1) The Columbus Company has three departments A, B and C. Material requisitions
amounted to $10,000, $8,000 and $5,000, respectively, for departments A, B and C. In
addition, $2,000 of indirect materials were used during the period. What is the entry to
record the materials used during the period?
A.Work-in-process 23,000
Materials – Department A 10,000
Materials – Department B 8,000
Materials – Department C 5,000
B.Work-in-process – Department A 10,000
Work-in-process – Department B 8,000
Work-in-process – Department C 5,000
Materials 23,000
C.Work-in-process – Department A 10,000
Work-in-process – Department B 8,000
Work-in-process – Department C 5,000
Factory overhead 2,000
Materials 25,000
D.Work-in-process 23,000
2) The personnel involved in the physical control of materials includes all of the
following except the:
A.Purchasing agent
B.Receiving clerk
C.Cost accountant
D.Production department supervisor
3) Information relating to direct labor for Brussels, Inc. follow:
The labor efficiency variance is:
A.$4,100 unfavorable
B.$5,300 unfavorable
C.$4,050 unfavorable
D.$1,200 unfavorable
4) The entry made in November to reverse the entry that was made to accrue October
payroll would be:
A.Debit – Wages Payable
Credit – Cash
B.Debit – Wages Payable
Credit – Payroll
C.Debit – Factory Overhead
Credit – Payroll
D.Debit – Payroll
5) Van Pelt Company uses the average cost method of process costing. The production
report for the Mixing department follows:
What are the equivalent units for:
Materials Conversion Costs
A. 5,650 5,450
B. 5,450 5,250
C. 4,850 4,400
D. 5,400 5,220
6) If a company uses a two-variance analysis for overhead variances and uses a
predetermined rate for absorbing manufacturing overhead, the production-volume
variance is the:
A.Underapplied or overapplied variable cost element of overhead
B.Underapplied or overapplied fixed cost element of overhead
C.Difference in budgeted costs and actual costs of fixed overhead items
D.Difference in budgeted costs and actual costs of variable overhead items
7) Which of the following statements about semivariable costs is not true?
A.They first have to be broken down into their fixed and variable components before
they can be used to predict costs at different levels of volume
B.They are sometimes called mixed costs
C.They vary in direct proportion to volume changes
D.They may remain constant over a range of production, then abruptly change
8) The level of production that provides complete utilization of all facilities and
personnel, but allows for some idle capacity due to operating interruptions such as
machinery breakdowns, idle time and other inescapable inefficiencies is:
A.practical capacity
B.theoretical capacity
C.budgeted capacity
D.normal capacity
9) Consider the Marshall Companys segment analysis:
Common costs are allocated arbitrarily based on sales dollars. If Marshall eliminates
Segment B, what is the impact on the operating loss of the company?
A.The loss decreases by $40,000
B.The loss increases by $20,000
C.The loss decreases by $60,000
D.The loss increases by $40,000
10) A budget prepared for a single level of volume based on managements best estimate
of the level of production and sales for the coming period is a:
A.Flexible budget
B.Static budget
C.Continuous budget
D.Capital budget
11) If a company has an income tax rate of 40% and fixed costs of $105,000, and
wishes to earn an after-tax profit of $150,000, what must its pre-tax income be?
A.$375,000
B.$425,000
C.$250,000
D.$175,000
12) Andrews Corporation purchased 3,000 gallons of raw materials for $9,200. The
standard price is $3.00 per gallon. If Andrews records the price variance at the earliest
possible time, the entry to record the purchase of the material is:
A.Materials 9,200
Material purchase price variance 200 Accounts payable 9,000
B.Materials 9,000
Accounts payable 9,000
C.Materials 9,000
Material purchase price variance 200
Accounts payable 9,200
D.Materials 9,200
13) The following decisions and transactions were made for the Sanders Company in
May:
May 1 The production manager informed the storeroom keeper that the forecasted
usage of Component X is 3,000 units. There are 1,500 units on hand, each having a unit
cost of $20. The company maintains a minimum stock of 1,000 units. The storeroom
keeper notifies the purchasing agent that the company will need 2,500 units of X to
meet Mays production needs and maintain a minimum inventory of 1,200 units.
May 3 The purchasing agent checks with a number of vendors and orders 2,500 units of
Component X. Unfortunately, the price has gone up to $25.
May 7 The shipment of Component X is received and inspected. The units are in good
condition and the company received the number of units it ordered.
May 9 The invoice covering Component X is received from the vendor and approved
for payment.
May 21 The May 9 invoice is paid in full.
May 31 During the month, 2,950 units of Component X are issued to production. The
company uses FIFO costing and a job order cost system.
May 31 An inventory of the storeroom is taken at the end of the day and there are 1,040
units of Component X on hand.
(a) Prepare a table to answer the following questions:
(1)What forms, if any, were used?
(2)What entry, if any, was recorded?
(b) Calculate the balance in the Materials account at May 31 .
