Cost Accounting Questions

Unit 1 Quiz
1. A managerial accountant who communicates information objectively is exercising

which of the following standards?
a. objectivity
b. integrity
c. competence
d. confidentiality
2. A managerial accountant who prepares clear reports and recommendations after
analyzing relevant facts is exercising which of the following standards?
a. objectivity
b. integrity
c. competence
d. confidentiality
3. Cost accounting standards
a. are legal standards set by the Institute of Management Accountants for use
in all manufacturing and professional businesses.
b. are set by the Cost Accounting Standards Board and are legally binding on
all manufacturers, but not service organizations.
c. do not exist except for those legal pronouncements for companies
bidding or pricing cost-related contracts with the government.
d. are developed by the Cost Accounting Standards Board, issued by the
Institute of Management Accountants, and are legally binding on CMAs.
4. Which of the following U.S. legislation relates to bribes being offered to foreign
officials?
a. Racketeer Influenced and Corrupt Organizations Act
b. Foreign Illegal Activities Act
c. Foreign Corrupt Practices Act
d. Federal Bribery and Corrupt Practices Act
5. The Institute of Management Accountants' Code of Ethics
a. is a legally enforceable contract with all management accountants.
b. should be viewed as a goal for professional behavior.
c. is a legally enforceable contract with all CPAs.
d. provides ways to measure departures from ethical behavior.
6. The Foreign Corrupt Practices Act is directed at
a. U.S. corporations operating overseas.
b. foreign businesses operating in the U.S.
c. all businesses dealing with U.S. consumers.
d. all U. S. businesses with operations in foreign countries.
7. The ethical standards established for management accountants are in the areas of
a. competence, licensing, reporting, and education.
b. budgeting, cost allocation, product costing, and insider trading.
c. competence, confidentiality, integrity, and credibility.
d. disclosure, communication, decision making, and planning.
8. Which ethical standard is violated by an accountant who accepts a gift from a
client
a. Credibility
b. Confidentiality
c. Competence
d. Integrity
9. Which ethical standard has been violated if an accountant fails to prepare financial
statements according to industry standards?
a. Competence
b. Confidentiality
c. Integrity
d. Credibility
10.
Which ethical standard is violated when an accountant uses information from
a financial statement he is preparing to advise a relative of a stock purchase?
a. Competence
b. Confidentiality
c. Integrity
d. Credibility
Unit 2 Practice Questions

1. Select the incorrect statement concerning cost objects. (Points : 1)
a. When the cost object is the Production Department, the cost of a production
supervisor's salary would be a direct cost.
b. A direct cost must be conveniently and economically traceable to the cost
object.
c. When the cost object is a Tundra truck, the cost of the truck's engine is a
direct cost.
d. When the cost object is the Toyota Princeton Indiana manufacturing
plant the cost of overhead is an indirect cost.
2. Which of the following statements is correct concerning fixed costs? (Points : 1)
a. Within the relevant range, total fixed costs always increase when volume
increases.
b. A step cost may be fixed or variable.
c. The fixed costs per unit will remain constant provided volume remains within
the relevant range.
d. Within the relevant range, total fixed costs always decrease when volume
increases.
3. A utility bill that includes a flat charge for basic service plus a stated rate for each
kilowatt hour of usage beyond a specified level is an example of a (Points : 1)
a. mixed cost.
b. step cost.
c. variable cost.
d. independent cost.
4. Question 4.4. In relation to the dollar amount of Tundra truck sales, which of the
following classifications is appropriate for the truck tires used in production and for
the salaries of production supervisors?
Truck Tires - Production Supervisor Salaries (Points : 1)
a. Variable costFixed cost
b. Fixed costVariable cost
c. Variable costMixed cost
d. Mixed cost Fixed cost
5. The estimated unit cost for a company planning to produce and sell at a level of
12,000 units per month is as follows:
Cost Item
Estimated Unit Cost
Direct material
$20
Direct labor
32
Variable manufacturing overhead
6
Fixed manufacturing overhead
12
Variable selling
4
Fixed selling
4
What is the total estimated conversion costs per unit? (Points : 1)
a.
$70
b.
$58
c.
$52
d.
$50
6. Which of the following is not a product cost for Tundra trucks? (Points : 1)
a.
Steering wheel
b.
Glue
c.
Salary of product sales manager
d.
Overhead
7. Which of the following types of firms has the highest degree of conversion causing
a major transformation from input to output? (Points : 1)
a.
Lee's Landscaping Company
b.
Toyota Manufacturing Company
c.
Wal-Mart Stores
d.
All of the above
8. Select the incorrect statement concerning the stages of the production or
conversion process. (Points : 1)
a. A manufacturing company's Finished Goods inventory account is
similar to a service company's Supplies inventory account.
b. Firms such as retailers that engage in only low or moderate degrees of
conversion ordinarily have only a single inventory account.
c. The production process occurs in three stages: raw material, work in process,
and finished goods.
d. At the point of sale, product costs flow from an inventory account to Cost of
Goods Sold expense.
9. Which of the following would not be classified as direct material for a Tundra truck?
(Points : 1)
a.
Cost of the battery
b.
Cost of the glue used to secure the carpet in the cab of the
truck
c.
Cost of freight paid on the truck windshield
d.
Cost of the fuel tank
10.
Which of the following would be classified as direct labor for the production
of a Tundra truck? (Points : 1)
a.
Wages paid to assembly line (production) workers
b.
Bonuses paid to production workers for exceeding production goals
c.
Production workers' Social Security taxes
d.
All of the above
11.
Which of the following costs would not be classified as overhead for the
production of Tundra trucks? (Points : 1)
a.
Salary of plant manager
b.
Indirect labor costs
c.
Salary of Toyota Chief Executive Officer
d.
Depreciation of production machinery
12.
All of the following are reasons why overhead costs are allocated to cost
objects except:
a. to compare alternative courses of action for management planning and
decision making.
b. to identify the fixed and variable components of the various
overhead costs.
c. to determine the full cost of the cost object.
d. to motivate the manager in charge of the cost object to manage it efficiently.
13.
A Company had the following inventories at the beginning and end of
January:
January 1
January 31
Finished goods
$12,500
$11,700
Work in process
23,500
25,100
Direct material
13,400
12,400
The following additional manufacturing data were available for the month of
January:
Direct material purchased $18,900
Direct labor
30,000
Actual factory overhead
17,500
What was the total cost of direct material used for January? (Points : 1)
a.
$19,900
b.
$18,900
c.
$17,900
d.
$6,500
14.
B Company had the following inventories at the beginning and end of
January:
January 1
January 31
Finished goods
$125,000
$117,000
Work in process
235,000
251,000
Direct material
134,000
124,000
The following additional manufacturing data were available for the month of
January:
Direct material used
$189,000
Direct labor
300,000
Actual factory overhead
175,000
What was B Company's cost of goods manufactured for January? (Points : 1)
a.
$672,000
b.
$660,000
c.
$658,000
d.
$648,000
15.
C Company had the following inventories at the beginning and end of
January:
January 1
January 31
Finished goods
$125,000
$117,000
Work in process
235,000
251,000
Direct material
134,000
124,000
Assuming the Cost of Goods Manufactured for January was $660,000, what was C
Company's cost of goods sold for January? (Points : 1)
a.
$676,000
b.
$668,000
c.
d.
$666,000
$652,000
16.
All of the following are reasons for using predetermined overhead rates in
product costing except:
a. to overcome the problem of fluctuations in activity levels that have no
impact on fixed overhead costs.
b. to overcome the problem caused by overhead containing both fixed
and variable costs.
c. to adjust for variations in actual overhead costs that are unrelated to
fluctuations in activity.
d. to allow management to determine whether a product, product line, or
customer is profitable.
17.
What is the best method for disposing of significant underapplied factory
overhead? (Points : 1)
a. Charge the underapplied amount to cost of goods sold
b. Prorate the underapplied amount to cost of goods sold, finished
goods, and work in process
c. Prorate the underapplied amount to inventory only (work in process and
finished goods)
d. Charge the underapplied amount to a loss account at the end of the period
18.
Select the incorrect statement concerning overapplied overhead. (Points : 1)
a. The overhead control account will have a debit balance.
b. The amount of overhead transferred to WIP from the overhead control
account exceeded the actual amount of overhead incurred.
c. Overapplied overhead must be closed at year-end because a single year's
activity level was used to set the predetermined overhead rate.
d. Overapplied overhead may result if the company's actual utilization of
capacity is greater than expected.
19.
In determining cost behavior in business, the cost function is often expressed
as y = a + bx. What does the "a" term represent? (Points : 1)
a.
Total variable costs
b.
Total fixed costs
c.
Unit variable cost
d.
Unit fixed cost
20.
M Company derived the following cost equation to explain its monthly
manufacturing overhead cost:
OH = $80,000 + $12MH, where MH = machine hours
The standard time required to manufacture one unit is 4 machine hours. The
company applies manufacturing overhead to production on the basis of machine
hours and its normal annual production is 50,000 units. What is the estimated
variable manufacturing overhead cost for a month in which scheduled production
is 5,000 units? (Points : 1)
a.
$360,000
b.
$320,000
c.
$240,000
d.
$80,000
21.
Which method of separating mixed costs ensures the best fitting regression
line? (Points : 1)
a.
High-low method
b.
Scattergraph method
c.
Proration method
d.
Least squares regression method

22.
W Company is working on its annual profit plan for the coming year. The
company wants to determine the cost behavior pattern of its maintenance costs.
The prior year's data regarding maintenance hours and costs are as follows.
Hours of Activity
Maintenance Costs
January
480
$4,200
February
320
3,000
March
400
3,600
April
300
2,820
May
500
4,350
June
310
2,960
July
320
3,030
August
520
4,470
September
490
4,260
October
470
4,050
November
350
3,300
December
340
3,160
Using the high-low method, estimate the amount of maintenance cost per hour.
(Points : 1)
a.
$2,781
b.
$570
c.
$7.50
d.
$0.13
23.
X Company uses simple regression to separate its selling costs (y) into fixed
and variable components based on units sold (x). A computer software program
generated the following regression analysis results:
Average x
400
Average y
3600
a
684.65
Standard error of a
49.515
b
7.2884
Standard error of b
0.12126
Std error of the estimate 34.469
r2
0.99724
What equation should X Company use to estimate its selling costs? (Points : 1)
a.
y = $3,600 + 400x
b.
y = $684.65 + 7.2884x
c.
y = $3,600 + 7.2884x
d.
y = $684.65 + .12126x
24.
In applying overhead, individual department rates would be used instead of a
plant wide rate if (Points : 1)
a. the manufactured products differ in the resources consumed from
the individual departments in the plant.
b. a company wants to adopt a standard cost system.
c. a company's manufacturing operations are highly automated.
d. manufacturing overhead is the largest component of product cost.
25.
Which cost accumulation and reporting system treats the costs of all
manufacturing components (direct material, direct labor, and both variable and
fixed overhead) as product costs? (Points : 1)
a.
Absorption costing
b.
Variable costing
c.
d.
Mixed costing
None of the above
26.
Which cost accumulation and reporting system reports the total contribution
margin? (Points : 1)
a.
Absorption costing
b.
Variable costing
c.
Mixed costing
d.
None of the above
27.
Which cost accumulation and reporting system is required for external
reporting and tax purposes? (Points : 1)
a.
Absorption costing
b.
Variable costing
c.
Mixed costing
d.
None of the above
28.
The primary difference between absorption and variable costing lies in the
treatment of:
a.
variable selling and administrative costs.
b.
variable overhead costs.
c.
fixed overhead costs.
d.
fixed selling and administrative costs.
29.
Which cost accumulation and reporting system provides management an
incentive to over-produce (i.e., produce more units than can be sold)? (Points : 1)
a.
Absorption costing
b.
Variable costing
c.
Mixed costing
d.
None of the above
30.
In a period in which there is no change in inventory, which cost accumulation
and reporting system will report higher profits? (Points : 1)
a.
Absorption costing
b.
Variable costing
c.
Mixed costing
d.
None of the above
Unit 2 Quiz
1. Which of the following is not a reason to use predetermined overhead rates?
a. to overcome the problems of assigning overhead to diverse types of
products
b. to compensate for fluctuations in monthly overhead costs
c. to provide a means for assigning overhead during the period rather than at
the end of the period
d. to smooth out the amount of overhead cost assigned to products when
monthly production activity differs
2. The estimated maximum potential activity for a specified time is:
a. theoretical capacity
b. practical capacity
c. normal capacity
d. expected capacity
3. The measure of activity that allows for routine variations in manufacturing activity
is:
c. normal capacity
4. The measure of production that considers historical and estimated future
production levels and cyclical fluctuations is referred to as:
c. normal capacity
5. A short-run measure of activity that represents a firm?s anticipated activity level
for an upcoming period based upon expected demand is referred to as:
c. normal capacity
6. If a firm produces more units than it sells, absorption costing, relative to variable
costing, will result in
a. higher income and assets.
b. higher income but lower assets.
c. lower income but higher assets.
d. lower income and assets.
7. Under absorption costing, if sales remain constant from period 1 to period 2, the
company will report a larger income in period 2 when
a. period 2 production exceeds period 1 production.
b. period 1 production exceeds period 2 production.
c. variable production costs are larger in period 2 than period 1.
d. fixed production costs are larger in period 2 than period 1.
8. A basic concept of variable costing is that period costs should be currently
expensed. What is the rationale behind this procedure?
a. Period costs are uncontrollable and should not be charged to a specific
product.
b. Period costs are generally immaterial in amount and the cost of assigning the
amounts to specific products would outweigh the benefits.
c. Allocation of period costs is arbitrary at best and could lead to erroneous
decision by management.
d. Because period costs will occur whether production occurs, it is
improper to allocate these costs to production and defer a current
cost of doing business.
9. A firm presently has total sales of $100,000. If its sales rise, its
a. net income based on variable costing will go up more than its net
income based on absorption costing.
b. net income based on absorption costing will go up more than its net income
based on variable costing.
c. fixed costs will also rise.
d. per unit variable costs will rise.
10.
For its most recent fiscal year, a firm reported that its contribution margin
was equal to 40 percent of sales and that its net income amounted to 10 percent
of sales. If its fixed costs for the year were $60,000, how much were sales?
a. $150,000
b. $200,000
c. $600,000
d. can't be determined from the information given

