Reference no: EM13758822

1. The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor hours worked, the total direct labor variance is

• $4,000 unfavorable
• $6,400 unfavorable
• $1,920 unfavorable
• $6,400 favorable

2. Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is:

Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Mini A using traditional costing using direct labor hours is

• $1,670,000
• $1,536,000
• $1,200,000
• $1,920,000

3. Disney's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase?

• $18,000
• $12,000
• $6,000
• $28,000

4. The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to $11 per unit. In 2006, Supplier Company has offered to supply Part A for $9 per unit. For the make-or-buy decision,

• net relevant costs are $1 per unit
• differential costs are $2 per unit
• incremental costs are $1 per unit
• incremental revenues are $2 per unit

5. Luca Company overapplied manufacturing overhead during 2006. Which one of the following is part of the year end entry to dispose of the overapplied amount assuming the amount is material?

• An increase to cost of goods sold
• An increase to finished goods
• A decrease to work in process inventory
• A decrease to applied overhead

6. In most cases, prices are set by the

• customers
• selling company
• largest competitor
• competitive market

7. Max Company uses 10,000 units of Part A in producing its products. A supplier offers to make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the opportunity cost of buying Part A from the supplier is

• $0
• $80,000
• $70,000
• $10,000

8. Prices are set by the competitive market when

• a company can effectively differentiate its product from others
• the product is specially made for a customer
• there are no other producers capable of manufacturing a similar item
• a product is not easily distinguished from competing products

9. Waco's Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during July. Waco keeps 10% of the next month's sales as ending inventory. How many units should Waco produce during June?

• 19,000
• 18,900
• 19,100
• 21,000

10. An activity that has a direct cause-effect relationship with the resources consumed is a(n)

• cost driver
• product activity
• cost pool
• overhead rate

11. The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month, 11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000 units of product. The direct materials quantity variance for last month was

• $2,400 favorable
• $5,600 unfavorable
• $3,200 unfavorable
• $3,200 favorable

12. Which of the following represents the two basic types of cost accounting systems?

• Job order and process cost systems
• Process cost and batch systems
• Job order and batch systems
• Job order and job accumulation systems

13. Which of the following statements is FALSE?

• The overhead volume variance is favorable if standard hours allowed for output is greater than the standard hours at normal capacity.
• The overhead volume variance indicates whether plant facilities were used efficiently during the period.
• The overhead volume variance relates solely to fixed costs.
• The costs that cause the overhead volume variance are usually controllable costs.

14. At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates it will sell 35,000 units during the first quarter of 2004 with a 10% increase in sales each quarter. Barry's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each widget costs $1 and is sold for $1.50. How much is budgeted sales revenue for the third quarter of 2004?

• $57,525
• $63,525
• $42,350
• $63,000

15. Manufacturing overhead costs are applied to work in process on the basis of

• standard hours allowed
• ratio of actual variable to fixed costs
• actual hours worked
• actual overhead costs incurred

16. Which cost is charged to the product under variable costing?

• Variable manufacturing overhead
• Fixed manufacturing overhead
• Fixed administrative expenses
• Variable administrative expenses

17. Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12 per unit; however, $5 per unit is avoidable. Should Truckel make or buy the wickets?

• Make; savings = $20,000
• Buy; savings = $25,000
• Buy; savings = $10,000
• Make; savings = $10,000

18. Which of the following statements is FALSE?

• A standard cost is more accurate than a budgeted cost.
• A standard is a unit amount.
• In concept, standards and budgets are essentially the same.
• The standard cost of a product is equivalent to the budgeted cost per unit of product.

19. Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April. Each mug requires 2 pounds of resin and a half hour of direct labor. Resin costs $1 per pound and employees of the company are paid $12.50 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor costs. Gottberg has 2,000 pounds of resin in beginning inventory and wants to have 2,400 pounds in ending inventory. How much is the total amount of budgeted direct labor for April?

• $27,500
• $13,750
• $12,500
• $25,000

20. The difference between a budget and a standard is that

• a budget expresses what costs were, while a standard expresses what costs should be
• a budget expresses a total amount while a standard expresses a unit amount
• standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system
• a budget expresses management's plans, while a standard reflects what actually happened

21. Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is:

Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Maxi B using traditional costing using direct labor hours is

• $1,280,000
• $1,536,000
• $1,670,000
• $2,000,000

22. Which of the following factors would suggest a switch to activity-based costing?

• Overhead costs constitute a significant portion of total costs.
• Product lines similar in volume and manufacturing complexity.
• Production managers use data provided by the existing system.
• The manufacturing process has been stable.