14) ISO 9000 is a set of international standards for:
A.determining the selling price of a product
B.cost control
C.quality management
D.planning
15) Which of the following is not one of the categories of a balanced scorecard?
A.Customer
B.Financial
C.Learning and Growth
D.Quality
16) The normal capacity of Noel Company is 4,000 units per month. At this volume,
budgeted fixed and variable factory overhead are $16,000 and $20,000, respectively. In
May, actual production was 4,200 units and actual overhead incurred was $37,900.
What is the variance between budgeted factory overhead per the flexible budget and
actual overhead incurred?
A.$1,900 U
B.$1,000 U
C.$900 U
D.$100 U
17) To effectively control materials, a business must maintain:
A.Limited access
B.Combination of duties
C.Safety stock
D.None of these are correct
18) Chase Companys new product is expected to have a sales price of $15 and variable
unit price of $7. Fixed costs are expected to be $560,000. What is the break-even point
in units?
A.56,000
B.70,000
C.37,333
D.80,000
19) The production report for Matthews, Inc. included the following information for
May:
How many units were started during the period?
A.43,100
B.58,700
C.47,500
D.50,900
20) Dan Louis is the supervisor of the Assembly Department of Wiggerman
Corporation. He has control over and is responsible for manufacturing costs traced to
the department. The Assembly Department is an example of a(n):
A.cost center
B.inventory center
C.supervised work center
D.workers center
21) The process of establishing objectives or goals for the firm and determining the
means by which they will be met is:
A.controlling
B.analyzing profitability
C.planning
D.assigning responsibility
22) A budget:
A.is a monthly financial statement issued to a companys lenders
B.is managements operating plan expressed in units and dollars
C.documents the production departments schedule
D.is the basis for the annual sales forecast
23) The following information pertains to the Braun Company for March:
Using the four-variance method of factory overhead variance analysis, what is the
variable overhead efficiency variance?
A.$1,200 unfavorable
B.$200 unfavorable
C.$1,000 favorable
D.$200 favorable
24) Meger Manufacturing uses the direct labor cost method for applying factory
overhead to production. The budgeted direct labor cost and factory overhead for the
previous fiscal year were $1,000,000 and $800,000, respectively. Actual direct labor
cost and factory overhead were $1,100,000 and $825,000, respectively.
What is the amount of under- or overapplied factory overhead?
A.$25,000 overapplied
B.$55,000 overapplied
C.$80,000 overapplied
D.$50,000 underapplied
25) Selected data concerning the past fiscal year’s operations (000’s omitted) of Kraig
Fabricators are presented below:
The cost of goods manufactured during the year was:
A.$1,410
B.$1,330
C.$1,420
D.$1,470
26) Becky Graham earns $15 per hour for up to 300 units of production per eight-hour
day. If she produces more than 300 pieces per day, she will receive an additional piece
rate of $.40 per unit. A summary of her work week follows:
(a) Determine Grahams earnings for each day and for the week.
(b) Prepare the journal entry to distribute the payroll for the week.
27) Budgeting provides the framework for:
A.Process costing
B.Breaking semivariable costs into their fixed and variable components
C.Planning and control
D.Delegating authority to managers
28) In a period of rising prices, the use of which of the following cost flow methods
would result in the lowest cost of goods sold?
A.FIFO
B.LIFO
C.Weighted average cost
D.Moving average cost
29) The Shiplett Companys payroll summary showed the following in November:
What is the amount that would be included in factory overhead in November?
A.$240,000
B.$190,000
C.$70,000
D.$30,000
30) Which of the following items relating to direct labor employees might be charged to
specific jobs in work in process rather than factory overhead?
A.Make-up guarantee
B.Idle time
C.Shift premiums
D.Fringe benefits
31) Each of the following is a method by which to allocate joint costs except:
A.Chemical or engineering analysis
B.Relative sales value
C.Relative weight, volume, or linear measure
D.Relative marketing costs
32) Sanborn Architectural Designs Inc. has three partners that each earn $80,000 per
year, and three associates that earn $58,000 per year. Each partner and associate has
2,000 billable hours per year. Using a simplified approach, if a partner worked 10 hours
on a project, the amount of labor cost that should be billed to the project is:
A.$350
B.$200
C.$320
D.$345
33) An industry that would mostlikely use process costing procedures is:
A.Beverage
B.Home Construction
C.Printing
D.Shipbuilding
34) Once the amounts of the service department allocations have been determined, a
journal entry should be prepared to record the distributions, the result of which is:
A.debit balances in the Factory Overhead accounts of the production departments for
which the total agrees to the total amount of factory overhead incurred
B.credit balances in the Factory Overhead accounts of the production departments for
which the total agrees to the total amount of factory overhead incurred
C.debit balances in the Factory Overhead accounts of the service departments for which
the total agrees to the total amount of factory overhead incurred
D.credit balances in the Factory Overhead accounts of the service departments for
which the total agrees to the total amount of factory overhead incurred
35) Arnold Furniture Company produced 4,000 chairs in July. The manufacturing costs
were:
The cost per tent is:
A.$14.75
B.$12.00
C.$9.00
D.$6.25
36) A(n) __________ requires estimating inventory balances during the year for interim
financial statements and shutting down operations to count all inventory items at the
end of the year.
