Acc349 Managerial / Cost Accounting: Week 5 Final Study Guide (42 MCQs)_JULY 2012 Version

Acc349 Cost Accounting

Week 5 Final Study Guide (42 MCQs) - July 2012 version

1) When a job is completed, what happens to the cost of the job?

A. It is removed from work in process and included in cost of goods sold.

B. It is removed from work in process and included in finished goods.

C. It is removed from materials inventory and included in work in process.

D. It is removed from finished goods and included in cost of goods sold.



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

A. The company incurred more total job costs than the amount budgeted for the job.

B. Estimated manufacturing overhead was less than actual manufacturing overhead costs.

C. The company incurred more manufacturing overhead costs than the manufacturing overhead assigned to jobs.

D. The actual manufacturing overhead costs were less than the manufacturing overhead assigned to jobs.

3) Why is factory overhead applied to products and jobs by manufacturing companies?

A. Total actual overhead costs can never be accurately determined for production.

B. It provides a more accurate cost of the job or products being processed.

C. It allows managers more timely determination of product costs during the manufacturing process.

D. Because indirect costs are easy to trace to products and jobs.

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

A. Debit Work in Process Inventory

B. Credit Raw Materials Inventory

C. Debit Manufacturing Overhead

D. Debit Finished Goods Inventory

5) In a job order cost accounting system, the Work in Process account is

A. closed at year end

B. a control account

C. an expense

D. a period cost



6) Which one of the following is an important feature of a job order cost system?

A. Each must be completed before a new product order is accepted.

B. Each job has characteristics similar to the next.

C. Each job uses similar processes to produce.

D. Each consists of features which distinguish it from the next.

7) Which one of the following is indirect labor considered?

A. Product cost

B. Period cost

C. Raw material cost

D. Nonmanufacturing cost

8) What broad functions do the management of an organization perform?

A. Directing, manufacturing, and controlling

B. Planning, directing, and selling

C. Planning, manufacturing, and controlling

D. Planning, directing, and controlling

9) Which of the following is an element of manufacturing overhead?

A. Factory workers wages

B. Plant manager’s salary

C. Flour used in manufactured cake mixes

D. Components used in calculators during production

10) A well-designed activity-based costing system starts with

A. identifying the activity-cost pools

B. assigning manufacturing overhead costs for each activity cost pool to products

C. analyzing the activities performed to manufacture a product

D. computing the activity-based overhead rate

11) In traditional costing systems, overhead is generally applied based on

A. direct labor

B. direct material dollars

C. units of production

D. machine hours

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

A. cost driver

B. cost pool

C. product activity

D. overhead rate

13) Which of the following is a nonvalue-added activity?

A. Engineering design

B. Inspection

C. Packaging

D. Machining

14) What sometimes makes implementation of activity-based costing difficult in service industries is

A. the labeling of activities as value-added

B. that a larger proportion of overhead costs are company-wide costs

C. attempting to reduce or eliminate nonvalue-added activities

D. identifying activities, activity cost plus, and cost drivers

15) Each of the following is a limitation of activity-based costing EXCEPT

A. It can be expensive to use.

B. More cost pools are used.

C. Some arbitrary allocations continue.

D. It is more complex than traditional costing.



16) 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 activity-based costing is

A. $1,200,000

B. $1,664,000

C. $1,920,000

D. $1,536,000



17) Which of the following factors would suggest a switch to activity-based costing?

A. Product lines similar in volume and manufacturing complexity.

B. The manufacturing process has been stable.

C. Production managers use data provided by the existing system.

D. Overhead costs constitute a significant portion of total costs.

18) 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

A. $1,280,000

B. $1,536,000

C. $2,000,000

D. $1,670,000

19) Ace Company sells office chairs with a selling price of $25 and a contribution margin per unit of $15. It takes 3 machine hours to produce one chair. How much is the contribution margin per unit of limited resource?

A. $5

B. $3.33

C. $10

D. $45

20) 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?

A. Buy; savings = $25,000

B. Buy; savings = $10,000

C. Make; savings = $10,000

D. Make; savings = $20,000

21) Walton, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $16, while the cost of assembling each unit is estimated at $17. Unassembled units can be sold for $55, while assembled units could be sold for $71 per unit. What decision should Walton make?

A. Sell before assembly; the company will save $1 per unit.

B. Sell before assembly; the company will save $15 per unit.

C. Process further; the company will save $16 per unit.

D. Process further; the company will save $1 per unit.

22) Which one of the following is required in order for an activity base to be useful in cost behavior analysis?