23. A standard cost is

• a predetermined cost
• the historical cost of producing a product last year
• a cost which is paid for a group of similar products
• the average cost in an industry

24. What broad functions does the management of an organization perform?

• Planning, directing, and controlling
• Directing, manufacturing, and controlling
• Planning, manufacturing, and controlling
• Planning, directing, and selling

25. What sometimes makes implementation of activity-based costing difficult in service industries is

• identifying activities, activity cost plus, and cost drivers
• that a larger proportion of overhead costs are company-wide costs
• attempting to reduce or eliminate nonvalue-added activities
• the labeling of activities as value-added

26. Which one of the following is NEVER part of recording the issuance of raw materials in a job order cost system?

• Debit Finished Goods Inventory
• Debit Manufacturing Overhead
• Debit Work in Process Inventory
• Credit Raw Materials Inventory

27. What is the best way to handle manufacturing overhead costs in order to get the most timely job cost information?

• The company should determine an allocation rate as soon as the actual costs are known, and then apply manufacturing overhead to jobs.
• The company should add actual manufacturing overhead costs to jobs as soon as the overhead costs are incurred.
• The company should account for only the direct production costs.
• The company should apply overhead using an estimated rate throughout the year.

28. Which of the following would be accounted for using a job order cost system?

• The pasteurization of milk
• The production of textbooks
• The production of town homes
• The production of cans of spinach

29. Which cost is NOT charged to the product under variable costing?

• Direct labor
• Direct materials
• Fixed manufacturing overhead
• Variable manufacturing overhead

30. If the standard hours allowed are less than the standard hours at normal capacity,

• variable overhead costs will be overapplied
• the overhead volume variance will be unfavorable
• the overhead controllable variance will be favorable
• variable overhead costs will be underapplied

31. Managerial accounting

• is governed by generally accepted accounting principles
• pertains to the entity as a whole and is highly aggregated
• places emphasis on special-purpose information
• is concerned with costing products

32. Which one of the following is indirect labor considered?

• Product cost
• Period cost
• Nonmanufacturing cost
• Raw material cost

33. Which cost is NOT charged to the product under absorption costing?

• Fixed administrative expenses
• Variable manufacturing overhead
• Direct materials
• Direct labor

34. One of Astro Company's activity cost pools is machine setups, with estimated overhead of $150,000. Astro produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

• $90,000
• $150,000
• $60,000
• $75,000

35. H55 Company sells two products, beer and wine. Beer has a 10 percent profit margin and wine has a 12 percent profit margin. Beer has a 27 percent contribution margin and wine has a 25 percent contribution margin. If other factors are equal, which product should H55 push to customers?

• Selling either results in the same additional income for the company
• Beer
• Wine
• It should sell an equal quantity of both.

36. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $6 per pound. Last month, 2,000 pounds of direct materials were purchased for $11,400. The direct materials price variance for last month was

• $600 favorable
• $600 unfavorable
• $300 favorable
• $11,400 favorable

37. At the end of the year, manufacturing overhead has been overapplied. What occurred to create this situation?

• The actual manufacturing overhead costs were less than the manufacturing overhead assigned to jobs.
• Estimated manufacturing overhead was less than actual manufacturing overhead costs.
• The company incurred more manufacturing overhead costs than the manufacturing overhead assigned to jobs.
• The company incurred more total job costs than the amount budgeted for the job.

38. Which of the following is NOT typical of traditional costing systems?

• Use of direct labor hours or direct labor cost to assign overhead
• Assumption of correlation between direct labor and incurrence of overhead cost
• Use of a single predetermined overhead rate
• Use of multiple cost drivers to allocate overhead

39. In traditional costing systems, overhead is generally applied based on

• machine hours
• direct labor
• direct material dollars
• units of production

40. All of the following statements are correct EXCEPT that

• activity-based costing has been widely adopted in service industries
• a larger proportion of overhead costs are company-wide costs in service industries
• the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company
• the objective of installing ABC in service firms is different than it is in a manufacturing firm

41. A company must price its product to cover its costs and earn a reasonable profit in

• all cases
• its early years
• the long run
• the short run

42. Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs of $74,400 and sales for the current year of $100,000. How much is Hess's break-even point?

• 6,200 units
• 2,133 units
• $25,600
• 4,600 units