11.
The following information regarding fixed production costs from a
manufacturing firm is available for the current year:
Fixed costs in the beginning inventory $ 16,000
Fixed costs incurred this period 100,000
Which of the following statements is not true?
a. The maximum amount of fixed production costs that this firm could deduct
using absorption costs in the current year is $116,000.
b. The maximum difference between this firm's the current year income based
on absorption costing and its income based on variable costing is $16,000.
c. Using variable costing, this firm will deduct no more than $16,000
for fixed production costs.
d. If this firm produced substantially more units than it sold in the current year,
variable costing will probably yield a lower income than absorption costing.
12.
A firm has fixed costs of $200,000 and variable costs per unit of $6. It plans
on selling 40,000 units in the coming year. To realize a profit of $20,000, the firm
must have a sales price per unit of at least
a. $11.00.
b. $11.50.
c. $10.00.
d. $10.50.
13.
Hahn Corporation produces a single product that sells for $7.00 per unit.
Standard capacity is 100,000 units per year; 100,000 units were produced and
80,000 units were sold during the year. Manufacturing costs and selling and
administrative expenses are presented below.
There were no variances from the standard variable costs. Any under- or
overapplied overhead is written off directly at year-end as an adjustment to cost of
goods sold.
Fixed
Variable costs
costs
$1.50 per unit
Direct material
$0
produced
1.00 per unit
Direct labor
0
produced
0.50 per unit
Manufacturing overhead
$150,000
produced
Selling & Administration
80,000
0.50 per unit sold
expense
Hahn Corporation had no inventory at the beginning of the year.
In presenting inventory on the balance sheet at December 31, the unit cost under
absorption costing is
a. $2.50.
b. $3.00.
c. $3.50.
d. $4.50.
14.
What is the net income under variable costing?
a. $50,000
b. $80,000
c. $90,000
d. $120,000
15.
a.
b.
c.
d.
What is the net income under absorption costing?

$50,000
$80,000
$90,000
$120,000

1. Activity-based management (ABM) focuses on improving customer value and
enhancing profitability. Which of the following is an impact of implementing ABM to
control production processes? (Points : 1)
a. More effective performance evaluation
b. More accurate cost determination and control
c. More efficient production processes
d. All of the above
2. Select the incorrect statement from the following. (Points : 1)
a. An activity is any repetitive action that is performed in fulfillment of a
business function.
b. Non-value-added activities increase the time spent on a product but do not
increase its worth.
c. The objective of activity-based management is to eliminate all nonvalue-added activities.
d. Activity analysis attempts to classify activities as value added or non-valueadded.
3. All of the following are non-value-added time except: (Points : 1)
a. inspection time.
b. move time.
c. processing time.
d. wait time.
4. Which of the following correctly computes manufacturing cycle efficiency?
a. Total Cycle Time - Total Value-Added Time.
b. Total Cycle Time / Total Value-Added Time.
c. Total Value-Added Time + Total Non-Value-Added Time.
d. Total Value-Added Time / Total Cycle Time.
5. The need to rework products because of a poorly designed training program is an
example of a non-value-added activity caused by (Points : 1)
a. systemic factors.
b. physical factors.
c. human factors.
d. None of the above.
6. All of the following are examples of batch-level costs except: (Points : 1)
a. costs of engineering change orders.
b. purchase order costs.
c. inspection costs.
d. movement costs.
7. Select the incorrect matching of cost and cost level. (Points : 1)
a. Unit level : Direct material
b. Facility level : Equipment maintenance
c. Product level : Product development
d. Batch level : Setup costs
8. Which costing system assigns costs within multiple cost pools to products using
multiple drivers? (Points : 1)
a. Activity-based costing
b. Variable costing
c. Traditional costing
d. None of the above
9. E Corporation, which makes electronic components for NASA's space shuttle, uses
activity-based costing. One of its activities is described below:
Activity
1 Quality control
Cost
Driver
Est. Qty.
Required for
Cost Rat
of Cost Driver
Current
Contract
No. of units 210,000 units
$0.14
17,500 units
Select the incorrect statement from the following. (Points : 1)

a. $2,450 will be assigned to the contract on which the company is currently
working.
b. The company's annual estimated quality control costs cannot be
determined from the information provided.
c. Since the component is being built for the U.S. Government for use on the
space shuttle, it is not unusual for the company to inspect every unit
produced.
d. It is likely that the company uses a different cost driver to assign other
support costs such as setup costs.
10.
P Company is considering using activity-based costing instead of its
traditional costing system because it believes its current system may be providing
misleading information. The following data shows the budgeted manufacturing
overhead.
Activity
Cost Driver
Materials
handling
Setup costs
No. of parts
handled
No. of setups
Machine hours
Machining costs
(MH)
Quality control No. of batches
Budgeted Activity
Budgeted
Cost
6,000,000
$720,000
750
315,000
30,000
540,000
500
Total overhead
cost
225,000
$1,800,000
The company also estimates that it will work 50,000 direct labor hours in the
coming year. The following information is provided for one of the company's
products for the coming year:
Direct material and Direct
Labor
Direct materials cost per unit
$4.4
0
Direct labor cost per unit

.05 DLH @ $15/DLH
Total
Sales and production
data:
Expected sales
Batch size
Setups
Total parts per finished
unit
Machine hour required
.75
$5.1
5
20,000 units
5,000 units
2 per batch
5 parts
80 MH per batch
If the organization uses a traditional full cost system, the cost per unit of this
product for the coming year will be (Points : 1)
a. $6.95.
b. $6.11.
c. $5.44.
d. $5.39.
11.
If the organization uses an activity-based cost system, the cost per unit of
this product for the coming year will be (Points : 1)
a. $6.30.
b. $6.21.
c. $6.08.
d. $6.00.
12.
The use of activity-based costing normally results in: (Points : 1)
a. substantially lower unit costs for low-volume products than is reported by
traditional product costing.
b. equalizing setup costs for all product lines.
c. decreased setup costs being charged to low-volume products.
d. substantially greater unit costs for low-volume products than is
reported by traditional product costing.
13.
Because of the changes that are occurring in the basic operations of many
firms, all of the following represent trends in the way indirect costs are allocated
except: (Points : 1)
a. treating direct labor as an indirect manufacturing cost in an automated
factory.
b. using throughput time as an application base to increase awareness of the
costs associated with lengthened throughput time.
c. preferring plant-wide application rates that are applied to machine
hours rather than incurring the cost of detailed allocations.
d. using several machine cost pools to measure product costs on the basis of
time in a machine center.
14.
Activity-Based Costing is appropriate for which of the following
organizations? (Points : 1)
a. One that produces and sells a wide variety of products.
b. One that produces and sells a single complex product.
c. One that provides a single service to customers.
d. All of the above
15.
A number of barriers must be overcome to implement activity-based costing
systems successfully. Select the barrier that is not matched up properly with its
type. (Points : 1)
a. Fear of change Individual barrier
b. Regulatory agenciesEnvironmental barrier
c. Corporate culture issues Organizational barrier
d. All of the above barriers are properly classified.
Unit 3 Quiz
1. When a firm redesigns a product to reduce the number of component parts, the
firm is
a. increasing consumer value.
b. increasing the value added to the product.
c. decreasing product variety.
d. decreasing non-value-added costs.
2. Non-value-added activities that are necessary to businesses, but not costs that
customers are willing to pay for are known as
a. business-value-added activities.
b. long-term variable activities.
c. short-term variable activities.
d. superior business activities.
3. A value chart indicates
a. all steps in a process and the time it takes for them to be
completed.
b. the value-added steps in a process and the time it takes for them to be
completed.
c. the time and cost of all value-added steps in a process.
d. the time and costs of all value-added and non-value-added steps in a
process.
4. Which of the following is not a drawback of mass customization?
a. The choices are too numerous.
b. The potential for errors is great.
c. Only a small percentage of available choices is normally selected.
d. All of the above are drawbacks.
5. Product costing systems in use over the last 40 years
a. concentrated on using multiple cost pools and cost drivers.
b. were often technologically incapable of handling activity-based
costing information.
c. have generally been responsive to changes in the manufacturing
environment.
d. have been appropriate for managerial decision purposes as long as they met
the requirements of generally accepted accounting principles.
6. In allocating fixed costs to products in activity-based costing,
a. direct labor hours should always be used as the allocation base.
b. a company should use the same allocation base that it uses for variable
costs.
c. a cost driver that is not volume-related should be used.
d. machine hours should always be used.
7. Under activity-based costing, benchmarks for product cost should contain an
allowance for
a. idle time.
b. idle time and scrap materials.
c. spoilage.
d. None of the responses are correct.
8. Activity-based costing and activity-based management are effective in helping
managers do all of the following except
a. trace technology costs to products.
b. promote excellence standards.
c. identify only value-added activities.
d. analyze performance problems.
9. Traditional standard costs are inappropriate measures for performance evaluation
in the "new era" of manufacturing because they
a. build in allowances for non-value-adding activities.
b. are based on historical information.
c. don't reflect current costs.
d. are ideal goals.
10.
A key concept underlying cost driver analysis is that
a. all cost drivers identified should be used for cost accumulation.
b. the cost of measuring a driver does not exceed the benefits of using
it.
c. only costs occurring at the unit-level should be assigned to products or
services.
d. organizational/facility costs are non-value-added and should never be
assigned to products or services.
11.
When cost driver analysis is used, organizational profit or loss can be
determined by subtracting
a. organizational costs from total margin provided by products.
b. organizational costs from total product revenue.
c. total product costs from total product revenue.
d. total unit, batch, product/process, and organizational level costs incurred for
a period from total product revenue.
12.
The Pareto principle is important to consider when an organization is
a. assessing whether to employ activity-based costing versus attribute-based
costing.
b. evaluating the number of activities that are value-added versus those that
are non-value-added.
c. deciding whether to offer a product in one color versus in ten colors.
d. determining whether simultaneous engineering activities will be impacted by
the "Rule of One."
13.
Engaging in which of the following will result in radical changes being made
to an organization's processes?
a. Continuous improvement
b. Benchmarking
c. Reengineering
d. Mass customization
14.
Which of the following is most likely to make the implementation of ABC/ABM
slow and difficult?
a. The development of new cost drivers that measure costs more effectively.
b. A lack of involvement by or support from upper management.
c. The need for dual costing systems.
d. An inability to eliminate all business-value-added activities.
15.
Activity-based costing and generally accepted accounting principles differ in
that ABC
a. does not define product costs in the same manner as GAAP.
b. cannot be used to compute an income statement, but GAAP can.
c. is concerned only with costs generated from automated processes, but GAAP
is concerned with costs generated from both manual and automated
processes.
d. information is useful only to managers, while GAAP information is useful to
all organizational stakeholders.

