1. One cost which is part of both manufacturing overhead and total manufacturing costs is
a. direct labor.
b. direct materials.
c. selling and administrative costs.
d. factory utilities.
2. Manufacturing costs are typically classified as
a. product costs or period costs.
b. direct materials or direct labor.
c. direct materials, direct labor, or manufacturing overhead.
d. direct materials, direct labor, or selling and administrative.
3. A credit balance in the Manufacturing Overhead account at the end of an interim month means that
a. the balance should be reported as a prepaid expense in the monthly balance sheet.
b. corrective action by management is necessary.
c. overhead has been overapplied.
d. cost of goods sold should be debited on the monthly income statement.
4. In a job order cost system, which of the following accounts is not a control account?
a. Raw Materials Inventory
b. Factory Labor
c. Finished Goods Inventory
d. Manufacturing Overhead
5. In the current assets section of the balance sheet, manufacturing inventories are listed in the following order:
a. raw materials, work in process, finished goods.
b. finished goods, work in process, raw materials.
c. work in process, finished goods, raw materials.
d. finished goods, raw materials, work in process.
The following data should be used for questions 6–9:
Raw materials inventory, January 1 $ 10,000
Raw materials inventory, December 31 20,000
Work in process, January 1 9,000
Work in process, December 31 6,000
Finished goods, January 1 20,000
Finished goods, December 31 16,000
Raw materials purchases 500,000
Direct labor 180,000
Factory utilities 75,000
Indirect labor 25,000
Factory depreciation 200,000
Selling and administrative expenses 210,000
6. Direct materials used is
a. $530,000.
b. $510,000.
c. $500,000.
d. $490,000.
7. Assume your answer to question 6 above is $500,000. Total manufacturing costs equal
a. $980,000.
b. $977,000.
c. $880,000.
d. $1,190,000.
8. Assume your answer to question 7 above is $950,000. Cost of goods manufactured equals
a. $946,000.
b. $947,000.
c. $953,000.
d. $954,000.
9. Assume your answer to question 8 above is $970,000. The cost of goods sold is
a. $973,000.
b. $954,000.
c. $966,000.
d. $974,000.
10. The functions of management in an organization are
a. planning, controlling, and decision making.
b. planning, directing, and controlling.
c. directing, controlling, and decision making.
d. directing, planning, and decision making.
11. The major activities of managerial accounting include all of the following except
a. providing a basis for controlling costs by comparing actual results with planned objectives.
b. preparing financial statements designed primarily for stockholders and creditors.
c. preparing internal reports for management.
d. determining the behavior of costs as activity levels change.
12. A job order cost system would most likely be used by a(n)
a. cement manufacturer.
b. paint manufacturer.
c. specialty printing company.
d. automobile manufacturer.
13. The formula for computing a predetermined overhead rate is
a. estimated annual overhead costs ÷ estimated annual operating activity.
b. estimated annual overhead costs ÷ actual annual operating activity.
c. actual annual overhead costs ÷ actual annual operating activity.
d. actual annual overhead costs ÷ estimated annual operating activity.
14. An example of a period cost, as opposed to a product cost, is
a. factory utilities.
b. wages of factory workers.
c. salesmen's commissions.
d. depreciation on the factory building.
15. When production costs are debited to Work in Process Inventory, accounts that may be credited are
a. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead.
b. Accounts Payable, Factory Wages Payable, and Accumulated Depreciation.
c. Raw Materials Inventory, Factory Labor, and Finished Goods Inventory.
d. Manufacturing Overhead, Factory Labor, and Cost of Goods Sold.
16. Given the following data, compute equivalent units of production for conversion costs:
Beginning Work in Process—8,000 units, 40% complete
Units Completed and Transferred Out—90,000 units
Ending Work in Process—6,000 units, 20% complete.
a. 88,000
b. 91,200
c. 94,400
d. 96,000
17. When there is beginning work in process, units transferred out can be computed by subtracting
a. ending work in process units from the units accounted for.
b. ending work in process units from the units started into production.
c. beginning work in process units from the units to be accounted for.
d. beginning work in process units from the units started into production.
18. Given the following data, compute equivalent units of production for materials costs. Materials are added at the beginning of the process.
Beginning Work in Process—8,000 units, 40% complete
Units Completed and Transferred Out—90,000 units
Ending Work in Process—6,000 units, 20% complete.
a. 88,000
b. 91,200
c. 94,400
d. 96,000
19. Which of the following does not describe a characteristic of process costing?
a. Job cost sheets must pass from one production department to the next on a daily basis.
b. Once production begins, it continues until the finished product emerges.
c. All units of production receive precisely the same amount of material, labor, and overhead.
d. Work in process accounts are maintained for each production department.
20. Which of the following is not an important element of JIT (just in time) processing?
a. A company must have dependable suppliers who are willing to deliver on short notice exact quantities of raw materials according to precise quality specifications.
b. A company must have a multi-skilled work force, so that one worker can have the responsibility to operate and maintain several different types of machines.
c. A process cost accounting system must be in place.
d. A total quality control system must be established throughout the manufacturing operations.
