1) Western Kentucky State College has two service departments, the Library and
Computing Services, that assist the School of Business and the School of Health.
Budgeted costs of the Library and Computing Services are $800,000 and $1,800,000,
respectively. Usage of the service departments’ output during the year is anticipated to
be:
Required:
A. Use the direct method to allocate the costs of the Library and Computing Services to
the School of Business and the School of Health.
B. Repeat requirement “A” using the step-down method. Western allocates the cost of
Computing Services first.
2) End-of-period figures for accounts receivable and payables to suppliers would be
found on the:
A.cash budget
B.budgeted schedule of cost of goods manufactured
C.budgeted income statement
D.budgeted balance sheet
E.budgeted statement of cash flows
3) CompuTronics, a manufacturer of computer peripherals, has excess capacity. The
company’s Utah plant has the following per-unit cost structure for item no. 89:
The traceable fixed administrative cost was incurred at the Utah plant; in contrast, the
allocated administrative cost represents a “fair share” of CompuTronics’ corporate
overhead. Utah has been presented with a special order of 5,000 units of item no. 89 on
which no selling cost will be incurred. The proper relevant cost in deciding whether to
accept this special order would be:
A.$40
B.$59
C.$61
D.$80
E.None of the other answers are correct
4) Hightower Company plans to incur $350,000 of salaries expense if a capital project
is implemented. Assuming a 30% tax rate, the salaries should be reflected in the
analysis by a:
A.$105,000 inflow
B.$105,000 outflow
C.$245,000 inflow
D.$245,000 outflow
E.$350,000 outflow
5) Kelly and Logan, an accounting firm, provides consulting and tax planning services.
For many years, the firm’s total administrative cost (currently $250,000) has been
allocated to services on the basis of billable hours to clients. A recent analysis found
that 65% of the firm’s billable hours to clients resulted from tax planning services, while
35% resulted from consulting services.
The firm, contemplating a change to activity-based costing, has identified three
components of administrative cost, as follows:
A recent analysis of staff support found a strong correlation between the number of staff
personnel and the number of clients served (consulting, 20; tax planning, 60). In
contrast, in-house computing and miscellaneous office cost varied directly with the
number of computer hours logged and number of client transactions, respectively.
Consulting consumed 30% of the firm’s computer hours and had 20% of the total client
transactions.
If Kelly and Logan switched from its current accounting method to an activity-based
costing system, the amount of administrative cost chargeable to consulting services
would:
A.decrease by $23,500
B.increase by $23,500
C.decrease by $32,500
D.change by an amount other than those listed
E.change, but the amount cannot be determined based on the information presented
6) Which of the following is not a broad, cost classification category typically used in
activity-based costing?
A.Unit-level
B.Batch-level
C.Product-sustaining level
D.Facility-level
E.Management-level
7) Indiana Company incurred the following costs during the past year when planned
production and actual production each totaled 20,000 units:
Indiana’s per-unit inventoriable cost under variable costing is:
A.$9.50
B.$25.00
C.$28.00
D.$33.00
E.$40.50
8) When determining the cost of a manufactured good under an operation-costing
system, a company would:
A.trace direct-material cost and actual conversion cost to each product produced
B.trace direct-material cost to each product produced and use a predetermined
application rate for conversion cost
C.trace actual conversion cost to each product produced and use a predetermined
application rate for direct material
D.use a predetermined application rate for both direct-material cost and conversion cost
E.often switch to a job-costing system to simplify recordkeeping procedures
9) Which of the following does not typically appear on an income statement prepared
by using a traditional format?
A.Cost of goods sold
B.Contribution margin
C.Gross margin
D.Selling expenses
E.Administrative expenses
10)
A machine is expected to produce annual savings in cash operating costs of $400,000
for the next six years. If the company has a 10% after-tax hurdle rate and is subject to a
30% income tax rate, the correct discounted net cash flow would be:
A.$522,600
B.$947,520
C.$1,219,400
D.$1,742,000
E.None of the other answers are correct
11) Which of the following costs exhibits both decreasing and increasing marginal costs
over a specific range of activity?
A.Semivariable cost
B.Curvilinear cost
C.Step-fixed cost
D.Step-variable cost
E.Fixed cost
12) Lone Star has computed the following unit costs for the year just ended:
Under variable costing, each unit of the company’s inventory would be carried at:
A.$35
B.$55
C.$65
D.$84
E.None of the other answers are correct
13) Which of the following statements is(are) correct?
A.Overtime premiums should be treated as a component of manufacturing overhead
B.Overtime premiums should be treated as a component of direct labor
C.Idle time should be treated as a component of direct labor
D.Idle time should be accounted for as a special type of loss
E.Overtime premiums should be treated as a component of direct labor and idle time
should be treated as a component of direct labor
14) Which of the following is least likely to be classified as a facility-level activity in an
activity-based costing system?