1. All of the following would most likely use a job order costing system except: (Points
: 1)
a.
a dental practice.
b.
an auto repair shop.
c.
a small appliance maker.
d.
an architectural firm.
2. Which of the following costs is not charged to Work in Process in a normal cost
system?
a.
Actual overhead
b.
Actual direct materials
c.
Actual direct labor
d.
Estimated indirect labor
3. Which of the following product costs would be charged to Work in Process
assuming a standard costing system? (Points : 1)
a.
Actual direct material costs
b.
Actual overhead costs
c.
Actual direct labor costs
d.
Applied overhead costs
4. Select the incorrect job order costing system characteristic. (Points : 1)
a. Costs are accumulated by job.
b. A job may consist of multiple units provided all units are similar.
c. Costs of different jobs cannot logically be averaged so a unique cost must be
determined for each job.
d. Jobs are usually produced to distinct customer specifications.
5. Which of the following serves at a subsidiary ledger for the Work in Process
account? (Points : 1)
a.
Standard cost card
b.
Material requisition form
c.
Job requisition form
d.
Job order cost sheet
6. Which of the following is not a source document used in job order costing systems?
(Points : 1)
a.
Cost of production report
b.
Employee time sheet
c.
Job cost sheet
d.
Material requisition form
7. Select the response that represents the correct flow of costs in a job order costing
system.
a.
Raw materials, work in process, cost of goods sold, finished goods
b.
Raw materials, work in process, finished goods, cost of goods
sold
c.
Raw materials, overhead, work in process
d.
Direct material, finished goods, work in process
8. The journal entry to apply overhead to production would include: (Points : 1)
a. a debit to Manufacturing Overhead Control.
b. credits to various accounts such as Cash, Accumulated Depreciation, and
Accounts Payable.
c. a credit to Manufacturing Overhead Control.
d. a credit to Work in Process.
9. The journal entry to transfer production from the Finishing Department to Finished
Goods would include a: (Points : 1)
a.
credit to Finished Goods.
b.
debit to Cost of Goods Manufactured.
c.
credit to WIP - Finishing.
d.
credit to Cost of Goods Manufactured.
10.
M Corporation manufactures a specialty line of jeans using a job-order-cost
system. During May, the following costs were incurred in completing Job M1: direct
materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling,
$5,600. Overhead was applied at the rate of $25 per machine hour, and Job M1
required 800 machine hours. If Job M1 resulted in 7,000 good jeans, the cost of
goods sold per unit would be (Points : 1)
a.
$5.50.
b.
$6.30.
c.
$5.70.
d.
$8.50.
11.
Q Company uses a normal cost system. The following information is from its
financial records for the year:
Total manufacturing costs, $2,500,000
Cost of goods manufactured, $2,425,000
Applied overhead, 30% of total manufacturing costs
Predetermined OH rate, 80% of direct labor cost
Assuming the company's work in process inventory at January 1 was 75 percent of
its December 31 work in process inventory, what is the carrying value of the
company's work in process inventory at December 31? (Points : 1)
a.
$75,000
b.
$100,000
c.
$225,000
d.
$300,000
12.
Which of the following costing systems does not involve computing cost
variances? (Points : 1)
a.
Actual costing system
b.
Normal costing system
c.
Standard costing system
d.
All of the above systems involve computing cost variances
13.
Select the incorrect statement concerning standard costs and job order
costing. (Points : 1)
a. A standard cost system determines product cost by using predetermined
norms in the inventory accounts for prices and/or quantities of cost
components.
b. Standards can be used in a job order cost system only if a company typically
engages in jobs that produce fairly similar products.
c. Under GAAP, standard cost job order systems may not substitute for
actual or normal costing systems.
d. Standard cost variances can be computed for actual-to-standard differences
regardless of whether standards have been established for both quantities
and prices or for prices or rates only.
14.
Which of the following statements is true concerning job order costing and
management decision making? (Points : 1)
a. Job order costing assists managers in their planning, controlling, decision
making and performance evaluations functions.
b. Job order costing allows managers to trace costs associated with specific
current jobs to better estimate costs of future jobs.
c. Job order costing provides a means by which managers can better control
the costs associated with their operations.
d. All of the above are true statements.
15.
Select the incorrect statement regarding the accounting for product losses.
(Points : 1)
a. Normal losses that are anticipated on all jobs are estimated and included in
the development of the predetermined OH rate.
b. Normal losses that are associated with a particular job are charged
to a loss account in the period they are incurred.
c. Abnormal losses are charged to a loss account in the period they are
incurred.
d. The difference between normal and abnormal loss is one of degree and
therefore must be determined by management.
16.
Which of the following would least likely use a process costing system?
(Points : 1)
a.
Manufacturer of custom furniture
b.
Manufacturer of soft drinks
c.
Manufacturer of gasoline
d.
Manufacturer of paper
17.
Which of the following is not a basic objective of process costing? (Points : 1)
a. Compute an average cost per unit since units are homogeneous
b. Allocate production costs between whole units and partial units
c. Separate production costs into fixed and variable components
d. Determine the amount of production costs that should be transferred to the
next department
18.
Select the incorrect statement regarding equivalent units of production
(EUP). (Points : 1)
a. Two units 50% complete are equivalent to one unit 100% complete.
b. Except in very rare instances, only one EUP calculation is needed per
department.
c. EUP equals the number of whole units of output that could have been
produced during a period from the actual effort expended.
d. The objective of EUP calculations is to eliminate the costing problemcaused
by partially completed units.
19.
The steps in process costing are listed below:
Calculate physical units to be accounted for
Calculate physical units accounted for
Calculate equivalent units of production (EUP)
Calculate total costs to be accounted for

Calculate the cost per EUP
?
What is the missing step? (Points : 1)
a.
Assign costs to whole and partial units in ending inventory
b.
Assign costs to whole units produced during the period
c.
Assign costs to units started and completed during the period
d.
Assign costs to units transferred out and units in ending inventory
20.
Which of the following is true about the weighted average method of process
costing? (Points : 1)
a. The calculation of EUP must take into consideration the units in both
beginning and ending inventory.
b. The cost per EUP will include prior period costs if the department had
beginning inventory.
c. The most common alternative to the weighted average method is the last-in,
first-out method.
d. The weighted average method refers to a method of determining which units
were sold and which units remain in inventory.
21.
Z Company employs a process costing system for its manufacturing
operations. All direct materials are added at the beginning of the process and
conversion costs are added proportionately. The production quantity schedule for
April is reproduced below:
Units
Work in process on April 1 (60% complete as to conversion costs)
1,000
Units started during April
5,000
Total units to account for
6,000
Units completed and transferred out
4,000
Work in process on April 30 (20% complete as to conversion costs)
2,000
Total units accounted for
6,000
Costs pertaining to the month of April are as follows:
Beginning inventory costs: (DM, $54,600; Conversion, $35,560)
$
90,160
Costs incurred during April (DM, $468,000; Conversion $574,060)
$1,042,060
Using the weighted average method, the equivalent units for direct materials for
April are:
a.
6,000 units.
b.
5,000 units.
c.
4,400 units.
d.
3,800 units.
22.
Using the weighted average method, the equivalent units for conversion
costs for April are:
a.
6,000 units.
b.
c.
d.
5,000 units.
4,400 units.
3,800 units.
23.
Using the weighted average method, the equivalent unit materials cost for
April is: (Points : 1)
a.
$78.00.
b.
$87.10.
c.
$130.65.
d.
$138.55.
24.
Using the weighted average method, the 4,000 units completed during April
will be transferred out at an EUP unit cost of: (Points : 1)
a.
$188.69.
b.
$225.65.
c.
$257.31.
d.
$283.04.
25.
L Company uses a process cost system to account for its manufacturing
operations. All direct materials are added at the beginning of the process and
conversion costs are added proportionately. The production quantity schedule for
June is reproduced below:
Units
Work in process on June 1 (20% complete as to conversion costs)
16,000
Units started during June
100,000
Total units to account for
116,000
Units completed and transferred out from beginning inventory
16,000
Units started and completed during June
76,000
Work in process on June 30 (40% complete as to conversion costs)
24,000
Total units accounted for
116,000
Costs pertaining to the month of June are as follows:
Beginning inventory costs: (DM, $54,600; Conversion, $35,560)
$
90,160
Costs incurred during June (DM, $468,000; Conversion $574,060)
$1,042,060
Using the FIFO method, the equivalent units for direct materials for June are:
(Points : 1)
a.
116,000 units.
b.
100,000 units.
c.
85,600 units.
d.
76,000 units.
26.
Using the FIFO method, the equivalent units for conversion costs for June are:
(Points : 1)
a.
116,000 units.
b.
100,000 units.
c.
d.
98,400 units.
76,000 units.
27.
Using the FIFO method, the direct materials cost per equivalent unit for units
started and completed during June is: (Points : 1)
a.
$6.16.
b.
$6.00.
c.
$5.23.
d.
$4.68.
28.
Select the incorrect statement concerning process costing in a
multidepartment setting.
a. In this environment, goods are transferred from a predecessor (upstream)
department to a successor (downstream) department.
b. Transferred out costs of the predecessor department become transferred in
costs of the successor department.
c. Occasionally, successor departments will change the unit of measure used in
predecessor departments.
d. By definition, successor departments may not add any additional raw
materials to the units received from predecessor departments.
29.
Which of the following statements is true concerning process costing? (Points
: 1)
a. Companies my substitute standard costs for actual costs.
b. EUP calculations for standard process costing are identical to those of FIFO
process costing.
c. An advantage of standard process costing is that material, labor, and
overhead variances can be computed to assist in performance evaluation.
d. All of the above are true.
30.
An appropriate costing system for a company whose various product lines
have different direct materials but similar processing techniques is likely a (Points :
1)
a.
weighted average method of process costing.
b.
first-in, first out method of process costing.
c.
hybrid method of process costing.
d.
last-in, first out method of process costing.
Unit 4 Quiz
1. Which of the following organizations would be most likely to use a job-order costing
system?
a.
the loan department of a bank
b.
the check clearing department of a bank
c.
a manufacturer of processed cheese food
d.
a manufacturer of video cassette tapes
2. A company producing which of the following would be most likely to use a price
standard for material? (Points : 1)
a.
furniture
b.
NFL-logo jackets
c.
custom-made picture frames
d.
none of the above
3. A company producing which of the following would be most likely to use a time
standard for labor? (Points : 1)
a.
mattresses
b.
custom-made picture frames
c.
floral arrangements
d.
stained-glass windows
4. In a job-order costing system, the net cost of normal spoilage is equal to (Points :
1)
a.
estimated disposal value plus the cost of spoiled work.
b.
the cost of spoiled work minus estimated spoilage cost.
c.
the units of spoiled work times the predetermined overhead rate.
d.
the cost of spoiled work minus the estimated disposal value.
5. The net cost of normal spoilage in a job-order costing system in which spoilage is
common to all jobs should be (Points : 1)
a.
assigned directly to the jobs that caused the spoilage.
b.
charged to manufacturing overhead during the period of the
spoilage.
c.
charged to a loss account during the period of the spoilage.
d.
allocated only to jobs that are completed during the period.
6. Spears Manufacturing Company produces beach chairs. Chair frames are all the
same size, but can be made from plastic, wood, or aluminum. Regardless of frame
choice, the same sailcloth is used for the seat on all chairs. Spears has set a
standard for sailcloth of $9.90 per square yard and each chair requires 1 square
yard of material. Spears produced 500 plastic chairs, 100 wooden chairs, and 250
aluminum chairs during June.
The total cost for 1,000 square yards of sailcloth during the month was $10,000. At
the end of the month, 50 square yards of sailcloth remained in inventory.
The unfavorable material price variance for sailcloth purchases for the month was
(Points : 1)
a.
$ 100.
b.
$ 495.
c.
$1,090.
d.
$1,585.
7. Assuming that there was no sailcloth in inventory at the beginning of June, the
unfavorable material quantity variance for the month was (Points : 1)
a.
$ 495.
b.
$ 500.
c.
$ 990.
d.
$1,000.
8. Equivalent units of production are equal to the (Points : 1)
a. units completed by a production department in the period.
b. number of units worked on during the period by a production department.
c. number of whole units that could have been completed if all work of
the period had been used to produce whole units.
d. identifiable units existing at the end of the period in a production
department.
9. The weighted average method is thought by some accountants to be inferior to the
FIFO method because it (Points : 1)
a.
is more difficult to apply.
b.
only considers the last units worked on.
c.
ignores work performed in subsequent periods.
d.
commingles costs of two periods.
10.
The first step in determining the cost per EUP per cost component under the
weighted average method is to (Points : 1)
a. add the beginning Work in Process Inventory cost to the current