21. In a JIT cost accounting system,
a. reduced product quality is offset by reduced cost.
b. manufacturing overhead is applied in the traditional manner.
c. Raw Materials and Work in Process Inventory accounts are replaced by Raw and In-Process Inventory.
d. conversion costs are eliminated.
22. The number of purchase orders would be an appropriate cost driver for
a. inspecting and testing cost.
b. machining cost.
c. ordering and receiving materials cost.
d. supervising cost.
23. All of the following are true about low-volume products except
a. they often require more special handling than high-volume products.
b. the overhead costs incurred by low-volume products are often disproportionate to a traditional allocation base.
c. they are frequently responsible for more overhead costs per unit than a high-volume product.
d. direct labor hours is usually a better cost driver for assigning overhead costs to low-volume products.
24. The primary benefit of activity-based costing is that it leads to
a. more cost pools used to assign overhead costs to products.
b. more accurate product costing.
c. enhanced control over overhead costs.
d. better management decisions.
25. All of the following are value-added activities in a manufacturing operation except
a. assembly.
b. engineering design.
c. inspections.
d. machining.
26. ABC costing is an approach for allocating
a. direct materials to products.
b. direct labor to products.
c. manufacturing overhead to products.
d. direct materials and direct labor to products.
27. The first step in activity-based costing is to
a. assign overhead costs for each activity cost pool to products.
b. compute the activity-based overhead rate.
c. identify cost drivers that accurately measure each activity's contribution to the finished product.
d. identify and classify the major activities involved in the manufacture of specific products.
28. Brooke Company desires net income of $360,000 when it has $1,000,000 of fixed costs and variable costs of 60% of sales. Required sales equals
a. $1,600,000.
b. $3,400,000.
c. $2,500,000.
d. $2,266,667.
29. A company's break-even point can be decreased by decreasing
a. the contribution margin ratio.
b. the contribution margin.
c. the selling price.
d. variable costs per unit.
30. Brooke Company desires net income of $360,000 when it has $1,000,000 of fixed costs and variable costs of 60% of sales. Contribution margin equals
a. $3,400,000.
b. $1,360,000. (1000000+360000)
c. $640,000.
d. $600,000.
31. Fixed costs
a. increase in total as total production increases.
b. decrease in total as total production decreases.
c. decrease per unit as total production decreases.
d. increase per unit as total production decreases.
32. Assume October is the high-volume month for a toy manufacturer and July is the low-volume month. The following total production costs and volume levels have been recorded:
Total Costs Volume
October $30,000 6,000
July $12,000 2,000
The total fixed costs are
a. $18,000
b. $3,000
c. $9,000
d. $6,000
33. Variable costs, as activity increases, will
a. will stay the same in total.
b. increase per unit.
c. remain constant per unit.
d. decrease in total.
34. A cost that increases in total, but not proportionately with increases in the activity level, is a(n)
a. mixed cost.
b. variable cost.
c. fixed cost.
d. unusual fixed cost.
35. Given the following costs for Bently Company, classify each cost as either variable, fixed, or mixed.
Total Cost at
2,000 Units 3,000 Units
Cost A $12,900 $19,350
Cost B 12,300 16,650
Cost C 13,000 13,000
a. Cost A and Cost B are variable; Cost C is fixed.
b. Cost A is variable; Cost B is mixed; Cost C is fixed.
c. Cost A and Cost B are mixed; Cost C is fixed.
d. Cost A is mixed; Cost B is variable; Cost C is fixed.
36. The assumptions that underlie basic CVP analysis include all of the following except
a. when more than one product is sold, total sales will be in a constant sales mix.
b. all costs can be classified as variable or fixed with reasonable accuracy.
c. the behavior of both costs and revenues is linear throughout the relevant range.
d. all of the above are assumptions.
Use the following information for questions 37 and 38.
Wynne Company has a weighted-average unit contribution margin of $25 for its two products, Regular and Deluxe. Expected sales for Wynne are 60,000 Regular and 40,000 Deluxe. Fixed expenses are $2,200,000.
37. How many Regulars would Wynne sell at the break-even point?
a. 35,200
b. 44,000
c. 52,800
d. 66,000
38. At the expected sales level, Wynne’s net income will be
a. $(300,000).
b. $0.
c. $300,000. \
d. $2,500,000.
____ 39 Fernetti Company can produce and sell only one of the following two products:
Machine Hours Contribution
Required Margin Per Unit
Product X 0.2 $3
Product Y 0.3 $5
The company has machine capacity of 1,200 hours. How much will contribution margin be if it produces only the most profitable product?
a. $1,800
b. $2,000
c. $18,000
d. $20,000
____ 40. Which of the following is included in the cost of goods manufactured under absorption costing but not under variable costing?
a. Direct materials
b. Variable factory overhead
c. Fixed factory overhead
d. Direct labor
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