40 Questions covering:Definitions, Cost Flows & Cost SchedulesJob CostingDepartmental CostsActivity Based CostingProcess...
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40 Questions covering:
Definitions, Cost Flows & Cost Schedules
Job Costing
Departmental Costs
Activity Based Costing
Process Costing
How Costs Behave
Variable & Absorption Costing
1) Department A had 1,000 units in Work in Process that were 70% completed at the beginning
of the period at a cost of $7,000. 4,000 units of direct materials were added during the period at a
cost of $8,200. 4,500 units were completed during the period, and 500 units were 60% complete
as to conversion costs at the end of the period. All materials are added at the beginning of the
process (100% complete when added). Direct labor was $28,700 and factory overhead was
$4,510. The cost of the 500 units in process at the end of the period if the first-in, first-out
method is used to cost inventories was:
$1,025
$5,000
$5,075
$3,455
2) Which of the following is an example of a factory overhead cost?
Repair and maintenance cost on the administrative building
Factory heating and lighting cost
Insurance premiums on salespersons' automobiles
President's salary
3) Which of the graphs in Figure 20-1 illustrates the nature of a mixed cost?
Graph 2
Graph 3
Graph 4
Graph 1
4) A bank may decide to use activity-based costing to determine all of the following except:
the amounts charged to customers for services provided
service quality
profitability by services provided
all are correct
5) During the period, labor costs incurred on account amounted to $225,000 including $195,000
for line workers and $30,000 for maintenance personnel. In addition, factory overhead applied to
production was $17,000. From the following, select the entry to record the actual factory
overhead costs incurred.
Accounts Payable
30,000
MOH Control/Applied
30,000
MOH Control/Applied
17,000
Accounts Payable
17,000
Work in Process
30,000
MOH Control/Applied
30,000
MOH Control/Applied
30,000
Wages Payable
30,000
6) The C Company forecasts that total overhead for the current year will be $12,000,000 and that
total machine hours will be 200,000 hours. Year to date, the actual overhead is $8,000,000 and
the actual machine hours are 100,000 hours. If the C Company uses a predetermined overhead
rate based on machine hours for applying overhead, as of this point in time (year to date) the
overhead is over/under applied by?
$2,000,000 over
$2,000,000 under
$4,000,000 over
$4,000,000 under
7) The level of inventory of a manufactured product has increased by 8,000 units during a period
(with no change in sales). The following data are also available:
Unit manufacturing costs of the period
Unit operating expenses of the period
Variable
$12.00
4.00
Fixed
$5.00
1.50
What would be the effect on income from operations if absorption costing is used rather than
variable costing?
$40,000 decrease
$40,000 increase
$44,000 increase
$52,000 increase
8) Conversion costs are
direct materials and direct labor
direct materials and factory overhead
factory overhead and direct labor
direct materials and indirect labor
9) The following are all product costs except:
Direct materials
Sales and administrative expenses
Direct labor
Factory overhead
10) Which of the following is not a prime cost?
Supervisorâs wages
Direct labor wages
Machine operator wages
Assembly line wages
11) Z Co. produces and sells a widget for $97.50 per unit. In the first month of operation,
2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the
amount budgeted for the month. Other information for the month includes:
Variable manufacturing costs
Variable marketing costs
Fixed manufacturing costs
Administrative expenses, all fixed
Ending inventories:
Direct materials
WIP
$22.10 per unit
$ 3.90 per unit
$13.00 per unit
$19.50 per unit
-0-0-
Finished goods
250 units
Using Variable Costing, what is net operating income?
$60,12
5
$125,1
25
$85,12
5
$65,00
0
12) Cost behavior refers to the manner in which:
a cost changes as the related activity changes
a cost is allocated to products
a cost is used in setting selling prices
a cost is estimated
13) MOH and WIP information for the period is presented as follows:
WIP Beginning Balance: $275,000
Direct Materials: ??
Direct Labor: $350,000
OH Applied: ??
Cost of Goods Manufactured: $1,230,000
Ending WIP: $200,000
Manufacturing Overhead:
Actual MOH costs: $90,000
Mfg. OH is applied at 30% of Direct Labor
Any over/under applied MOH is written off to Cost of Goods Sold
What was the amount debited to Work in Process for direct materials for the period?