period's production cost.
b. divide the current period's production cost by the equivalent units.
c. subtract the beginning Work in Process Inventory cost from the current
period's production cost.
d. divide the current period's production cost into the EUP.
11.
The difference between EUP calculated using FIFO and EUP calculated using
weighted average is the equivalent units (Points : 1)
a.
started and completed during the period.
b.
residing in beginning Work in Process Inventory.
c.
residing in ending Work in Process Inventory.
d.
uncompleted in Work in Process Inventory.
12.
EUP calculations for standard process costing are the same as (Points : 1)
a.
the EUP calculations for weighted average process costing.
b.
the EUP calculations for FIFO process costing.
c.
LIFO inventory costing for merchandise.
d.
the EUP calculations for LIFO process costing.
13.
To compute equivalent units of production using the FIFO method of process
costing, work for the current period must be stated in units (Points : 1)
a. completed during the period and units in ending inventory.
b. completed from beginning inventory, units started and completed
during the period, and units partially completed in ending inventory.
c. started during the period and units transferred out during the period.
d. processed during the period and units completed during the period.
14.
Material is added at the beginning of a process in a process costing system.
The beginning Work in Process Inventory for the process was 30 percent complete
as to conversion costs. Using the FIFO method of costing, the number of equivalent
units of material for the process during this period is equal to the (Points : 1)
a. beginning inventory this period for the process.
b. units started and completed this period in the process.
c. units started this period in the process plus the beginning Work in Process
Inventory.
d. units started and completed this period plus the units in ending
Work in Process Inventory.
15.
Averaging the total cost of completed beginning work-in-process inventory
and units started and completed over all units transferred out is known as (Points :
1)
a.
strict FIFO.
b.
modified FIFO.
c.
weighted average costing.
d.
normal costing.

1. Select the correct statement regarding standards. (Points : 1)
a.
A standard is a benchmark or norm used for planning and control.
b.
The difference between standard cost and actual cost is referred to as a
variance.
c.
Standards are developed for materials, labor, and overhead.
d.
All of the above
2. The document that summarizes the expected quantities and costs needed to
produce a unit is called a (Points : 1)
a.
bill of materials.
b.
total cost of ownership document.
c.
operations flow document.
d.
standard cost card.
3. This month R Company planned to produce 3,000 units of its product. The standard
cost card calls for six pounds of material at $.30 per pound. Actual production for
the month was 3,100 units, resulting in a favorable price variance of $380 and an
unfavorable quantity variance of $120. Based on these variances, one could
conclude that: (Points : 1)
a.
more materials were purchased than were used.
b.
the actual cost of material was less than the standard cost.
c.
the actual usage of material was less than the standard allowed.
d.
the actual cost and usage of material were both less than standard.
4. An unfavorable direct labor efficiency variance could be caused by a (n): (Points :
1)
a.
unfavorable variable overhead spending variance.
b.
unfavorable fixed overhead volume variance.
c.
unfavorable material usage variance.
d.
favorable fixed overhead volume variance.
5. The flexible budget for the month of August was for 9,000 units with direct
material at $15 per unit. Direct labor was budgeted at 45 minutes per unit for a
total of $81,000. Actual output for the month was 8,500 units with $127,500 in
direct material and $77,775 in direct labor expense. Direct labor hours of 6,375
were actually worked during the month. Variance analysis would show: (Points : 1)
a.
a favorable direct labor efficiency variance of $1,275.
b.
an unfavorable direct labor efficiency variance of $1,275.
c.
an unfavorable direct labor rate variance of $1,275.
d.
none of the above.
6. The total fixed overhead variance is the: (Points : 1)
a.
measure of the lost profits from the lack of sales volume.
b.
amount of the underapplied or overapplied fixed overhead
costs.
c.
potential cost reduction that can be achieved from better cost control.
d.
measure of production inefficiency.
7. Variable overhead is applied on the basis of standard direct labor hours. If the
direct labor efficiency variance is favorable, the variable overhead efficiency
variance will be: (Points : 1)
a.
unfavorable.
b.
favorable.
c.
zero.
d.
the same amount as the labor efficiency variance.
8. Y Company's product has a labor standard of 2 hours per unit. For 2011, it
estimates its production will be 200,000 units (400,000 DLHs). It budgets total
overhead at $900,000, which results in a fixed overhead rate of $1.50 per hour.
Actual data for the year include: Actual production, 198,000 units (440,000 DLHs),
Actual variable overhead, $352,000, Actual fixed overhead, $575,000 The variable
overhead efficiency variance for the year is: (Points : 1)
a.
$66,000 unfavorable.
b.
$35,520 favorable.
c.
$33,000 favorable.
d.
$33,000 unfavorable.
9. Standard cost systems should be used for all of the following reasons except:
(Points : 1)
a.
motivation.
b.
decision-making.
c.
establishing blame.
d.
clerical efficiency.
10.
Select the correct statement from the following. (Points : 1)
a. An extremely favorable variance is not necessarily a good variance.
b. There is a movement in practice toward reporting variances less often than
in the past.
c. Only unfavorable variances need to be investigated.
d. For proper performance evaluation to be made, responsibility for variances
should not be traced to specific managers.
11.
The best basis upon which cost standards should be set to measure
controllable production inefficiencies is: (Points : 1)
a.
engineering standards based on attainable performance.
b.
normal capacity.
c.
engineering standards.
d.
ideal capacity.
12.
Variance analysis for conversion cost in automated plants normally focuses
on: (Points : 1)
a.
spending variances for overhead costs.
b.
efficiency variances for machinery and production costs rather than
labor costs.
c.
volume variance for production.
d.
all of the above.
13.
A possible combination of materials or labor is called (Points : 1)
a.
materials-time measurement.
b.
yield.
c.
mix.
d.
conversion.
14.
A measure of the difference between the actual total quantity of input and
the standard total quantity allowed based on output is called the (Points : 1)
a.
mix variance.
b.
yield variance.
c.
volume variance.
d.
none of the above.
15.
Select the correct equation for the labor mix variance. (Points : 1)
a. (Actual mix x Actual hours x Actual rate) - (Actual mix x Actual hours x
Standard rate)
b. (Actual mix x Actual hours x Standard rate) - (Actual mix x Actual hours x
Standard rate)
c. (Actual mix x Actual hours x Standard rate) - (Standard mix x Actual
hours x Standard rate)
d. (Standard mix x Actual hours x Standard rate) - (Standard mix x Standard
hours x Standard rate)
16.
Which income statement format better facilitates the determination of a
company's break-even point? (Points : 1)
a.
Absorption costing income statement
b.
c.
d.
Full costing income statement

Variable costing income statement
None of the above
17.
Select the incorrect equation for computing the breakeven point. (Points : 1)
a.
Total Fixed Costs = Total Contribution Margin
b.
Total Revenue = Total Costs
c.
Total Profit = $0
d.
Total Variable Costs = Total Fixed Costs
18.
A Company sells a product for $7.50 whose variable cost is $2.25 per unit.
The company needed to sell 20,000 shirts to break even. What was the company's
total fixed costs? (Points : 1)
a.
$105,000
b.
$150,000
c.
$45,000
d.
$3,810
19.
B Company sells a product for $7.50 whose variable cost is $2.25 per unit.
The company needed to sell 20,000 shirts to break even and its net income was
$5,040 before tax. How many units did the company sell? (Points : 1)
a.
2,240
b.
20,000
c.
20,672
d.
20,960
20.
W Company manufactures a product that sells for $800 per unit. The unit
variable costs are $600 and total fixed costs are $6,600,000. The annual sales
volume required for W Company to break even is: (Points : 1)
a.
$26,400,000.
b.
$8,800,000.
c.
$6,600,000.
d.
None of the above.
21.
F Company manufactures and sells T-shirts. Last year, the shirts sold for
$7.50 each, and the variable cost to manufacture them was $2.25 per unit. The
company needed to sell 20,000 shirts to break even. The net income last year was
$5,040. F Company's expectation for the coming year include the following:
The selling price of the T-shirts will be $9.00
Variable cost to manufacture will increase by one-third
Fixed costs will increase by 10%
The income tax rate of 40% will be unchanged
The number of T-shirts that must be sold to break even in the coming year is:
(Points : 1)
a.
22,000.
b.
20,000.
c.
19,250.
d.
17,500.
22.
A calculation used in a CVP analysis determines the break-even point. Once
the break-even point has been reached, operating income will increase by the:
(Points : 1)
a.
contribution margin per unit for each additional unit sold.
b.
gross margin per unit for each additional unit sold.
c.
fixed costs per unit for each additional unit sold.
d.
variable costs per unit for each additional unit sold.
23.
A company sells a product for $9.00 which has a variable manufacturing cost
of $3.00 per unit. Last year, the company needed to sell 20,000 shirts to break
even. Assuming the company is subject to a 40% tax rate and wishes to earn
$22,500 profit after tax for the coming year, what sales will be required? (Points :
1)
a.
$257,625
b.
$236,250
c.
$213,750
d.
$180,000
24.
X Company sold a product last year that had a $5.00 unit contribution
margin. A significant change in the company's production technology has caused a
10% increase in annual fixed costs but a 20% decrease in unit variable costs.
Assuming there was no change in the product's $10.00 selling price what is the
company's new contribution margin ratio? (Points : 1)
a.
60%
b.
50%
c.
40%
d.
Can't be determined from the information provided
25.
A significant change in Y Company's production technology caused its total
fixed costs of $6,708,716 to increase by 9%. However, the change caused a 20%
unit cost decrease in direct labor and a 25% decrease in the unit material cost
leading to $25 increase in its $300 unit contribution margin. After incorporating
these changes, what is Y Company's new break-even point? (Points : 1)
a.
22,500 units
b.
20,643 units
c.
24,375 units
d.
22,363 units
26.
One Company sells two products, A and B. A has a unit contribution margin
of $40 while B has a unit contribution margin of $25. Last year the company sold
40,000 units of Product A and 60,000 units of Product B. What is the company's
weighted average contribution margin? (Points : 1)
a.
($40 + $25) / 2
b.
($40 x 40,000) + ($25 x 60,000)
c.
($40 x 0.4) + ($25 x 0.6)
d.
None of the above
27.
For a profitable company, the amount by which sales can decline before
losses occur is known as the: (Points : 1)
a.
sales volume variance.
b.
hurdle rate.
c.
marginal income rate.
d.
margin of safety.
28.
V Company sold 10,000 units of its product for $100 per unit. It's unit
variable costs are $20 and its total fixed costs are $600,000. Assuming the
company has a 40% tax rate, what is its degree of operating leverage? (Points : 1)
a.
4.00
b.
0.25
c.
6.67
d.
0.15
29.
Which of the following is not an assumption of CVP analysis? (Points : 1)
a.
All revenues and variable cost are linear.
b.
c.
d.
30.
a.
b.
c.
d.
Mixed costs can be accurately separated into their fixed and variable
components.
Sales exceed production.
Labor productivity and market conditions will not change.
If changes occur in selling price or cost, new computations must be made for
break-even and CVP analysis.
In the long-term, fixed costs should be regarded as a long-term variable cost.
Fixed costs exist only in a short-term perspective.
In the future, the only nonmonetary variable included in the breakeven model will be sales volume.
Unit 5 Quiz
1. An operations flow document (Points : 1)
a. tracks the cost and quantity of material through an operation.
b. tracks the network of control points from receipt of a customer's order
through the delivery of the finished product.
c. specifies tasks to make a unit and the times allowed for each task.
d. charts the shortest path by which to arrange machines for completing
products.
2. Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of
product. Each unit should take 4 direct labor hours. Bailey Corporation applies
variable overhead to production on a direct labor hour basis.
The variable overhead efficiency variance (Points : 1)
a.
will be unfavorable.
b.
will be favorable.
c.
will depend upon the capacity measure selected to assign overhead to
production.
d.
is impossible to determine without additional information.
3. A variable overhead spending variance is caused by (Points : 1)
a. using more or fewer actual hours than the standard hours allowed for the
production achieved.
b. paying a higher/lower average actual overhead price per unit of the activity
base than the standard price allowed per unit of the activity base.
c. larger/smaller waste and shrinkage.
d. both b and c are causes.
4. Fixed overhead costs are (Points : 1)
a. best controlled on a unit-by-unit basis of products produced.
b. mostly incurred to provide the capacity to produce and are best
controlled on a total basis at the time they are originally negotiated.
c. constant on a per-unit basis at all different activity levels within the relevant
range.
d. best controlled as to spending during the production process.
5. In analyzing manufacturing overhead variances, the volume variance is the
difference between the (Points : 1)
a. amount shown in the flexible budget and the amount shown in the debit side
of the overhead control account.
b. predetermined overhead application rate and the flexible budget application
rate times actual hours worked.
c. budget allowance based on standard hours allowed for actual