A. The activity level should be an approved GAAP activity base.

B. The activity should always be a fixed amount.

C. The activity should always be based on the number of units produced.

D. There should be a correlation between changes in the level of activity and changes in costs.

23) 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?

A. 4,600 units

B. $25,600

C. 2,133 units

D. 6,200 units

24) Which statement describes a fixed cost?

A. It varies in total at every level of activity.

B. The amount per unit varies depending on the activity level.

C. It remains the same per unit regardless of activity level.

D. Its total varies proportionally to the level of activity.

25) Orbach Company sells its product for $40 per unit. During 2005, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $10, direct labor $6, and variable overhead $2. Fixed costs are: $480,000 manufacturing overhead, and $60,000 selling and administrative expenses. The per unit manufacturing cost under variable costing is

A. $16

B. $18

C. $27

D. $26

26) Which cost is NOT charged to the product under absorption costing?

A. Direct materials

B. Direct labor

C. Fixed administrative expenses

D. Variable manufacturing overhead

27) Which cost is charged to the product under variable costing?

A. Variable manufacturing overhead

B. Fixed manufacturing overhead

C. Fixed administrative expenses

D. Variable administrative expenses

28) The difference between a budget and a standard is that

A. standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system

B. a budget expresses management's plans, while a standard reflects what actually happened

C. a budget expresses what costs were, while a standard expresses what costs should be

D. a budget expresses a total amount while a standard expresses a unit amount

29) Which of the following statements is FALSE?

A. The standard cost of a product is equivalent to the budgeted cost per unit of product.

B. A standard is a unit amount.

C. A standard cost is more accurate than a budgeted cost.

D. In concept, standards and budgets are essentially the same.



30) Which of the following is NOT considered an advantage of using standard costs?

A. Standard costs can make employees "cost-conscious."

B. Standard costs can be useful in setting prices for finished goods.

C. Standard costs can reduce clerical costs.

D. Standard costs can be used as a means of finding fault with performance.

31) 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

A. $5,600 unfavorable

B. $2,400 favorable

C. $3,200 favorable

D. $3,200 unfavorable



32) The total variance is $10,000. The total materials variance is $4,000. The total labor variance is twice the total overhead variance. What is the total overhead variance?

A. $4,000

B. $2,000

C. $1,000

D. $3,000



33) The standard rate of pay is $5 per direct labor hour. If the actual direct labor payroll was $19,600 for 4,000 direct labor hours worked, the direct labor price (rate) variance is

A. $500 favorable

B. $400 favorable

C. $400 unfavorable

D. $500 unfavorable



34) The overhead volume variance relates only to

A. all manufacturing costs

B. fixed overhead costs

C. variable overhead costs

D. both variable and fixed overhead costs

35) Which of the following statements is FALSE?

A. The overhead volume variance is favorable if standard hours allowed for output is greater than the standard hours at normal capacity.

B. The costs that cause the overhead volume variance are usually controllable costs.

C. The overhead volume variance indicates whether plant facilities were used efficiently during the period.

D. The overhead volume variance relates solely to fixed costs.

36) If the standard hours allowed are less than the standard hours at normal capacity, the volume variance

A. will be greater than the controllable variance

B. will be favorable

C. cannot be calculated

D. will be unfavorable

37) 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?

A. $27,500

B. $12,500

C. $13,750

D. $25,000

38) During December, the capital budget indicates a $280,000 purchase of equipment. The ending November cash balance is budgeted to be $40,000. Cash receipts are $840,000, and cash disbursements are $610,000 during December. The company wants to maintain a minimum cash balance of $20,000. What is the minimum cash loan that must be planned to be borrowed from the bank during December?

A. $0

B. $30,000

C. $10,000

D. $50,000

39)Waco’s Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during July.Wacokeeps 10% of the next month’s sales as ending inventory. How many units shouldWacoproduce during June?

A. 19,000

B. 18,900

C. 21,000

D. 19,100

40) The cost-plus pricing approach's major advantage is

A. it can be used to determine a product’s target cost

B. it considers customer demand

C. that sales volume has no effect on per unit costs

D. it is simple to compute

41) Prices are set by the competitive market when

A. a product is not easily distinguished from competing products

B. the product is specially made for a customer

C. there are no other producers capable of manufacturing a similar item

D. a company can effectively differentiate its product from others

42) In most cases, prices are set by the

A. selling company

B. customers

C. competitive market

D. largest competitor
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