$700,000
$805,000
$300,000
$605,000
14) In order to be useful to managers, management accounting reports should possess all of the
following characteristics EXCEPT:
a provide observations of past operations and estimates about future decisions
.
b be
.
c be
.
d be
.
prepared in accordance with generally accepted accounting principles
provided at any time management needs information
prepared to report information for any unit of the business to support decision making
15) The debits to Work in Process--Assembly Department for the month, together with data
concerning production, are as follows:
Beginning work in process:
Materials cost, 3,000 units
Conversion costs, 3,000 units,
2/3 completed as to conversion costs
Materials added during the month, 10,000 units
Conversion costs during month
Goods completed during the monthl, 11,500 units
Ending work in process, 1,500 units,
1/2 completed as to conversion costs
$ 7,500
6,000
26,000
31,000
-----
All direct materials are placed in process at the beginning of the process (100% complete when
added) and the average cost method is used to cost inventories.
The materials cost per equivalent unit (to the nearest cent) for April is:
$2.60
$2.58
$3.02
$2.26
16) The four steps necessary to determine the cost of goods completed and the ending inventory
valuation in a process cost system are:
1.
2.
3.
4.
allocate costs to transferred and partially completed units
determine the units to be assigned costs
determine the cost per equivalent unit
calculate equivalent units of production
The correct ordering of the steps is:
2, 4, 3, 1
4, 2, 3, 1
2, 3, 4, 1
2, 3, 1, 4
17) If there was no beginning work in process and no ending work in process under the
weighted-average process costing method, the number of equivalent units for direct
materials, if direct materials were added at the start of the process, would be ________.
more than the units started or transferred in during
the period
equal to the units completed during the period
less than the units completed during the period
equal to total of units started and units completed
during the period
18) Contribution margin is:
the excess of sales revenue over variable cost
another term for volume in the "cost-volume-profit" analysis
profit
the same as sales revenue
19) At the end of the accounting period, Armstrong Corporation reports operating income of
$30,000. Which of the following statements is true, if Armstrong's inventory levels decrease
during the accounting period?
Variable costing will report less operating income than absorption costing.
Variable costing and absorption costing will report the same operating income since the
cost of goods sold is the same.
Variable costing and absorption costing will report the same operating income since the
total costs are the same.
Absorption costing will report less operating income than variable costing.
20) Compute conversion costs given the following data: Direct Materials, $352,700; Direct
Labor, $196,300; Factory Overhead, $177,600.
$549,000
$726,600
$373,900
$530,300
21) Activity rates are determined by
dividing the actual cost for each activity pool by the actual activity base for that pool.
dividing the cost budgeted for each activity pool by the estimated activity base for that pool.
dividing the actual cost for each activity pool by the estimated activity base for that pool.
dividing the cost budgeted for each activity pool by the actual activity base in that pool.
22) Which of the following statements is true of contribution-margin format of the income
statement?
It is used for absorption costing.
It highlights the lump sum of fixed manufacturing
costs.
It distinguishes manufacturing costs from
nonmanufacturing costs.
It calculates gross margin.
23) Which of the following items would not be classified as part of factory overhead?
Direct labor used
Amortization of manufacturing patents
Production supervisors' salaries
Factory supplies used
24) The cost of production of completed and finished goods during the period amounted to
$400,000, and the finished products shipped to customers had total production costs of $337,000.
From the following, select the entry to record the transfer of costs from finished goods to cost of
goods sold.
Finished Goods
400,000
Cost of Goods Sold
400,000
Finished Goods
337,000
Cost of Goods Sold
337,000
Cost of Goods Sold
337,000
Finished Goods
337,000
Cost of Goods Sold
400,000
Finished Goods
400,000
25) A manufacturing company applies factory overhead based on direct labor hours. At the
beginning of the year, it estimated that factory overhead costs would be $360,000 and direct
labor hours would be 45,000. Actual factory overhead costs incurred were $377,200, and actual
direct labor hours were 46,000. What is the amount of overapplied or underapplied
manufacturing overhead at the end of the year?