production for the period and the amount budgeted to be applied
during the period.
d. actual amount spent for overhead items during the period and the overhead
amount applied to production during the period.
6. Variance analysis for overhead normally focuses on (Points : 1)
a.
efficiency variances for machinery and indirect production
costs.
b.
volume variances for fixed overhead costs.
c.
the controllable variance as a lump-sum amount.
d.
the difference between budgeted and applied variable overhead.
7. The use of separate variable and fixed overhead rates is better than a combined
rate because such a system (Points : 1)
a.
is less expensive to operate and maintain.
b.
does not result in underapplied or overapplied overhead.
c.
is more effective in assigning overhead costs to products.
d.
is easier to develop.
8. In a just-in-time inventory system, (Points : 1)
a.
practical standards become ideal standards.
b.
ideal standards become expected standards.
c.
variances will not occur because of the zero-defects basis of JIT.
d.
standard costing cannot be used.
9. Consider the equation X = Sales - [(CM/Sales) ? (Sales)]. What is X? (Points : 1)
a.
net income
b.
fixed costs
c.
contribution margin
d.
variable costs
10.
If a firm's net income does not change as its volume changes, the firm('s)
(Points : 1)
a.
must be in the service industry.
b.
must have no fixed costs.
c.
sales price must equal $0.
d.
sales price must equal its variable costs.
11.
In a CVP graph, the slope of the total revenue line indicates the (Points : 1)
a.
rate at which profit changes as volume changes.
b.
rate at which the contribution margin changes as volume
changes.
c.
ratio of increase of total fixed costs.
d.
total costs per unit.
12.
If a company's fixed costs were to increase, the effect on a profit-volume
graph would be that the (Points : 1)
a.
contribution margin line would shift upward parallel to the present line.
b.
contribution margin line would shift downward parallel to the
present line.
c.
slope of the contribution margin line would be more pronounced
(steeper).
d.
slope of the contribution margin line would be less pronounced (flatter).
13.
Management is considering replacing an existing sales commission
compensation plan with a fixed salary plan. If the change is adopted, the
company's (Points : 1)
a.
break-even point must increase.
b.
c.
d.
margin of safety must decrease.

operating leverage must increase.
profit must increase.
14.
As projected net income increases the (Points : 1)
a.
degree of operating leverage declines.
b.
margin of safety stays constant.
c.
break-even point goes down.
d.
contribution margin ratio goes up.
15.
A managerial preference for a very low degree of operating leverage might
indicate that
a.
an increase in sales volume is expected.
b.
a decrease in sales volume is expected.
c.
the firm is very unprofitable.
d.
the firm has very high fixed costs.

1. Short-term planning that produces "single use" plans such as the annual budget is
referred to as (Points : 1)
a.
strategic planning.
b.
managerial planning.
c.
tactical planning.
d.
internal planning.
2. A budget sets the resource constraints under which managers must operate for the
upcoming budget period. The control phase includes all of the following except:
(Points : 1)
a.
making actual-to-budget comparisons.
b.
providing feedback to operating managers.
c.
investigating variances.
d.
assigning blame for poor performance.
3. All of the following are operating budgets except: (Points : 1)
a.
selling and administrative budget.
b.
purchases budget.
c.
cash budget.
d.
sales budget.
4. When preparing the series of annual operating budgets, management usually
starts the process with the: (Points : 1)
a.
cash budget.
b.
budgeted balance sheet.
c.
sales budget.
d.
production budget.
5. G Company has beginning inventory of 4,000 units. Management estimates that
35,000 units will be sold during the first quarter with a 10% increase in sales each
quarter. It is the company's policy to maintain an ending inventory equal to 25% of
the next quarter's sales. Each unit sells for $3.00. How much sales revenue should
be budgeted for the third quarter? (Points : 1)
a.
$84,700
b.
$115,050
c.
$126,000
d.
$127,050
6. L Company's budget calls for the following production:
Quarter
145,000 units Quarter
334,000 units
Quarter
238,000 units Quarter
448,000 units
Each unit of product requires three pounds of direct material. The company's policy
is to begin each quarter with an inventory of direct material equal to 30% of that
quarter's direct material production requirements. Budgeted direct material
purchases (in pounds) for the third quarter would be: (Points : 1)
a.
114,600.
b.
89,400.
c.
38,200.
d.
29,800.
7. The following beginning and ending inventory levels (in units) are planned for the
upcoming fiscal year:
Beginning of Year
End of Year
Raw material
40,000
50,000
Work-in-process
10,000
10,000
Finished goods
80,000
50,000
Two units of raw material are needed to produce each unit of finished product. If
the company plans to sell 480,000 units during the upcoming fiscal year, the
number of units it would have to manufacture during the year would be: (Points :
1)
a.
510,000 units.
b.
480,000 units.
c.
450,000 units.
d.
440,000 units.
8. Company is planning to sell 2,000 units and produce 2,200 units during the
upcoming month. Each unit requires 2 ounces of raw material at a cost of $15.00
per ounce and one-half hour of direct labor at a rate of $12.50 per hour. Overhead
is applied at a rate of 120% of direct labor costs. The company has 2,000 ounces of
raw material in its beginning inventory and wants to have 2,400 ounces in its
ending inventory. How much direct labor cost should be budgeted for the upcoming
month? (Points : 1)
a.
$27,500
b.
$16,500
c.
$13,750
d.
$12,500
9. E Company is planning to sell 2,000 units and produce 2,200 units during the
upcoming month. Each unit requires 2 ounces of raw material at a cost of $15.00
per ounce and one-half hour of direct labor at a rate of $12.50 per hour. Overhead
is applied at a rate of 120% of direct labor costs. The company has 2,000 ounces of
raw material in its beginning inventory and wants to have 2,400 ounces in its
ending inventory. How much overhead cost should be budgeted for the upcoming
month? (Points : 1)
a.
$27,500
b.
$16,500
c.
$13,750
d.
$12,500
10.
The following credit sales are budgeted by J Company:
January
$124,000
February
120,000
March
135,000
April
140,000
May
142,000
The company's past experience indicates that 50% of receivables are collected in
the month of sale, 30% in the month following the sale, and 20% in the second
month following the sale. What amount should be budgeted as cash receipts for
March? (Points : 1)
a.
$135,000
b.
$128,300
c.
$67,500
d.
$60,800
11.
M Company budgeted direct materials purchases of $150,000 in April and
$240,000 in May. It is the company's practice to pay for 70% of its purchases in the
month of purchase and the remaining 30% in the following month. Other costs are
all paid during the month incurred. During May, the following items were budgeted:
Wages expense
$75,000
Purchase of office equipment
36,000
Selling and administrative expenses 24,000
Depreciation expense
18,000
What amount should be budgeted for cash disbursements for May? (Points : 1)
a.
$366,000
b.
$348,000
c.
$324,000
d.
$213,000
12.
Select the correct formula to compute cost of goods manufactured. (Points :
1)
a. Beginning WIP + Raw Materials Purchased + Direct Labor + Factory
Overhead - Ending WIP
b. Beginning Finished Goods + Cost of Goods Sold - Ending Finished Goods
c. Raw Materials Used + Direct Labor + Factory Overhead
d. Beginning WIP + Raw Materials Used + Direct Labor + Factory
Overhead - Ending WIP
13.
A continuous budget: (Points : 1)
a. presents a statement of expectations for a period but does not present a firm
commitment.
b. drops the current month or quarter and adds a future month or a
future quarter as the current month or quarter is completed.
c. presents the plan for only one level of activity and does not adjust to
changes in the level of activity.
d. presents the plan for a range of activity so that the plan can be adjusted for
changes in activity.
14.
All of the following are benefits of budgeting except: (Points : 1)
a.
budgeting provides assurance that the company will achieve its
objectives.
b.
budgeting facilitates the coordination of activities.
c.
budgeting requires managers to plan ahead.
d.
budgeting provides specific benchmarks for evaluating performance.
15.
Which of the following items should be included in a company's budget
manual? (Points : 1)
a.
Sample budgetary forms
b.
Calendar of scheduled budgetary activities
c.
Original, revised, and approved budgets
d.
All of the above should be included.
Unit 6 Quiz
1. When actual performance varies from the budgeted performance, managers will be
more likely to revise future budgets if the variances were (Points : 1)
a.
controllable rather than uncontrollable.
b.
uncontrollable rather than controllable.
c.
favorable rather than unfavorable.
d.
small.
2. The amount of raw material purchased in a period may be different than the
amount of material used that period because (Points : 1)
a.
the number of units sold may be different from the number of units
produced.
b.
finished goods inventory may fluctuate during the period.
c.
the raw material inventory may increase/decrease during the
period.
d.
companies often pay for material in the period after it is purchased.
3. A company that maintains a raw material inventory, which is based on the
following month's production needs, will purchase less material than it uses in a
month where (Points : 1)
a.
sales exceed production.
b.
production exceeds sales.
c.
planned production exceeds the next month's planned
production.
d.
planned production is less than the next month's planned production.
4. If a company has a policy of maintaining an inventory of finished goods at a
specified percentage of the next month's budgeted sales, budgeted production for
January will exceed budgeted sales for January when budgeted (Points : 1)
a.
February sales exceed budgeted January sales.
b.
January sales exceed budgeted December sales.
c.
January sales exceed budgeted February sales.
d.
December sales exceed budgeted January sales.
5. Matthews Company has a policy of maintaining an inventory of finished goods
equal to 30 percent of the following month's sales. For the forthcoming month of
March, Matthews has budgeted the beginning inventory at 30,000 units and the
ending inventory at 33,000 units. This suggests that (Points : 1)
a.
February sales are budgeted at 10,000 units less than March sales.
b.
March sales are budgeted at 10,000 units less than April sales.
c.
February sales are budgeted at 3,000 units less than March sales.
d.
March sales are budgeted at 3,000 units less than April sales.
6. For the month of November, Whetzel Corporation. predicts total cash collections to
be $1 million. Also for November, Whetzel Corporation. estimates that its
beginning cash balance will be $50,000 and that it will borrow cash in the amount
of $70,000. If Whetzel Corporation. estimates an ending cash balance of $30,000
for November, what must its projected cash disbursements be? (Points : 1)
a.
$1,090,000
b.
$1,120,000
c.
$1,070,000
d.
$1,020,000
7. For the month of March, Robertson Corporation. predicts total cash collections to
be $1.5 million. Also for March, Robertson Corporation. estimates that its beginning
cash balance will be $60,000 and that it will borrow cash in the amount of $80,000.
If Robertson Corporation. estimates an ending cash balance of $40,000 for March,
what must its projected cash disbursements be?
a.
$1,520,000
b.
$1,580,000
c.
$1,600,000
d.
$1,640,000
8. Sullivan Company is preparing its Manufacturing Overhead budget for the second
quarter of the year. Budgeted variable factory overhead is $3.00 per unit
produced; budgeted fixed factory overhead is $75,000 per month, with $16,000 of
this amount being factory depreciation.
If the budgeted cash disbursements for factory overhead for June are $80,000,
then the budgeted production for June must be: (Points : 1)
a.
7,400 units
b.
6,200 units
c.
6,500 units
d.
7,000 units
9. Mercy Medical Center has provided you with the following budget information for
April:
Cash collections
$876,000
April 1 cash balance
23,000
Cash disbursements 978,600
Mercy has a policy of maintaining a minimum cash balance of $20,000 and borrows
only in $1,000
increments. How much will Mercy borrow in April? (Points : 1)
a.
$80,000
b.
$79,600
c.
$99,000
d.
$100,000
10.
Bentonville Medical Center has provided you with the following budget
information for July:
Cash collections
$918,000
July 1 cash balance
32,000
Cash disbursements 1,020,400
Bentonville has a policy of maintaining a minimum cash balance of $30,000 and
borrows only in $1,000 increments. How much will Bentonville borrow in July?
(Points : 1)
a.
$ 70,400
b.
$ 71,000
c.
$100,400
d.
$101,000
11.
Lindburgh Company manufactures toy airplanes. Information on Lindburgh
Company's labor costs follow:
Sales commissions
$5 per plane
Administration
$10,000 per month
Indirect factory labor
$3 per plane
Direct factory labor
$5 per plane
The following information applies to the upcoming month of July for Lindburgh
Company:
Budgeted production 1,200 units

