are uncontrollable and should not be charged to a specific
product
14) In the financial statements, Materials should be categorized as:
A.Revenue
B.Expenses
C.Assets
D.Liabilities
15) Daktari Enterprises Schedule of Earnings and Payroll Taxes for April is as follows:
Assuming overtime was the result of random scheduling of jobs, the entry to distribute
payroll would include:
A.A debit to Payroll for $132,000
B.A credit to Wages Payable for $114,800
C.A debit to Factory Overhead for $35,000
D.A debit to Work in Process for $85,000
16) Consider the following budgets:
(1) Direct materials
(2) Income statement
(3) Production
(4) Cost of goods sold
In what order should these budgets be prepared?
A.2, 3, 1, 4
B.3, 4, 1, 2
C.1, 3, 4, 2
D.3, 1, 4, 2
17) The report that is prepared after the posting is completed at the end of the
accounting period that shows the items of expense by department and in total, and is
used to prove the balance of the Factory Overhead Control account is the:
A.Schedule of Fixed Cost
B.Summary of Factory Overhead
C.Flexible Budget
D.Subsidiary Ledger
18) Murphy Company uses 2,000 yards of material each day to make hats. It usually
takes five days from the time Murphy orders the material to when it is received. If
Murphys desired safety stock is 6,000 yards, what is Murphys order point?
A.6,000 yards
B.8,000 yards
C.10,000 yards
D.16,000 yards
19) Income taxes
A.will increase the break-even point
B.will decrease the break-even point
C.have no impact on the break-even point
D.may increase or decrease the break-even point depending upon the income tax rate
20) 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 purchase price variance?
A.$390 favorable
B.$390 unfavorable
C.$400 favorable
D.$400 unfavorable
21) Budgeted inventories for the Remle Company follow:
Additional budget information follows:
Calculate the budgeted cost of goods sold.
A.$352,800
B.$350,400
C.$361,000
D.$359,300
22) Which of the following statements about using the direct labor hour method of
applying factory overhead to production is false?
A.It may not be as accurate as the direct labor cost method if factory overhead primarily
consists of items more closely tied to employee wages, such as benefits
B.The application base could be substantially smaller than when direct labor cost is
used
C.It is the most appropriate method for a highly automated department
D.The amount of factory overhead applied is not affected by the mix of labor rates
23) In a given process costing system, the equivalent units of production are computed
using the average cost method. The percentage of completion for the current period
only is included in the calculation of the:
A.NoNo
B.NoYes
C.YesNo
D.YesYes
24) Under a job order cost system of accounting, the entry to distribute payroll to the
appropriate accounts would be:
A.Debit-Payroll
Credit-Wages Payable
B.Debit-Work in Process
Debit-Factory Overhead
Debit-Selling and Administrative Expense
Credit-Payroll
C.Debit-Work in Process
Debit-Finished Goods
Debit-Cost of Goods Sold
Credit-Payroll
D.Debit-Work in Process
25) Venus Company has developed the following flexible budget formula for annual
indirect labor cost:
Total annual cost = $12,000 + $.25 / unit
Operating budgets for the current month are based on 5,000 units. Indirect labor costs
included in this monthly planning budget are:
A.$13,250
B.$1,250
C.$3,200
D.$2,250
26) The practice of taking overhead costs previously in a single indirect cost pool and
separating them into a number of homogeneous cost pools with separate cost drivers for
each pool is:
A.Peanut-butter costing
B.Process costing
C.Activities-based costing
D.Job costing
27) The purpose of a flexible budget is to:
A.Compare actual and budgeted results at virtually any level of production
B.Eliminate cyclical fluctuations in production reports by ignoring variable costs
C.Allow management some latitude in meeting goals
D.Reduce the total time in preparing the annual budget
28) The Jason Manufacturing Company has two production departments (millwright
and assembly) and three service departments (general factory administration, factory
maintenance, and factory development). A summary of costs and other data for each
department, prior to allocation of service department costs for the year ended March 30,
appears below.
The costs of the general factory administration department, factory maintenance
department, and factory development department are allocated on the basis of direct
labor hours, square footage occupied, and number of employees, respectively.
Assuming that Jason elects to use the sequential method to distribute service
department costs (starting with factory development), what would be the amount of
factory development that would be allocated to the factory maintenance department?
A.$ 9,100
B.$ 4,350
C.$29,640
D.$0
29) In a production cost report using process costing, transferred-in costs are similar to:
A.Material added at the beginning of the process
B.Conversion costs added during the process
C.Costs transferred to the next process
D.Costs included in beginning inventory
30) Tyler Jacob is paid $15 per hour for a 40-hour work week with time-and-a-half for
overtime, which is not charged to specific jobs. For the week of March 4 – 10, Tylers
labor time record was as follows:
Other Information:
Tylers year-to-date wages as of March 3 were $7,500. He contributes $20 weekly for
his health insurance premiums.
Current tax rates in effect are: FIT withholding rate – 10%; FICA – 8% on the first
$100,000 of wages; SUTA – 4% on the first $8,000 of wages; and FUTA – 1% on the
first $8,000 of wages.