$17,000 overapplied.
$17,000 underapplied.
$9,200 overapplied.
$9,200 underapplied.
26) P Corporation is estimating activity costs associated with producing disk drives, tapes drives,
and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted
activity cost and activity base information, along with the estimated activity-base information, is
provided below.
Procurement
Scheduling
Materials handling
Product
development
Production
Disk
drives
Activity
Cost
$ 360,000
240,000
480,000
720,000
1,420,000
Activity Base
Number of purchase orders
Number of production orders
Number of moves
Number of engineering changes
Machine hours
Numbe Number of Numb Number
r of
Production
er
of
Purcha
Orders
of Engineeri
se
Moves
ng
Orders
Changes
4,000
300
1,400
10
Machine
Hours
Number
of
Units
2,000
2,000
Tape
drives
Wire
drives
2,000
150
600
5
8,000
4,000
12,000
800
4,000
25
10,000
2,500
Determine the activity-based cost for each disk drive unit.
$193.70
$192.00
$142.90
$285.80
27) Cost-volume-profit analysis cannot be used if which of the following occurs?
Costs cannot be properly classified into fixed and variable costs
The total fixed costs change
The per unit variable costs change
Per unit sales prices change
28) On the variable costing income statement, the figure representing the difference between
manufacturing margin and contribution margin is the:
fixed manufacturing costs
variable cost of goods sold
fixed selling and administrative expenses
variable selling and administrative expenses
29) When job 711 was completed, direct materials totaled $4,000; direct labor, $4,600; and
factory overhead, $2,400, respectively. Units produced totaled 1,000. Unit costs are:
$11,000
$1,100
$110
$11
30) The cost of a manufactured product generally consists of which of the following costs?
Direct materials cost and factory overhead cost
Direct labor cost and factory overhead cost
Direct labor cost, direct materials cost, and factory overhead cost
Direct materials cost and direct labor cost
31) Given the following cost and activity observations for Johnson Companyâs utilities, use the
high-low method to calculate Johnsonâs fixed costs per month.
Cost
Machine Hours
January
$52,600
20,000
February
75,100
29,000
March
57,000
22,000
April
64,000
24,500
$2,600
$50,000
$12,500
$5,000
32) The following budget data are available for Newest Company:
Estimated direct labor hours
Estimated direct dollars
Estimated factory overhead costs
9,000
$60,000
$154,00
0
If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate
is
$2.57
$.39
$6.67
$17.11
33) Accountants prefer the variable costing method over absorption costing method for
evaluating the performance of a company because
by using the absorption costing method, income could appear to be higher by producing
more inventory.
by using the absorption method, more sales will be generated.
by using the variable costing method, the cost of goods sold will be higher as more units are
manufactured and sales remain the same.
by using the variable costing method, all fixed and variable costs are included in the unit
cost of the product manufactured.
34) Costs other than direct materials cost and direct labor cost incurred in the manufacturing
process are classified as:
factory overhead cost
miscellaneous expense
product costs
other manufacturing costs
35) The weighted-average process-costing method calculates the equivalent units by
________.
considering only the work done during the current period
the units started during the current period minus the units in ending inventory
the units started during the current period plus the units in ending inventory
the equivalent units completed during the current period plus the equivalent
units in ending inventory
36) Costs that are treated as assets until the product is sold are called:
product costs
period costs
conversion costs
selling expenses
37) Equivalent production units, usually are determined for
direct materials and conversion costs.
direct materials only.
conversion costs only.
direct materials and direct labor costs only.
38) As production increases, what should happen to the fixed costs per unit?
Stay the same.
Increase.
Decrease.
Either increase or decrease, depending on the variable costs.
39) Which of the following manufacturing costs is an indirect cost of producing a product?
Oil lubricants used for factory machinery
Commissions for sales personnel
Hourly wages of an assembly worker
Memory chips for a microcomputer manufacturer
40) HCo. uses a plant-wide factory overhead rate based on direct labor hours. Overhead costs
would be overcharged to which of the following departments?