Budget sales 1,000 units
What amount of budgeted labor cost would appear in the July selling, general, and
administrative expense budget? (Points : 1)
a.
$10,000
b.
$16,000
c.
$15,000
d.
$23,000
12.
Lindburgh Company manufactures toy airplanes. Information on Lindburgh
Company's labor costs follow:
Sales commissions
$5 per plane
Administration
$10,000 per month
Indirect factory labor
$3 per plane
Direct factory labor
$5 per plane
The following information applies to the upcoming month of July for Lindburgh
Company:
Budgeted production 1,200 units
Budget sales 1,000 units
What is Lindburgh?s budgeted factory labor cost for July? (Points : 1)
a.
$8,000
b.
$15,600
c.
$25,600
d.
$9,600
13.
Budgeted sales for Fleetwood Corporation for the first quarter the year are
shown below:
JANUARY
FEBRUARY
MARCH
UNITS:
35,000
25,000
32,000
The company has a policy that requires the ending inventory in each period to be
10 percent of the following period's sales. Assuming that the company follows this
policy, what quantity of production should be scheduled for February? (Points : 1)
a.
24,300 units
b.
24,700 units
c.
25,000 units
d.
25,700 units
14.
Budgeted sales for Parker Corporation for the second quarter the year are
shown below:
APRIL
MAY
JUNE
UNITS: 40,000 30,000 38,000
The company has a policy that requires the ending inventory in each period to be
15 percent of the following period's sales. Assuming that the company follows this
policy, what quantity of production should be scheduled for May? (Points : 1)
a.
28,800 units
b.
29,700 units
c.
25,000 units
d.
31,200 units
15.
Production of Product B has been budgeted at 200,000 units for November.
One unit of Product B requires 2 lbs. of raw material. The projected beginning and
ending materials inventory for November are:
Beginning inventory: 2,000 lbs.
Ending inventory:
10,000 lbs.
How many lbs. of material should be purchased during November? (Points : 1)
a.
b.
c.
d.
192,000
208,000
408,000
416,000

1. Which of the following is not a required characteristic of relevant information?
(Points : 1)
a.
Must be associated with the decision under consideration
b.
Must have a connection to or bearing on some future endeavor
c.
Must be important to the decision maker
d.
Must be verifiable by an independent reviewer or auditor
2. Contribution to income that is foregone by not using a limited resource for its best
alternative use is referred to as (Points : 1)
a.
marginal cost.
b.
incremental cost.
c.
non-relevant cost.
d.
opportunity cost.
3. Total unit costs are: (Points : 1)
a.
relevant for cost-volume-profit analysis.
b.
needed for determining sunk costs.
c.
non-relevant in marginal analysis.
d.
needed for determining product contribution.
4. Sunk costs are: (Points : 1)
a.
relevant to decision making.
b.
not relevant to decision making.
c.
non-relevant to long-run decisions but not to short-run decisions.
d.
fixed costs.
5. In equipment-replacement decisions, which one of the following does not affect the
decision-making process? (Points : 1)
a.
Historical cost of the old equipment
b.
Cost of the new equipment
c.
Operating costs of the new equipment
d.
Current disposal price of the old equipment
6. Select the incorrect statement from the following. (Points : 1)
a. A cost that is the same for multiple alternatives under consideration is not
relevant.
b. The cost of acquiring the machine that is currently used to produce
a component is relevant in making an outsourcing decision.
c. The cost to acquire a component in a make or buy decision is relevant.
d. The salvage or residual value of a piece of machinery is relevant in a keep-orreplace decision.
7. A company's approach to a make-buy decision (Points : 1)
a.
involves an analysis of avoidable costs.
b.
depends on whether the company is operating at or below breakeven.
c.
should use absorption costing.
d.
should use activity-based costing.
8. P Company currently manufactures all component parts used in the manufacture of
various small appliances. A steel handle is used in three different products. The
current year budget for 20,000 handles has the following unit cost:
Direct material
$0.60
Direct labor
0.40
Variable overhead
0.10
Fixed overhead
0.20
Total unit cost
$1.30
A steel company has offered to supply 20,000 handles to P Company for $1.25
each, which includes delivery. Accepting the offer will: (Points : 1)
a.
decrease the handle unit cost by $0.15.
b.
decrease the handle unit cost by $0.25.
c.
increase the handle unit cost by $0.15.
d.
Increase the handle unit cost by $0.05.
9. Select the incorrect statement concerning scarce resource decisions. (Points : 1)
a. Unit contribution margin rather than gross margin is the appropriate measure
of profitability.
b. Scarce resources may include machine hours, skilled labor hours, and raw
materials.
c. If the objective is to maximize profits, a scarce resource is best used
to produce and sell the product generating the highest contribution
margin per unit.
d. Although in the long run, a company may acquire a higher quantity of the
scarce resource, in the short run, management must make the most efficient
use of the currently available resources.
10.
D Company recently expanded its manufacturing capacity, which will allow it
to produce up to 15,000 units of Products A and B. The sales department believes
it can sell up to 13,000 units of either product this year. Because the two products
are very similar, D Company will produce only one of the two products. The
following information is available:
Per Unit Data
Product A
Product B
Selling price
$88.20
$80.00
Variable costs
52.80
52.80
Fixed costs will total $369,600 if Product A is produced but will be only $316,800 if
Product B is produced. D Company is subject to a 40% income tax rate. If the
company desires an after-tax profit of $24,000, how many units of Product B will
the company have to sell? (Points : 1)
a.
4,460
b.
12,529
c.
13,118
d.
13,853
11.
Select the correct statement concerning special order decisions. (Points : 1)
a. Such decisions must not violate the Robinson-Patman Act which prohibits
companies from pricing the same product at different levels when those
amounts do not reflect related cost differences.
b. Companies may give ad hoc discounts if such concessions relate to real or
imagined competitive pressures.
c. Special order decisions often hinge on productive capacity issues.
d. All of the above are correct.
12.
R Company sells a product for $10.00 that has the following unit cost:
Direct material
$1.60
Direct labor
2.40
Variable overhead
1.20
Fixed overhead
1.30
Total unit cost
$6.50
A company that does not compete with R Company's existing customers has made
an offer to purchase 1,000 units of the product at a proposed price of $6.00. R
Company is currently selling all of the units it can produce to its existing
customers. Select the correct statement from the following. (Points : 1)
a.
Reject the offer since the offer price is less than the unit production cost.
b.
Accept the offer since the offer price exceeds the sum of the variable
costs.
c.
Reject the offer to avoid a $4.00 per unit decrease in profit on
the 1,000 units.
d.
Accept the offer since the offer price exceeds the unit fixed cost.
13.
Select the correct definition of segment margin from the following: (Points :
1)
a.
Revenue - Expenses
b.
Revenue - Variable Costs
c.
Revenue - Variable Costs - Avoidable Fixed Costs
d.
Revenue - Variable Costs - Unavoidable Fixed Costs
14.
A product that results from a joint process may be classified as (Points : 1)
a.
a joint product.
b.
a by-product.
c.
scrap.
d.
All of the above.
15.
a. Producing first-quality merchandise and factory seconds in a single operation
can be viewed as a joint process.
b. Waste is a residual output from many production processes whose
sales value is comparable to that of by-products.
c. By-products are distinguished from scrap by their higher sales value.
d. While joint cost allocations are necessary to determine financial statement
valuations, such allocations should not be used in making internal decisions.
16.
Select the incorrect statement concerning the split-off point. (Points : 1)
a. The split-off point is the point at which joint process outputs are first
identifiable as individual products.
b. If joint output is processed beyond the split-off point, additional costs will be
incurred and must be assigned to the specific products for which those costs
were incurred.
c. A single joint process cannot have multiple spit-off points.
d. Output may be sold at the split-off point or processed further and then sold.
17.
In joint product costing and analysis, which one of the following costs is
relevant when deciding the point at which a product should be sold in order to
maximize profits? (Points : 1)
a.
Purchase costs of the materials required for the joint products
b.
Separable costs after the split-off point
c.
Joint costs to the split-off point
d.
Sales salaries for the period when the units were produced
18.
Before committing resources to a joint process, management must first
decide whether total expected revenue from selling the joint output 'basket' of
products is likely to exceed the:
a.
selling expenses for the goods.
b.
joint costs and separate processing costs after split-off.
c.
d.
disposal costs for any waste generated.

