1) Prime costs are comprised of:
A.direct materials and manufacturing overhead
B.direct labor and manufacturing overhead
C.direct materials, direct labor, and manufacturing overhead
D.direct materials and direct labor
E.direct materials and indirect materials
2) Xin Co., had 3,000 units of work in process on April 1 that were 60% complete.
During April, 10,000 units were completed and as of April 30, 4,000 units that were
40% complete remained in production. How many units were started during April?
A.8,600
B.9,800
C.11,000
D.12,200
E.None of the other answers are correct
3) The assumptions on which cost-volume-profit analysis is based appear to be most
valid for businesses:
A.over the short run
B.over the long run
C.over both the short run and the long run
D.in periods of sustained profits
E.in periods of increasing sales
4) Which of the following involves the coordination of daily business functions within
an organization?
A.Decision making
B.Planning
C.Directing operational activities
D.Controlling
E.Motivating
5) Product costs incurred before the split-off point in a joint processing environment are
called:
A.separable processing costs
B.joint product costs
C.non-relevant costs
D.scrap costs
E.spoilage costs
6) The Magellan Division of Global Corporation, which has income of $250,000 and an
asset investment of $1,562,500, is studying an investment opportunity that will cost
$450,000 and yield a profit of $67,500. Assuming that Global uses an imputed interest
charge of 14%, would the investment be attractive to:
1Divisional management if ROI is used to evaluate divisional performance?
2Divisional management if residual income (RI) is used to evaluate divisional
performance?
3The management of Global Corporation?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
7) The Gingham Company’s budgeted income statement reflects the following amounts:
Sales are collected 50% in the month of sale, 30% in the month following sale, and
19% in the second month following sale. One percent of sales is uncollectible and
expensed at the end of the year.
Gingham pays for all purchases in the month following purchase and takes advantage of
a 3% discount. The following balances are as of January 1:
*Of this balance, $35,000 will be collected in January and the remaining amount will be
collected in February.
The monthly expense figures include $5,000 of depreciation. The expenses are paid in
the month incurred.
Gingham’s budgeted cash receipts in February are:
A.$91,000
B.$95,000
C.$113,090
D.$113,640
E.$114,000
8) Northwest’s production data for one of its products were taken from the most recent
quarterly production budget:
If it takes two direct labor hours to produce each unit and Northwest’s cost per labor
hour is $15, direct labor cost for August would be budgeted at:
A.$16,500
B.$31,200
C.$33,000
D.$34,800
E.None of the other answers are correct
9) Fowler Industries produces two bearings: C15 and C19 . Data regarding these two
bearings follow.
The company requires 8,000 units of C15 and 11,000 units of C19. Recently,
management decided to devote additional machine time to other product lines, resulting
in only 31,000 machine hours per year that can be dedicated to production of the
bearings. An outside company has offered to sell Fowler the bearings at prices of
$13.50 for C15 and $13.50 for C19 .
Required:
A. Assume that Fowler decided to produce all C15s and purchase C19s only as needed.
Determine the number of C19s to be purchased.
B. Compute the net benefit to the company of manufacturing (rather than purchasing) a
unit of C15 . Repeat the calculation for a unit of C19 . (Note: in answering this
question, do not take into consideration any machine hours constraint).
C. Fowler lacks sufficient machine time to produce all of the C15s and C19s needed.
Which component (C15 or C19) should Fowler manufacture first with the limited
machine hours available? Why? Be sure to show all supporting computations.
10) A standard cost:
A.is the “true” cost of a unit of production
B.is a budget for the production of one unit of a product or service
C.can be useful in calculating equivalent units
D.is normally the average cost within an industry
E.is almost always the actual cost from previous years
11) The following data relate to LebeauxCorporation for the year just ended:
Which of the following statements is correct?
A.Lebeaux’s variable-costing income statement would show a gross margin of $270,000
B.Lebeaux’s variable costing income statement would show a contribution margin of
$330,000
C.Lebeaux’s absorption-costing income statement would show a contribution margin of
$330,000
D.Lebeaux’s absorption costing income statement would show a gross margin of
$330,000
E.Lebeaux’s absorption-costing income statement would show a gross margin of
$145,000
12) A formal budget program will almost always result in:
A.higher sales
B.more cash inflows than cash outflows
C.decreased expenses
D.improved profits
E.a detailed plan against which actual results can be compared
13) A hospital administrator is in the process of implementing an activity-based-costing
system. Which of the following tasks would not be part of this process?
A.Identification of cost pools
B.Calculation of pool rates
C.Assignment of cost to services provided
D.Identification of cost drivers
E.None of the other answers is correct
14) 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 .
15) Many companies use the dual-rate method of cost allocation.
Required:
A. How does the dual-rate method work?
B. Is there any advantage of the dual-rate method over a method that uses a combined,
lump-sum single rate? Briefly explain.
16) Consider the following information:
The direct-labor rate variance is:
A.$17,250U
B.$20,700U
C.$20,700F
D.$21,000F
E.none of the other answers are correct
17) Which of the following is a key document in a typical process-costing system?
A.Departmental production report
B.Master schedule
C.Production budget
D.Sequential product report
E.Materials requirement report
18) Roberts Corp., which began business at the start of the current year, had the
following data:
Planned and actual production: 40,000 units
Sales: 37,000 units at $15 per unit
Production costs:
Variable: $4 per unit
Fixed: $260,000
Selling and administrative costs:
Variable: $1 per unit
Fixed: $32,000
The gross margin that the company would disclose on an absorption-costing income
statement is:
A.$97,500
B.$147,000
C.$166,500
D.$370,000
E.None of the other answers are correct
19) Which of the following would have no effect, either direct or indirect, on an
organization’s cash budget?