A labor-intensive department
A capital-intensive department
A materials-intensive department
None of the above
Definitions, Cost Flows & Cost Schedules
Job Costing
Departmental Costs
Activity Based Costing
Process Costing
How Costs Behave
Variable & Absorption Costing
1) Department A had 1,000 units in Work in Process that were 70% completed at the beginning
of the period at a cost of $7,000. 4,000 units of direct materials were added during the period at a
cost of $8,200. 4,500 units were completed during the period, and 500 units were 60% complete
as to conversion costs at the end of the period. All materials are added at the beginning of the
process (100% complete when added). Direct labor was $28,700 and factory overhead was
$4,510. The cost of the 500 units in process at the end of the period if the first-in, first-out
method is used to cost inventories was:
$1,025
$5,000
$5,075
$3,455
2) Which of the following is an example of a factory overhead cost?
Repair and maintenance cost on the administrative building
Factory heating and lighting cost
Insurance premiums on salespersons' automobiles
President's salary
3) Which of the graphs in Figure 20-1 illustrates the nature of a mixed cost?
Graph 2
Graph 3
Graph 4
Graph 1
4) A bank may decide to use activity-based costing to determine all of the following except:
the amounts charged to customers for services provided
service quality
profitability by services provided
all are correct
5) During the period, labor costs incurred on account amounted to $225,000 including $195,000
for line workers and $30,000 for maintenance personnel. In addition, factory overhead applied to
production was $17,000. From the following, select the entry to record the actual factory
overhead costs incurred.
Accounts Payable
30,000
MOH Control/Applied
30,000
MOH Control/Applied
17,000
Accounts Payable
17,000
Work in Process
30,000
MOH Control/Applied
30,000
MOH Control/Applied
30,000
Wages Payable
30,000
6) The C Company forecasts that total overhead for the current year will be $12,000,000 and that
total machine hours will be 200,000 hours. Year to date, the actual overhead is $8,000,000 and
the actual machine hours are 100,000 hours. If the C Company uses a predetermined overhead
rate based on machine hours for applying overhead, as of this point in time (year to date) the
overhead is over/under applied by?
$2,000,000 over
$2,000,000 under
$4,000,000 over
$4,000,000 under
7) The level of inventory of a manufactured product has increased by 8,000 units during a period
(with no change in sales). The following data are also available:
Unit manufacturing costs of the period
Unit operating expenses of the period
Variable
$12.00
4.00
Fixed
$5.00
1.50
What would be the effect on income from operations if absorption costing is used rather than
variable costing?
$40,000 decrease
$40,000 increase
$44,000 increase
$52,000 increase
8) Conversion costs are
direct materials and direct labor
direct materials and factory overhead
factory overhead and direct labor
direct materials and indirect labor
9) The following are all product costs except:
Direct materials
Sales and administrative expenses
Direct labor
Factory overhead
10) Which of the following is not a prime cost?
Supervisorâs wages
Direct labor wages
Machine operator wages
Assembly line wages
11) Z Co. produces and sells a widget for $97.50 per unit. In the first month of operation,
2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the
amount budgeted for the month. Other information for the month includes:
Variable manufacturing costs
Variable marketing costs
Fixed manufacturing costs
Administrative expenses, all fixed
Ending inventories:
Direct materials
WIP
$22.10 per unit
$ 3.90 per unit
$13.00 per unit
$19.50 per unit
-0-0-
Finished goods
250 units
Using Variable Costing, what is net operating income?
$60,12
5
$125,1
25
$85,12
5
$65,00
0
12) Cost behavior refers to the manner in which:
a cost changes as the related activity changes
a cost is allocated to products
a cost is used in setting selling prices
a cost is estimated
13) MOH and WIP information for the period is presented as follows:
WIP Beginning Balance: $275,000
Direct Materials: ??
Direct Labor: $350,000
OH Applied: ??
Cost of Goods Manufactured: $1,230,000
Ending WIP: $200,000
Manufacturing Overhead:
Actual MOH costs: $90,000
Mfg. OH is applied at 30% of Direct Labor
Any over/under applied MOH is written off to Cost of Goods Sold
What was the amount debited to Work in Process for direct materials for the period?