All of the above.
19.
When estimating unit selling prices for use in allocating joint production
costs, which of the following should be considered? (Points : 1)
a.
Competitor prices
b.
Consumers' sensitivity to price changes
c.
Costs
d.
All of the above
20.
All of the following are common monetary measures for allocating joint costs
to joint products except: (Points : 1)
a.
approximated net realizable value at split-off.
b.
gross margin at split-off.
c.
net realizable value at split-off.
d.
sales value at split-off.
21.
LS Company manufactures two products, Product L and Product S in a joint
process. The joint (common) costs incurred are $420,000 for a standard production
run that generates 180,000 units of L and 120,000 units of S. Product L sells for
$2.40 per unit while Product S sells for $3.90 per unit. Assuming both products are
sold at the split-off point, the amount of joint cost of each production run allocated
to Product L on a net realizable value (NRV) basis is: (Points : 1)
a.
$252,000.
b.
$218,400.
c.
$201,600.
d.
$168,000.
22.
Products A and B are manufactured in a joint process. The joint (common)
costs incurred are $252,000 for a standard production run that generates 108,000
gallons of Product A which sells for $2.40 per gallon and 72,000 gallons of Product
B which sells for $3.90 per gallon. If no additional costs are incurred after the splitoff point, the amount of joint cost of each production run allocated to Product B on
a physical measure basis is: (Points : 1)
a.
$100,800.
b.
$140,000.
c.
$151,200.
d.
$280,800.
23.
Products X and Y are manufactured in a joint process. The joint (common)
costs incurred are $420,000 for a standard production run that generates 180,000
gallons of Product X which sells for $2.40 per gallon and 120,000 gallons of Product
Y which sells for $3.90 per gallon. If additional processing costs beyond the split-off
point are $1.40 per gallon for Product X and $0.90 per gallon for Product Y, the
amount of joint cost allocated to Product Y on a net realizable value basis is:
(Points : 1)
a.
$280,000.
b.
$252,000.
c.
$168,000.
d.
$140,000.
24.
M Company incurs $10,000,000 in joint costs for its three products. The
company estimates the products' production, final selling price, and separate costs
after split-off as follows:
How much of the joint costs should be allocated to Product A under the
approximated net realizable value at split-off? (Note: round percentages to zero
decimal places.) (Points : 1)
a.
$4,600,000
b.
$4,100,000
c.
$1,300,000
d.
None of the above
25.
P Inc. always generates a certain amount of waste due to the nature of its
production activities regardless of which products it is producing at the time. After
production in a recent month, the company sold $200 of scrap. Which of the
following is the correct entry to record the sale of the scrap using the realized
value approach? (Points : 1)
a.
Cash 200
Manufacturing Overhead 200
b.
Cash 200
Finished Goods 200
c.
Cash 200
Scrap Inventory 200
d.
Cash 200
Work in Process 200
26.
Select the incorrect statement concerning the accounting for by-product and
scrap. (Points : 1)
a. Reducing joint cost by the NRV of the by-product/scrap is the traditional
method used to account for such goods.
b. Regardless of whether a company uses the NRV or the realized value
approach, the specific method used to account for by-product should be
established before the joint cost is allocated to the joint products.
c. Two common methods used to account for by-products are the NRV approach
and the realized value approach.
d. Under the realized value approach, the estimated selling price of
the by-product is recognized prior its actual sale.
27.
Not-for-profit organizations may charge the entire cost of a joint activity to
fund-raising if all of the following criteria are met except: (Points : 1)
a.
amount.
b.
audience.
c.
content.
d.
purpose.
28.
If a majority of compensation or fees for anyone performing a part of an
activity is tied to contributions raised, the activity automatically fails the (Points :
1)
a. purpose criterion and all costs of the activity must be charged to program
activities.
b. content criterion and all costs of the activity must be charged to fund-raising.
c. purpose criterion and all costs of the activity must be charged to
fund-raising.
d. audience criterion and all costs of the activity must be charged to
administrative activities.
Unit 7 Quiz
1. An ad hoc sales discount is (Points : 1)
2.
3.
4.
5.
a.
an allowance for an inferior quality of marketed goods.
b.
a discount that an ad hoc committee must decide on.
c.
brought about by competitive pressures.
d.
none of the above.
Eichholtz Company uses 10,000 units of a part in its production process. The costs
to make a part are: direct material, $12; direct labor, $25; variable overhead, $13;
and applied fixed overhead, $30. Eichholtz has received a quote of $55 from a
potential supplier for this part. If Eichholtz buys the part, 70 percent of the applied
fixed overhead would continue. Eichholtz Company would be better off by (Points :
1)
a.
$50,000 to manufacture the part.
b.
$150,000 to buy the part.
c.
d.
Collins Company uses 12,000 units of a part in its production process. The costs to
make a part are: direct material, $15; direct labor, $27; variable overhead, $15;
and applied fixed overhead, $32. Eichholtz has received a quote of $60 from a
potential supplier for this part. If Collins buys the part, 75 percent of the applied
fixed overhead would continue. Collins Company would be better off by (Points : 1)
a.
b.
c.
d.
Buxton Company is currently operating at a loss of $15,000. The sales manager
has received a special order for 5,000 units of product, which normally sells for $35
per unit. Costs associated with the product are: direct material, $6; direct labor,
$10; variable overhead, $3; applied fixed overhead, $4; and variable selling
expenses, $2. The special order would allow the use of a slightly lower grade of
direct material, thereby lowering the price per unit by $1.50 and selling expenses
would be decreased by $1. If Buxton wants this special order to increase the total
net income for the firm to $10,000, what sales price must be quoted for each of
the 5,000 units? (Points : 1)
a.
$23.50
b.
$24.50
c.
$27.50
d.
$34.00
The Southern Digital, Inc. produces a high-quality computer chip. Unit production
costs (based on capacity production of 100,000 units per year) follow:
Direct material
$50
Direct labor
20
Overhead (20% variable)
10
Other information:
Sales price
100
SG&A costs (40% variable) 15
Assume, for this question only, that the Memory Division is producing and selling at
capacity. What is the minimum selling price that the division would consider on a
"special order" of 1,000 chips on which no variable period costs would be incurred?
(Points : 1)
a.
$100
b.
$72
c.
$81
d.
$94
6. The Southern Digital, Inc. produces a high-quality computer chip. Unit production
Direct material
$50
Direct labor
20
10
Other information:
Sales price
100
SG&A costs (40% variable)
15
Assume, for this question only, that the Memory Division is operating at a level of
70,000 chips per year. What is the minimum price that the division would consider
on a "special order" of 1,000 chips to be distributed through normal channels?
(Points : 1)
a.
$78
b.
$95
c.
$100
d.
$81
7. The Southern Digital, Inc. produces a high-quality computer chip. Unit production
Direct material
$50
Direct labor
20
10
Other information:
Sales price
100
SG&A costs (40% variable)
15
Assume, for this question only, that the Memory Division is presently operating at a
level of 80,000 chips per year. Accepting a "special order" on 2,000 chips at $88
will (Points : 1)
a.
increase total corporate profits by $4,000.
b.
increase total corporate profits by $20,000.
c.
decrease total corporate profits by $14,000.
d.
decrease total corporate profits by $24,000.
8. Which of the following statements is true regarding by-products or scrap? (Points :
1)
a. Process costing is the only method that should result in by-products or scrap.
b. Job order costing systems will never have by-products or scrap.
c. Job order costing systems may have instances where by-products or
scrap result from the production process.
d. Process costing will never have by-products or scrap from the production
process.
9. The method of pricing by-products/scrap where no value is assigned to these items
until they are sold is known as the (Points : 1)
a.
net realizable value at split-off point method.
b.
sales value at split-off method.
c.
realized value approach.
d.
approximated net realizable value at split-off method.
10.
Riley Company produces two products from a joint process: A and C. Joint
processing costs for this production cycle are $9,000.
Yards
Sales Price
Disposal
Further
Final Sales
@ Split-Off
Cost @
Processing
Price
Split-Off
A
1,800
$7.00
$4.50
$1.50
$8.00
C
2,600
10.00
6.00
3.50
12.25
If A and C are processed further, no disposal costs will be incurred or such costs
will be borne by the buyer.
11.
Using sales value at split-off, what amount of joint processing cost is
allocated to Product A (round to the nearest dollar)? (Points : 1)
a.
$2,938
b.
$3,682
c.
$4,500
d.
$6,062
12.
Using sales value at split-off, what amount of joint processing cost is
allocated to Product C (round to the nearest dollar)?
a. $2,718
b. $4,500
c. $6,062
d. $6,282
13.
Using net realizable value at split-off, what amount of joint processing cost is
allocated to Product C (round to the nearest dollar)?
a. $2,718
b. $4,500
c. $6,062
d. $6,282
14.
Using approximated net realizable value at split-off, what amount of joint
processing cost is allocated to Product A (round to the nearest dollar)? (Points : 1)
a.
$2,718
b.
$2,934
c.
$3,014
d.
$4,500
15.
Using approximated net realizable value at split-off, what amount of joint
processing cost is allocated to Product C (round to the nearest dollar)? (Points : 1)
a.
$4,500
b.
$5,986
c.
$6,062
d.
$6,282

1. Select the incorrect statement concerning the historical relationship between cost
accounting systems and financial accounting systems. (Points : 1)
a. The two systems often compete.
b. Financial accounting systems have been the dominant system.
c. For financial reporting requirements, cost information must be
highly segmented.
d. Information provided by the financial reporting system is often of little value
for cost management purposes.
2. A structure of interrelated elements that collects, organizes, and communicates
data to managers so they can plan, control, make decisions, and evaluate
performance is a: (Points : 1)
a.
cost management system (CMS).
b.
enterprise resource planning (ERP) system.
c.
management control system (MCS).
d.
management information system (MIS).
3. Which of the following is not a primary component of a management control
system? (Points : 1)
a.
Assessor
b.
Black box
c.
Effector
d.
Sensor
4. Which of the following is not an organizational role of a cost management system?
(Points : 1)
a.
Help manage core competencies
b.
Link plans and strategies to actual organizational performance
c.
Help identify tactics to fend off organizational threats
d.
Identify the organization's mission
5. Which of the following is not a primary goal of a cost management system?
(Points : 1)
a.
Assess product/service life-cycle performance
b.
Develop accurate product costs
c.
Identify the company's least profitable customers
d.
Measure performance
6. The product/service costs generated by the CMS are used for which of the following
purposes? (Points : 1)
a.
Prepare financial statements
b.
Create a basis for performance measurements
c.
Establish prices for cost-plus contracts
d.
All of the above
7. The relative composition of an organization's fixed and variable costs and, thus,
how costs change relative to changes in production or sales volume is referred to
as its: (Points : 1)
a.
cost behavior.
b.
cost horizon.
c.
cost pattern.
d.
cost structure.
8. The underlying set of assumptions about the entity and the goals, processes,
practices, and values that its member share is referred to as its: (Points : 1)
a.
mission.
b.
strategic plan.
c.
organizational culture.
d.
organizational structure.
9. The strategy of identifying and exploiting temporary opportunities for advantage is
known as a (Points : 1)
a.
confrontational strategy.
b.
cost leadership strategy.
c.
differentiation strategy.
d.
systematic strategy.
10.
Core competencies which are the operational dimensions that are key to the
company's survival include: (Points : 1)
a.
quality.
b.
customer service.
c.
cost control.
d.
all of the above.
11.

a. High-tech companies can't pursue a cost leadership strategy due to
the high costs of technology.
b. Management of high technology costs requires beating competitors to the
market with new products.
c. Often, getting products to market quickly and profitably requires a
compromise between product innovation and superior product design.
d. The faster a product gets to market, the fewer competitive products will
exist.
12.
Cost control (Cost Leadership), product replacement (Product Differentiation),
and Distribution channel development (Confrontation) are activities for which
product life cycle? (Points : 1)
a.
Build
b.
Harvest
c.
Hold
d.
Grow
13.
Stock options are an example of a: (Points : 1)
a.
cash incentive plan.
b.
short-term performance incentive.
c.
long-term performance incentive.
d.
none of the above.
14.
Select the item that incorrectly details the shift in control emphasis in future
competitive environments? (Points : 1)
a. Performance Measurement: From concentrating on multiple types of
critical success measures to concentrating on financial results
b. Cost Standards: from using expected standards to using ideal standards
c. Budgeting: From developing annual budgets to developing rolling budgets
d. Product Offerings: From developing a limited number of product styles to
engaging in mass customization to entice a wide variety of customers
15.
Which of the following is not an objective of enterprise resource planning
systems? (Points : 1)
a.
Manage and coordinate a myriad of organizational activities
b.
Maintain the company's various legacy information systems
c.
Improve operational efficiencies
d.
Take advantage of cost savings from shared service centers
16.
Every company has upstream suppliers and downstream customers. These
relationships may be referred to as a (Points : 1)
a.
total quality management system.
b.
kanban system.
c.
value chain.
d.
just-in-time network.
17.
Which of the following items is not included in annual inventory carrying
costs? (Points : 1)
a.
Inventory storage cost
b.
Inventory purchase cost
c.
Insurance on inventory
d.
Property taxes on inventory
18.
The approach to producing inventory in which production is conducted in
anticipation of customer orders is referred to as a (Points : 1)
a.
just in time system.
b.
push system.
c.
d.
19.
1)
a.
b.
c.
d.
value chain.
pull system.
The primary objective of a pull system of production is to minimize: (Points :
the purchase cost of inventory.

the number of parts needed to produce a product.
the number of production supervisors needed in the factory.
the cost of carrying inventory.
20.
Which of the following is not a stage of development in a product's life cycle?
(Points : 1)
a.
Maturity
b.
Growth
c.
Entrenchment
d.
Introduction
21.
In which stage of the product life cycle are costs usually at their lowest level
and profits at their highest levels? (Points : 1)
a.
Maturity
b.
Growth
c.
Entrenchment
d.
Introduction
22.
Select the correct equation for a product's target cost (TC). (Points : 1)
a. TC = Estimated selling price x (Acceptable profit margin + Selling and
administrative costs)
b. TC = Estimated selling price / Acceptable profit margin + Selling and
c. TC = Estimated selling price - Acceptable profit margin - Selling and
administrative costs
d. TC = Estimated selling price + (Acceptable profit margin - Selling and
23.
Which of the following is a primary goal of just-in-time systems? (Points : 1)
a.
Eliminating any production process that does not add value to the
product/service
b.
Reducing the total cost of production/performance while increasing
quality
c.
Continuously improving production/performance efficiency
d.
All of the above
24.
What is the optimal JIT situation with regard to supplier relationships?
(Points : 1)
a.
Have only one vendor for any given item
b.
Use at least two vendors for each item purchased to minimize chances
of stockout
c.
Acquire all items needed to produce the company's products from a
single vendor
d.
None of the above
25.
A production system involving a network of robots and material conveyance
devices monitored and controlled by computers that allows for rapid production
and responsiveness to changes in production needs is referred to as: (Points : 1)
a.
flexible manufacturing system.
b.
computer-integrated manufacturing system.
c.
focused factory arrangement system.
d.
virtual reality manufacturing system.
26.
Select the incorrect statement concerning lean enterprises. (Points : 1)