A.periodic inventory system
B.inventory control account
C.perpetual inventory system
D.inventory cost method
37) The method of distributing service department costs to production departments
which makes no attempt to determine the extent to which one service department
renders its services to another department is the:
A.Direct distribution method
B.Sequential distribution method
C.Service department distribution method
D.Reciprocal method
38) Allen Companys master budget called for 50,000 units of production. Budgeted
direct material costs at this level were $450,000 or $9 per unit. Allen actually produced
54,000 units and incurred direct material costs of $496,000.
What is Allens direct material variance using flexible budgeting?
A.$10,000 U
B.$46,000 U
C.$36,000 U
D.$10,000 F
39) When evaluating profitability of a segment, costs that are directly identifiable with a
specific segment are called:
A.Direct costs
B.Common costs
C.Indirect costs
D.Fixed costs
40) On September 1, Saranac Enterprises had a work in process inventory of 45,000
units that were complete as to materials and 60% complete as to labor and overhead.
September 1, costs follow:
During September, the following transactions occurred:
a .Purchased materials costing $105,000 on account.
b. Placed direct materials costing $89,900 into production.
c. Incurred production wages totaling $16,200.
d. Incurred overhead costs for September:
e. Applied overhead to work in process at a predetermined rate of 200% of direct labor
cost.
f. Completed and transferred 100,000 units to Finished Goods.
Saranac uses an average cost system. The ending inventory consisted of 50,000 units
that were completed as to materials and 40% complete as to labor and overhead.
Required:
Prepare the journal entries to record the above information for the month of September.
41) Fischer Company desires and after-tax income of $975,000. It has fixed costs of
$480,000. Its only product sells for $40 and has a variable cost per unit of $28. Fischers
effective tax rate is 35%.
1> What amount of pre-tax income is needed to earn an after tax income of $975,000?
2> What target volume of sales revenue must be reached to earn $975,000 in after tax
income?
3> How many units must be sold to earn after-tax income of $975,000?
4> What target volume of sales revenue would have been needed to achieve the
$975,000 of income had no income tax existed?
42) Daisy Drink Company has the following budget at 500,000 cases of cola:
(1) Compute the cost per case of cola at 500,000 cases.
(2) Develop the budget for 550,000 cases.
(3) Compute the cost per case at 550,000 dozen.
(4) Explain why the difference in the cost per dozen occurs at the different levels of
volume.
43) The materials account of Hetzer Industries reflected the following changes during
May:
Assuming that Hetzer maintains perpetual inventory records, calculate the cost of the
ending inventory at May 31 and the cost of the units issued in May using the LIFO
method.
44) Following is a list of costs incurred by the Sitka Products Co. during the month of
June:
Prepare the journal entries necessary to record the issuance of materials, the distribution
of labor cost, the recording of factory overhead, and the entry transferring Factory
Overhead to Work in Process.
45) Perry Company has two service departments, Maintenance and Human Resources,
and two production departments, Machining and Assembly. The following data have
been estimated for next years operations:
The Human Resources Department services all departments.
Requirements:
(1) Distribute the service department costs using the direct distribution method.
(2) Distribute the service department costs using the sequential distribution method with
the department servicing the greatest number of other departments being distributed
first.
(3) Using the results from the direct distribution method, calculate the predetermined
factory overhead rate for the machining department using labor hours as the basis.
46) Information for Chaucer, Ltd. in July for the Prep Department, the first stage of the
production cycle, is as follows:
Material costs are added at the beginning of the process. The ending work in process is
two-thirds complete as to conversion costs. How would the total costs accounted for be
distributed using the average cost method?
47) Bradley Company has forecasted sales for the month of March for its single product
to be 10,000 in its Columbus Region, 13,000 units in its Cincinnati Region and 15,000
units in its Cleveland Region. The estimated inventory on March 1 is 4,500 units and
the company desires to have 3,800 units on hand March 31 . The budgeted sales price is
$00 per unit.
(1) Prepare a sales budget for the month of March.
(2) Prepare a production budget for the month of March.
48) Jasinski Jewelry produces a component for lapel pins. Budgeted production in April
is 8,400 units. Each unit requires 1/3 ounce of gold, and 2 hours of direct labor time. It
is estimated that Jasinski will have 100 ounces of gold on hand at April 1, and since
management anticipates an increase in the price of gold in the coming months, the
desired ending inventory at the end of April is 150 ounces. The standard cost of an
ounce of gold is $300. The standard rate for direct labor is $25 per hour.
(1) Prepare a direct materials budget.
(2) Prepare a direct labor budget.