(a)Calculate Tylers gross and net pay.
(b)Prepare the journal entries necessary to
(1)Record Tylers payroll
(2)Pay Tylers payroll
(3)Distribute Tylers payroll to the appropriate accounts
(c)Calculate the employers payroll taxes and prepare the journal entry to record them
employers portion of payroll taxes
31) Which of the following is not included in departmental product costs?
A.Costs identifiable with the department
B.Costs added by prior production departments carried to the department
C.Cost of sales and administrative departments that have been allocated to the
production department
D.Costs of factory service departments that have been allocated to the production
department
32) Jay Vato works at Batwing Industries from midnight until 8:00 AM. His normal
wage rate is $17 per hour, while Ben Phillips, who does the same job from 8:00 AM
until 4:00 PM makes $15 per hour. Since Ben and Jay have the same seniority within
the plant, the difference in pay is due to a(n):
A.overtime premium
B.production bonus
C.make-up guarantee
D.shift premium
33) Rowe Co.’s Job 401 for the manufacture of 2,200 wagons was completed during
August at the unit costs presented below. Final inspection of Job 401 disclosed 200
spoiled wagons that were sold to a jobber for $6,000.
Assume that the spoilage loss is attributable to the exacting specifications of Job 401
and is charged to this specific job. What would be the journal entry to record the
spoilage?
A.Factory Overhead 6,000
Work in Process 6,000
B.Spoiled Goods Inventory 6,000
Work in Process 6,000
C.Spoiled Goods Inventory 6,000
Factory Overhead 5,200
Work in Process 11,200
D.Spoiled Goods Inventory 6,000
34) The materials account of the Flynn Company reflected the following changes
during May:
Assuming that Flynn Company maintains perpetual inventory records, calculate the
ending inventory at May 31 and the cost of the units issued in May using each of the
following methods:
(a) First in, first out (FIFO)
(b) Last in, first out (LIFO)
(c) Moving average
35) In a backflush accounting system, a single account is used for the following:
A.Work in process and finished goods inventories
B.Finished goods inventories and cost of goods sold
C.Factory overhead and raw materials
D.Raw materials and work in process inventories
36) Harrison Industries produces 4,000 lunch boxes each day. The average number of
units in work in process is 12,000, having an average cost of $60,000. The annual
carrying costs related to inventory are 10%.
Consultants have determined that the work in process could be reduced by as much as a
third by rearranging the factory floor. What would the throughput time be if Harrison
implements the recommended changes?
A.Twelve hours
B.One day
C.Two days
D.Three days
37) Kilowatt hours would be an appropriate basis for distributing the cost of which of
the following service departments to production departments?
A.Power
B.Machine Maintenance
C.Human Resources
D.Building Maintenance
38) In a four-variance method analyzing factory overhead, the fixed factory overhead
spending 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
39) The following data were taken from Middletown Merchandisers on July 31, for the
first month of its fiscal year:
Compute the inventory at July 1 .
40) Jasper Company makes two versions of one product, Standard and Deluxe. In
November, sales of standard and Deluxe amount to $680,000 and $520,000,
respectively. The contribution margin ratio for Standard is 30% and Standard had direct
fixed production and administrative costs of $125,000. The contribution margin ratio
for Deluxe was 40% and direct fixed costs were $160,000. Common costs that couldnt
be allocated in a meaningful way were $100,000.
Prepare a segmented income statement for the month of November.
41) The Paul Manufacturing Company uses the process cost system and the average
cost method. The following production data are for the month of April, 20–.
Prepare a cost of production summary for the month.
42) The factory payroll for the week is $55,000, consisting of $40,000 earned by 50
direct laborers and $15,000 earned by 16 indirect laborers. All workers receive two
weeks of paid vacation time and eight paid holidays.
Required:
1> Prepare the journal entry to distribute the weekly payroll.
2> Assuming this is a typical week, prepare the journal entry to accrue the vacation and
holiday pay if the fringe benefits of all factory employees are charged to Factory
Overhead.
3> Assuming this is a typical week, prepare the journal entry to accrue the vacation and
holiday pay if the fringe benefits of direct laborers are charged to the individual jobs on
which they worked during the period.
43) Howard Poster Incorporated had 12,000 units of work in process in Department B
on October 1 . These units were 60 percent complete as to conversion costs. Materials
are added at the end of the process. During the month of October, 38,000 units were
transferred in from Department A 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. (Ignore units transferred in.)
2> Using the average cost method determine the equivalent units for materials and
conversion costs for the month of October. (Ignore transferred in costs.)
44) The Roberto Company had computed the flow of units for Department A for the
month of May as follows:
Materials are added at the beginning of the process. There were 8,000 units of work in
process at May 31 . The work in process at May 1 was 70 percent complete as to
conversion costs and the work in process at May 31 was 60 percent complete as to
conversion costs. What was the cost of the goods transferred out and in ending work in
process using the FIFO method?