$700,000
$805,000
$300,000
$605,000
14) In order to be useful to managers, management accounting reports should possess all of the
following characteristics EXCEPT:
a provide observations of past operations and estimates about future decisions
.
b be
.
c be
.
d be
.
prepared in accordance with generally accepted accounting principles
provided at any time management needs information
prepared to report information for any unit of the business to support decision making
15) The debits to Work in Process--Assembly Department for the month, together with data
concerning production, are as follows:
Beginning work in process:
Materials cost, 3,000 units
Conversion costs, 3,000 units,
2/3 completed as to conversion costs
Materials added during the month, 10,000 units
Conversion costs during month
Goods completed during the monthl, 11,500 units
Ending work in process, 1,500 units,
1/2 completed as to conversion costs
$ 7,500
6,000
26,000
31,000
-----
All direct materials are placed in process at the beginning of the process (100% complete when
added) and the average cost method is used to cost inventories.
The materials cost per equivalent unit (to the nearest cent) for April is:
$2.60
$2.58
$3.02
$2.26
16) The four steps necessary to determine the cost of goods completed and the ending inventory
valuation in a process cost system are:
1.
2.
3.
4.
allocate costs to transferred and partially completed units
determine the units to be assigned costs
determine the cost per equivalent unit
calculate equivalent units of production
The correct ordering of the steps is:
2, 4, 3, 1
4, 2, 3, 1
2, 3, 4, 1
2, 3, 1, 4
17) If there was no beginning work in process and no ending work in process under the
weighted-average process costing method, the number of equivalent units for direct
materials, if direct materials were added at the start of the process, would be ________.
more than the units started or transferred in during
the period
equal to the units completed during the period
less than the units completed during the period
equal to total of units started and units completed
during the period
18) Contribution margin is:
the excess of sales revenue over variable cost
another term for volume in the "cost-volume-profit" analysis
profit
the same as sales revenue
19) At the end of the accounting period, Armstrong Corporation reports operating income of
$30,000. Which of the following statements is true, if Armstrong's inventory levels decrease
during the accounting period?
Variable costing will report less operating income than absorption costing.
Variable costing and absorption costing will report the same operating income since the
cost of goods sold is the same.
Variable costing and absorption costing will report the same operating income since the
total costs are the same.
Absorption costing will report less operating income than variable costing.
20) Compute conversion costs given the following data: Direct Materials, $352,700; Direct
Labor, $196,300; Factory Overhead, $177,600.
$549,000
$726,600
$373,900
$530,300
21) Activity rates are determined by
dividing the actual cost for each activity pool by the actual activity base for that pool.
dividing the cost budgeted for each activity pool by the estimated activity base for that pool.
dividing the actual cost for each activity pool by the estimated activity base for that pool.
dividing the cost budgeted for each activity pool by the actual activity base in that pool.
22) Which of the following statements is true of contribution-margin format of the income
statement?
It is used for absorption costing.
It highlights the lump sum of fixed manufacturing
costs.
It distinguishes manufacturing costs from
nonmanufacturing costs.
It calculates gross margin.
23) Which of the following items would not be classified as part of factory overhead?
Direct labor used
Amortization of manufacturing patents
Production supervisors' salaries
Factory supplies used
24) The cost of production of completed and finished goods during the period amounted to
$400,000, and the finished products shipped to customers had total production costs of $337,000.
From the following, select the entry to record the transfer of costs from finished goods to cost of
goods sold.
Finished Goods
400,000
Cost of Goods Sold
400,000
Finished Goods
337,000
Cost of Goods Sold
337,000
Cost of Goods Sold
337,000
Finished Goods
337,000
Cost of Goods Sold
400,000
Finished Goods
400,000
25) A manufacturing company applies factory overhead based on direct labor hours. At the
beginning of the year, it estimated that factory overhead costs would be $360,000 and direct
labor hours would be 45,000. Actual factory overhead costs incurred were $377,200, and actual
direct labor hours were 46,000. What is the amount of overapplied or underapplied
manufacturing overhead at the end of the year?