A.Sales revenues
B.Outlays for professional labor
C.Advertising expenditures
D.Raw material purchases
E.None of the other answers are correct, since all of these items would have some
influence
20) Johnson manufactures products X and Y, applying overhead on the basis of labor
hours. X is a high-volume product and relatively simplistic in nature. Y is both a
low-volume product and requires a variety of complex manufacturing procedures. What
would an activity-based costing system likely disclose about products X and Y as a
result of Johnson’s current accounting procedures?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
21) All of the following statements about an operation-costing system are true except:
A.direct material and conversion costs are traced to each batch of product produced
B.direct-material cost is traced to each batch produced
C.conversion costs are applied to products on a departmental basis using a
predetermined application rate
D.batches of product pass sequentially through the same processes
E.conversion activities are similar across product lines but direct materials differ
significantly
22) Which of the following is not an overhead variance?
A.Variable-overhead spending variance
B.Variable-overhead efficiency variance
C.Fixed-overhead efficiency variance
D.Fixed-overhead budget variance
E.Fixed-overhead volume variance
23) The adoption of a 24/7 employee hotline for workplace complaints is an example of
a:
A.business-value-added activity
B.customer-value-added activity
C.nonvalue-added activity
D.batch-related activity
E.product-sustaining activity
24) Which of the following costs is not a component of manufacturing overhead?
A.Indirect materials
B.Factory utilities
C.Factory equipment
D.Indirect labor
E.Property taxes on the manufacturing plant
25) Green Company owes White Company money for the purchase of equipment.
White has given Green the following payment options:
I. Immediate payment in full of $38,000.
II. Annual payments of $15,000 made at the end of each of the next three years.
III. A single payment of $48,000 made at the end of three years.
Green uses a 10% annual compound interest rate and will choose the option with the
lowest present value. Which option should Green choose, and what is the present value
of that option?
A.Option I, $34,542
B.Option I, $38,000
C.Option II, $37,305
D.Option III, $34,164
E.Option III, $36,048
26) Alaina’s customer service department follows up on customer complaints by
telephone inquiry. During a recent period, the department initiated 10,000 calls and
incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale
operation; the remainder was for the retail division. Costs allocated to the wholesale
operation are:
A.$0
B.$31,200
C.$118,560
D.$193,440
E.$203,000
27) Crossword Company is studying a capital project that will produce $600,000 of
added sales revenue, $400,000 of additional cash operating expenses, and $50,000 of
depreciation. Assuming a 30% income tax rate, the company’s after-tax cash inflow
(outflow) is:
A.$105,000
B.$125,000
C.$155,000
D.$175,000
E.None of the other answers are correct
28) Which of the following types of companies would most likely use process costing?
A.Aircraft manufacturers
B.Textile manufacturers
C.Textbook publishers
D.Custom-machining firms
E.Shipbuilders
29) Which of the following is not a function of the treasurer?
A.Safeguarding assets
B.Managing investments
C.Preparing financial statements
D.Being responsible for an entity’s credit policy
E.Raising capital
30) The following information was taken from the segmented income statement of
Restin, Inc., and the company’s three divisions:
In addition, the company incurred common fixed costs of $18,000.
The profit margin controllable by the Central Valley segment manager is:
A.$32,000
B.$44,000
C.$50,000
D.$75,000
E.$145,000
31) Levitt Corporation, which uses an operation-costing system, has three processing
departments. All units pass through Department no. 1; upon completion, 70% of the
goods are sent to Department no. 2 and 30% are sent to Department no. 3. Additional
data follow.
Forty thousand units were manufactured during the year.
Conversion cost in each department was: No. 1, $380,000; no. 2, $196,000; and no. 3,
$150,000.
Batch no. 67, which consisted of 500 units, was sent to Department no. 3 for its
additional processing. Direct materials of $23,500 and $11,900 were introduced to this
batch in Department nos. 1 and 3, respectively.
Levitt assigns conversion cost to goods manufactured on the basis of units produced.
Required:
A. Determine the conversion cost per unit in Department no. 1, Department no. 2, and
Department no. 3 .
B. Compute the total cost of batch no. 67 .
C. Operation costing is sometimes referred to as a hybrid costing system. Briefly
explain.
32) 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
33) Costs that are expensed when incurred are called:
A.product costs
B.direct costs
C.inventoriable costs
D.period costs
E.indirect costs
34) Sainte Claire Corporation has a highly automated production facility. Which of the
following correctly shows the two factors that would likely have the most direct
influence on the company’s manufacturing overhead budget?
A.Sales volume and labor hours
B.Contribution margin and cash payments
C.Production volume and management judgment
D.Labor hours and management judgment
E.Management judgment and indirect labor cost
35) Lewisa Company needs to determine the variable utilities rate per machine hour in
order to estimate cost for August. Relevant information is as follows.
Lewisa anticipates producing 5,000 units in August, each unit requiring 1.5 hours of
machine time. The company uses the high-low method to analyze costs.
Required:
A. Calculate the variable and fixed components of the utilities cost.
B. Using the data calculated above, estimate the utilities cost for August.
C. Compare the high-low method versus the visual-fit method with respect to (1)
number of data observations used in the analysis and (2) objectivity of the results.