A.Plant maintenance
B.Property taxes
C.Machine processing cost
D.Plant depreciation
E.Plant management salaries
15) Carolina Plating Company reported a cost of goods manufactured of $520,000, with
the firm’s year-end balance sheet revealing work in process and finished goods of
$70,000 and $134,000, respectively. If supplemental information disclosed raw
materials used in production of $80,000, direct labor of $140,000, and manufacturing
overhead of $240,000, the company’s beginning work in process must have been:
A.$130,000
B.$10,000
C.$66,000
D.$390,000
E.None of the other answers are correct
16) Quatro Products started and finished job no. C19 during June. The job required
$15,000 of direct material and 75 hours of direct labor at $12 per hour. The
predetermined overhead rate is $16 per direct labor hour.
During June, direct materials requisitions for all jobs totaled $149,000; the total direct
labor hours and cost were 6,200 hours at $12 per hour; and the total cost of jobs
completed was $337,500. All of these figures include data that pertain to job no. C19 .
Required:
A. Prepare journal entries that summarize June’s total activity.
B. Determine the cost of job no. C19 .
17) Which of the following statements about the visual-fit method is (are) true?
I. The method results in the creation of a scatter diagram.
II. The method is not totally objective because of the manner in which the cost line is
determined.
III. The method is especially helpful in the determination of outliers.
A.I only
B.II only
C.I and II
D.I and III
E.I, II, and III
18) When comparing EOQ and JIT inventory systems, which of the following
statements is false?
A.The EOQ approach takes the viewpoint that some inventory is necessary
B.The EOQ system assumes a constant order quantity
C.JIT argues that inventory investments should be minimized
D.The EOQ system focuses on acquisition and holding costs
E.JIT argues that safety stocks are necessary to reduce the probability of a stock
shortage
19) Mahler, Inc., applies manufacturing overhead at the rate of $40 per machine hour.
Budgeted machine hours for the current period were anticipated to be 120,000;
however, a lengthy strike resulted in actual machine hours being worked of only
90,000. Budgeted and actual manufacturing overhead figures for the year were
$4,800,000 and $4,180,000, respectively. On the basis of this information, the
company’s year-end overhead was:
A.overapplied by $580,000
B.underapplied by $580,000
C.overapplied by $1,200,000
D.underapplied by $1,200,000
E.underapplied by $900,000
20) Which of the following organizations is not likely to use budgets?
A.Manufacturing firms
B.Merchandising firms
C.Firms in service industries
D.Nonprofit organizations
E.none of the other answers are correct, because all are likely to use budgets
21) S’Round Sound, Inc. reported the following results from the sale of 24,000 units of
IT-54:
Rhythm Company has offered to purchase 3,000 IT-54s at $16 each. Sound has
available capacity, and the president is in favor of accepting the order. She feels it
would be profitable because no variable selling costs will be incurred. The plant
manager is opposed because the “full cost” of production is $17. Which of the following
correctly notes the change in income if the special order is accepted?
A.$3,000 decrease
B.$3,000 increase
C.$12,000 decrease
D.$12,000 increase
E.None of the other answers are correct
22) Laskey uses a weighted-average process-costing system. Material A is added at the
start of production; packaging material is introduced at the end. Conversion costs are
incurred evenly throughout manufacturing.
The following selected data were extracted from the company’s production report:
Required:
A. Compute the equivalent-unit cost for conversion cost.
B. How far into the manufacturing process is the ending work-in-process inventory?
C. Would the total equivalent units for Material A and the packaging material be the
same? Why?
D. Compute the cost of goods completed during the period.
E. Compute the cost of the ending work-in-process inventory.
F. What account would be debited to record the cost of goods completed during the
period?
23) A cash flow measured in nominal dollars is:
A.the actual cash flow that we experience
B.the adjustment for a change in the dollar’s purchasing power
C.the discounted cash flow
D.the realistic cash flow after taxes
E.None of the other answers are correct
24) Which of the following is classified as an inventory shortage cost?
A.Purchase order preparation
B.Production disruption
C.Lost sales and lost customers
D.Spoilage
E.Both production disruption and lost sales and lost customers
25) During a recent accounting period, Marty’s shipping department processed 26
orders. Each order typically takes four hours to complete. However, the average time
increased to five hours because of various departmental inefficiencies. If shipping labor
is paid $14 per hour, the company’s non-value-added cost would be:
A.$0
B.$56
C.$364
D.$1,456
E.$1,820
26) Which of the following statements is true?
A.The word “cost” has the same meaning in all situations in which it is used
B.Cost data, once classified and recorded for a specific application, are appropriate for
use in any application
C.Different cost concepts and classifications are used for different purposes
D.All organizations incur the same types of costs
E.Costs incurred in one year are always meaningful in the following year
27) Consider the following statements about transfer pricing:
I. Income taxes and import duties are an important consideration when setting a transfer
price for companies that pursue international commerce.
II. Transfer prices cannot be used by organizations in the service industry.
III. Transfer prices are totally cost-based in nature, not market-based.
Which of the above statements is(are) true?