$17,000 overapplied.
$17,000 underapplied.
$9,200 overapplied.
$9,200 underapplied.
26) P Corporation is estimating activity costs associated with producing disk drives, tapes drives,
and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted
activity cost and activity base information, along with the estimated activity-base information, is
provided below.
Procurement
Scheduling
Materials handling
Product
development
Production
Disk
drives
Activity
Cost
$ 360,000
240,000
480,000
720,000
1,420,000
Activity Base
Number of purchase orders
Number of production orders
Number of moves
Number of engineering changes
Machine hours
Numbe Number of Numb Number
r of
Production
er
of
Purcha
Orders
of Engineeri
se
Moves
ng
Orders
Changes
4,000
300
1,400
10
Machine
Hours
Number
of
Units
2,000
2,000
Tape
drives
Wire
drives
2,000
150
600
5
8,000
4,000
12,000
800
4,000
25
10,000
2,500
Determine the activity-based cost for each disk drive unit.
$193.70
$192.00
$142.90
$285.80
27) Cost-volume-profit analysis cannot be used if which of the following occurs?
Costs cannot be properly classified into fixed and variable costs
The total fixed costs change
The per unit variable costs change
Per unit sales prices change
28) On the variable costing income statement, the figure representing the difference between
manufacturing margin and contribution margin is the:
fixed manufacturing costs
variable cost of goods sold
fixed selling and administrative expenses
variable selling and administrative expenses
29) When job 711 was completed, direct materials totaled $4,000; direct labor, $4,600; and
factory overhead, $2,400, respectively. Units produced totaled 1,000. Unit costs are:
$11,000
$1,100
$110
$11
30) The cost of a manufactured product generally consists of which of the following costs?
Direct materials cost and factory overhead cost
Direct labor cost and factory overhead cost
Direct labor cost, direct materials cost, and factory overhead cost
Direct materials cost and direct labor cost
31) Given the following cost and activity observations for Johnson Companyâs utilities, use the
high-low method to calculate Johnsonâs fixed costs per month.
Cost
Machine Hours
January
$52,600
20,000
February
75,100
29,000
March
57,000
22,000
April
64,000
24,500
$2,600
$50,000
$12,500
$5,000
32) The following budget data are available for Newest Company:
Estimated direct labor hours
Estimated direct dollars
Estimated factory overhead costs
9,000
$60,000
$154,00
0
If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate
is
$2.57
$.39
$6.67
$17.11
33) Accountants prefer the variable costing method over absorption costing method for
evaluating the performance of a company because
by using the absorption costing method, income could appear to be higher by producing
more inventory.
by using the absorption method, more sales will be generated.
by using the variable costing method, the cost of goods sold will be higher as more units are
manufactured and sales remain the same.
by using the variable costing method, all fixed and variable costs are included in the unit
cost of the product manufactured.
34) Costs other than direct materials cost and direct labor cost incurred in the manufacturing
process are classified as:
factory overhead cost
miscellaneous expense
product costs
other manufacturing costs
35) The weighted-average process-costing method calculates the equivalent units by
________.
considering only the work done during the current period
the units started during the current period minus the units in ending inventory
the units started during the current period plus the units in ending inventory
the equivalent units completed during the current period plus the equivalent
units in ending inventory
36) Costs that are treated as assets until the product is sold are called:
product costs
period costs
conversion costs
selling expenses
37) Equivalent production units, usually are determined for
direct materials and conversion costs.
direct materials only.
conversion costs only.
direct materials and direct labor costs only.
38) As production increases, what should happen to the fixed costs per unit?
Stay the same.
Increase.
Decrease.
Either increase or decrease, depending on the variable costs.
39) Which of the following manufacturing costs is an indirect cost of producing a product?
Oil lubricants used for factory machinery
Commissions for sales personnel
Hourly wages of an assembly worker
Memory chips for a microcomputer manufacturer
40) HCo. uses a plant-wide factory overhead rate based on direct labor hours. Overhead costs
would be overcharged to which of the following departments?
A labor-intensive department
A capital-intensive department
A materials-intensive department
None of the above