a. Lean manufacturing refers to making only those items in demand by
customers and making those items without waste.
b. Like JIT, one of the primary goals of lean manufacturing is to
eliminate value-added activities.
c. Lean enterprises seek to lower cycle times and increase quality.
d. Lean manufacturing can lead to reduced product life cycles.
27.
Points at which the processing levels are sufficiently slow to produce idle
time in other processing mechanisms in the network are referred to as (Points : 1)
a.
stress points.
b.
bottlenecks.
c.
traffic jams.
d.
backflush points.
28.
The annual demand for mantle clocks is estimated to be 5,000 units. The
annual cost of carrying one unit in inventory is $10, and the cost to initiate a
production run is $1,000. There are no clocks on hand and so the company plans to
schedule four equal production runs for the coming year. The company operates
250 business days per year. Assume that sales occur uniformly throughout the
year and that production is instantaneous. If the company does not maintain a
safety stock, the estimated total annual carrying costs for the mantle clock is:
(Points : 1)
a.
$10,250.
b.
$6,250.
c.
$5,000.
d.
$4,000.
29.
B Company needs help in determining the number of production runs it
should schedule for the coming year. It has no beginning inventory, annual
demand of 5,000 units, annual cost of carrying one unit in inventory is $10, and
the estimated cost of setting up a production run is $1,000. How many production
runs are needed for the coming year? (Points : 1)
a.
7
b.
5
c.
4
d.
2
30.
When the level of safety stock is increased: (Points : 1)
a.
lead time will increase.
b.
carrying costs will decrease.
c.
the frequency of stock outs will decrease.
d.
lead time will decrease.
Unit 8 Quiz
1. A cost management system (Points : 1)
a. is finalized when the information currently being produced is the same as the
information currently desired.
b. can be generically designed to fit the information needs of the majority of
domestic (but not global) organizations.
c. must be continuously improved to adapt to changes in an
organization's internal and external environment.
d. that has been appropriately designed from gap analysis, does not need to be
changed unless there is a change in organizational management or culture.
2. Which of the following indicates the mission being pursued by a subunit that is
using cash? generating cash? (Points : 1)
a.
save harvest
b.
build save
c.
harvest build
d.
build harvest
3. An increase in the use of technology has caused (Points : 1)
a. fewer costs to be susceptible to short-run control.
b. companies to be more flexible in responding to changing short-term
conditions.
c. managers to be less concerned about capacity utilization because of the
increased ability to produce in large quantities.
d. a decline in the amount of fixed costs in an organization.
4. The life cycles of many products are becoming shorter (Points : 1)
a. causing companies to recognize that it may be more advantageous
to confront, rather than compete with, the competition.
b. making products in the maturity stage of their life cycle the basis on which
firms expect growth to be generated.
c. so companies spend less and less on product design and development
because products will not last as long as previously.
d. meaning that tools such as benchmarking and target costing become less
important in adapting to the competitive environment.
5. Most managers evaluate decision alternatives based on how (Points : 1)
a. much the decision will increase or decrease organizational profits.
b. the outcomes may affect selected performance measurement and
reward criteria.
c. much the outcome will reduce the organization's cost of capital.
d. easily the decision impacts can be quantified in the organization's cost
management system.
6. Target costing (Points : 1)
a.
can be applied to services if they are sufficiently uniform.
b.
can be applied to services only if they are automated.
c.
can be applied to services that are performed in a manufacturing
environment.
d.
cannot be applied to services.
7. Which of the following statements is false concerning electronic data interchange?
(Points : 1)
a.
Electronic data interchange (EDI) is essential in a pull system.
b.
One of the benefits realized by EDI organizations is a faster processing
of transactions.
c.
Electronic data interchange is essential in a push system.
d.
Electronic data interchange refers to computer-to-computer exchange of
information.
8. When JIT is implemented, which of the following changes in the accounting system
would not be expected? (Points : 1)
a.
fewer cost allocations
b.
elimination of standard costs
c.
combining labor and overhead into one product cost category
d.
combing raw material and materials in work-in-process into one product
cost category
9. In which life-cycle stage are product quality improvements and stable selling prices
likely to occur? (Points : 1)
a.
introduction
b.
growth
c.
maturity
d.
decline
10.
From a cost management view, research and development cost represents
(Points : 1)
a.
a life-cycle investment
b.
a period expense.
c.
an unearned revenue.
d.
a risk reserve.
11.
In a JIT manufacturing environment, product costing information is least
important for use in (Points : 1)
a.
work in process inventory valuation.
b.
pricing decisions.
c.
product profitability analysis.
d.
make-or-buy decisions.
12.
With JIT manufacturing, which of the following costs would be considered a
direct product cost? (Points : 1)
a.
insurance on the plant
b.
utilities used for manufacturing
c.
janitors' salaries
d.
salary of the plant supervisor
13.
The JIT environment has caused a reassessment of product costing
techniques. Which of the following statements is true with respect to this
reassessment? (Points : 1)
a. Traditional cost allocations based on direct labor are being
questioned and criticized.
b. The federal government, through the SEC, is responsible for the
reassessment.
c. The reassessment is caused by the replacement of machine hours with labor
hours.
d. None of the above is true.
14.
When a firm adopts the just-in-time method of management, (Points : 1)
a. employees are retrained on different equipment, but the plant layout
generally remains unchanged.
b. new machinery and equipment must be purchased from franchised JIT
dealers.
c. machinery and equipment are moved into small autonomous
production lines called islands or cells.
d. new, more efficient machinery and equipment are purchased and installed in
the original plant layout.
15.
Which of the following describes the effect on direct labor when
management adopts the JIT philosophy? (Points : 1)
a. Each direct labor person performs a single task, thereby allowing that person
to reach his or her theoretical potential.
b. Because each person runs a single machine in a JIT environment, there are
more employees classified as direct labor.
c. The environment becomes more labor-intensive.
d. Machine operators are expected to run several different types of

machines, help set up for production runs, and identify and repair
machinery needing maintenance.

1. Which of the following is not a major business trend promoting the increased use of
business process reengineering? (Points : 1)
a.
Increasing use of the corporate form of business organization
b.
Advancement of technology
c.
Pursuit of increased quality
d.
Increase in price competition caused by globalization
2. Business process reengineering changes the way firms execute processes by:
(Points : 1)
a.
making better use of technology.
b.
making less use of technology.
c.
using more employees.
d.
eliminating all but the most profitable products in order to simply
operations.
3. Global competition is forcing firms to downsize and restructure operations to:
(Points : 1)
a.
defend core competencies.
b.
remain cost competitive.
c.
eliminate non-value activities.
d.
all of the above.
4. One of the grim realities of ever-improving efficiency is that (Points : 1)
a.
Input costs are declining
b.
Cycle times are increasing
c.
Fewer workers are required
d.
All of the above
5. The data, facts, experiences, and lessons learned important to an organization's
existence are referred to as: (Points : 1)
a.
a data depository.
b.
an enterprise resource planning system.
c.
workforce diversity.
d.
organizational memory.
6. Different languages and cultures can impede communication within globally
dispersed operations. Why is accounting a useful coordinating mechanism?
(Points : 1)
a.
Because accounting represents an application of the universal language
of mathematics
b.
Because the interpretation of accounting information need not depend
on local culture
c.
Because accounting is the universal language of business
d.
All of the above
7. All of the following are objectives of enterprise resource planning (ERP) systems
except:
a.
to automate accounting processes.
b.
to share data across the enterprise.
c.
to eliminate information system installation costs.
d.
to provide real-time access to company data.
8. Installation of an ERP system impacts the financial function in all of the following
ways except:
a. Financial specialists have to find ways to finance the acquisition of
the ERP system.
b. Financial and system specialists become responsible for selecting and
installing the software.
c. Financial specialists will be responsible for analyzing the data repository to
support management decisions.
d. Finance specialists are accountable for integrating externally purchased data
with internally generated data.
9. Which technique uses statistical techniques to uncover answers to important
questions about business operations? (Points : 1)
a.
business process reengineering (BPR)
b.
data mining
c.
employee to capital cost ratio (ECC)
d.
enterprise resource planning system (ERP)
10.
Joint ventures, equity investments, and technology swaps are examples of
(Points : 1)
a.
venture capitalists.
b.
licensing agreements.
c.
strategic alliances.
d.
exclusive buyer-seller agreements
11.
An agreement involving two or more firms to jointly contribute to the supply
chain (Points : 1)
a.
involves the exploitation of partner knowledge.
b.
includes partners with access to different markets.
c.
allows sharing of risks and rewards.
d.
all of the above.
12.
Characteristics of firms that are best suited to a successful implementation
of open-book management include all of the following except: (Points : 1)
a.
small size.
b.
centralized management.
c.
a history of employee empowerment.
d.
the presence of trust between employees and managers.
13.
Open-book management: (Points : 1)
a. decreases the transparency of information within an organization.
b. requires accountants to change from a mind-set of sharing to guarding
information.
c. frequently uses games and meetings to make information
understandable to financially unsophisticated employees.
d. centralizes both authority to make decisions and responsibility for decision
results.
14.
Which of the following is not a common principle of open-book management?
(Points : 1)
a.
Teach employees to understand the company's financial results
b.
Link nonfinancial measures to financial results
c.
Empower employees by allowing them to evaluate their own
performance
d.
Turn the management of the business into a game that employees can
win
15.
Which of the following is not a general approach to controlling environmental
costs? (Points : 1)
a.
Signing the Kyoto Protocol to reduce pollution
b.
Cleaning up pollutants after they are produced
c.
Improving processes to reduce the amount of waste produced
d.
Preventing pollution by never producing polluting materials
Unit 9 Quiz
1. ERP stands for (Points : 1)
a.
enterprise resource production.
b.
enterprise resource purchasing.
c.
enterprise resource planning.
d.
enterprise resource processing.
2. ERP systems are (Points : 1)
a.
packaged software.
b.
methods of examining processes.
c.
ways to downsize.
d.
ways to expand geographical operations.
3. ERP systems should help a company (Points : 1)
a.
improve quality.
b.
improve service.
c.
reduce overhead.
d.
all of the above.
4. Data mining is used to (Points : 1)
a.
uncover quality problems.
b.
study customer retention.
c.
identify cost drivers.
d.
all of the above.
5. Data mining (Points : 1)
a.
is packaged software.
b.
is a method of examining processes.
c.
uses statistical techniques to solve problems.
d.
is a way to downsize.
6. A strategic alliance is a (Points : 1)
a.
packaged software.
b.
way for two companies to jointly contribute to the supply chain.
c.
way to downsize.
d.
method of examining processes.
7. Strategic alliances take the form of (Points : 1)
a.
joint ventures.
b.
technology swaps.
c.
licensing.
d.
all of the above.
8. ____ allows a company to accomplish a technology swap. (Points : 1)
a.
Data mining
b.
Strategic alliance
c.
Diversity
d.
BPR
9. ____ is a philosophy of increasing a firm's performance by involving all workers.

(Points : 1)
a.
Open-book management
b.
Data mining
c.
Diversity
d.
Strategic alliance
10.
Disclosing detailed financial information to all employees is a characteristic
of (Points : 1)
a.
open-book management.
b.
data mining.
c.
diversity.
d.
strategic alliance.
11.
____ is a way of teaching accounting concepts to financially unsophisticated
employees. (Points : 1)
a.
Data mining
b.
Open-book management
c.
Game playing
d.
BPR
12.
To make game playing successful, the employees must be able to (Points : 1)
a.
mine data.
b.
form strategic alliances.
c.
win.
d.
use ERP.
13.
For game playing to work, motivation must come from (Points : 1)
a.
individual employees.
b.
lower management.
c.
the board of directors.
d.
upper management.
14.
____ is a characteristic of a company that is best suited for open-book
management. (Points : 1)
a.
Large size
b.
Decentralized management
c.
Centralized management
d.
Service-oriented
15.
EMS stands for (Points : 1)
a.
environmental manufacturing system.
b.
employee management system.
c.
emergency medical services.
d.
environmental management system.

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Unit 1 Quiz

1. A managerial accountant who communicates information objectively is exercising

Unit 2 Practice Questions

Least squares regression method

d. can't be determined from the information given

What is the net income under absorption costing?

Unit 3 Practice Questions

No. of units 210,000 units

Select the incorrect statement from the following. (Points : 1)

Direct labor cost per unit

Unit 4 Practice Questions

Raw materials, work in process, finished goods, cost of goods

Calculate total costs to be accounted for

a. add the beginning Work in Process Inventory cost to the current

Unit 5 Practice Questions

Full costing income statement

c. budget allowance based on standard hours allowed for actual

margin of safety must decrease.

Unit 6 Practice Questions

All of the above should be included.

Budgeted production 1,200 units

Unit 7 Practice Questions

disposal costs for any waste generated.

Unit 8 Practice Questions

Select the incorrect statement from the following. (Points : 1)

the purchase cost of inventory.

Select the incorrect statement concerning lean enterprises. (Points : 1)

d. Machine operators are expected to run several different types of

Unit 9 Practice Questions

9. ____ is a philosophy of increasing a firm's performance by involving all workers.

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