A.I only
B.II only
C.I and II
D.II and III
E.I, II, and III
28) For the year just ended, Cole Corporation’s manufacturing costs (raw materials
used, direct labor, and manufacturing overhead) totaled $1,500,000. Beginning and
ending work-in-process inventories were $60,000 and $90,000, respectively. Cole’s
balance sheet also revealed respective beginning and ending finished-goods inventories
of $250,000 and $180,000. On the basis of this information, how much would the
company report as cost of goods manufactured (CGM) and cost of goods sold (CGS)?
A.CGM, $1,430,000; CGS, $1,460,000
B.CGM, $1,470,000; CGS, $1,540,000
C.CGM, $1,530,000; CGS, $1,460,000
D.CGM, $1,570,000; CGS, $1,540,000
E.Some other amounts
29) Which of the following situations would cause variable-costing income to be higher
than absorption-costing income?
A.Units sold equaled 39,000 and units produced equaled 42,000
B.Units sold and units produced were both 42,000
C.Units sold equaled 55,000 and units produced equaled 49,000
D.Sales prices decreased by $7 per unit during the accounting period
E.Selling expenses increased by 10% during the accounting period
30) Costs that result from a company’s ownership or use of facilities and its basic
organizational structure are known as:
A.discretionary fixed costs
B.committed fixed costs
C.discretionary variable costs
D.committed variable costs
E.engineered costs
31) Aladdin’s customer service department follows up on customer complaints by
telephone inquiry. During a recent period, the department initiated 7,000 calls and
incurred costs of $203,000. If 2,940 of these calls were for the company’s wholesale
operation (the remainder were for the retail division), costs allocated to the wholesale
operation should amount to:
A.$0
B.$29
C.$85,260
D.$117,740
E.$203,000
32) When computing the conversion cost per equivalent unit under the
weighted-average method of process costing, all of the following information would be
needed except:
A.the number of units completed during the current accounting period
B.the conversion work performed during the current period on the ending
work-in-process inventory
C.the conversion work performed during the current period on the beginning
work-in-process inventory
D.the conversion cost in the beginning work-in-process inventory
E.the conversion cost incurred during the current accounting period
33) Delaware has computed the following unit costs for the year just ended:
Which of the following choices correctly depicts the per-unit cost of inventory under
variable costing and absorption costing?
A.Variable, $85; absorption, $105
B.Variable, $85; absorption, $116
C.Variable, $103; absorption, $105
D.Variable, $103; absorption, $116
E.None of the other answers are correct
34) A recent income statement of Yang Corporation reported the following data:
If these data are based on the sale of 5,000 units, the break-even sales would be:
A.$2,000,000
B.$2,206,000
C.$2,500,000
D.$10,000,000
E.None of the other answers is correct
35) Consider the three firms that follow: (1) Southwest Airlines, (2) BMW, and (3)
Target. These firms, examples of service providers, manufacturers, and merchandisers,
tend to have different characteristics with respect to costs and financial-statement
disclosures.
Required:
Determine which of the preceding firms (1, 2, and/or 3) would likely:
A. Disclose operating expenses on the income statement.
B. Have product costs.
C. Have period costs.
D. Disclose cost of cost good sold on the income statement.
E. Have no meaningful investment in inventory.
F. Maintain raw-material, work-in-process, and finished-goods inventories.
G. Have variable and fixed costs.
36) Barrett Corporation had 6,500 units of work in process on April 1 . During April,
19,100 units were completed and as of April 30, 5,100 units remained in production.
How many units were started during April?
A.11,600
B.17,700
C.20,500
D.30,700
E.None of the other answers are correct
37) Johnstone Company makes two products: Carpet Kleen and Floor Deodorizer.
Operating information from the previous year follows.
Fixed costs of $20,000 per year are presently allocated equally between both products.
If the product mix were to change, total fixed costs would remain the same.
Assuming there is unlimited demand for both products and Johnson has 10,000 machine
hours available, how many units of each product should be produced and sold?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
38) Which of the following underlying assumptions form(s) the basis for
cost-volume-profit analysis?
A.Revenues and costs behave in a linear manner
B.Costs can be categorized as variable, fixed, or semivariable
C.Worker efficiency and productivity remain constant
D.In multiproduct organizations, the sales mix remains constant
E.All the other answers are assumptions that underlie cost-volume-profit analysis
39) Springer began business at the start of the current year. The company planned to
produce 40,000 units, and actual production conformed to expectations. Sales totaled
37,000 units at $42 each. Costs incurred were:
If there were no variances, the company’s absorption-costing income would be:
A.$155,000
B.$230,000
C.$240,500
D.$592,000
E.None of the other answers are correct
40) The sum of the discount factors applicable to individual cash flows in a series of
equal cash flows is called the:
A.single-sum, present-value factor
B.total discount factor
C.annuity discount factor
D.compound discount factor
E.internal rate discount factor