AMIS 525

Cost Accounting

Sample Questions Exam 1

This set of 12 questions, taken from prior examinations, covers some topics in
Chapters 1, 2, 10, 4, 5, and 17.
The purpose of sample questions is to acquaint you with the style and
substance of typical exam questions over this material.
Each exam may consist of multiple choice" type questions, long problems
and short problems. Both calculation type questions and concept type
questions, without computations required, will be used.
Please be aware that:
1. sample questions are only one of many resources available to prepare
for testing events reading textbook chapters and working through
chapter examples, studying the end-of-chapter review problem and
accompanying solution, and reviewing assigned homework items and
the published solutions may be more powerful methods to increase your
understanding of the topics covered in the course.
2. the exam questions used this quarter will be similar but different from
these example questions understanding the main concepts in each
chapter is critical to success on the testing events; remembering a
sample question may be of some help but the format of a question on the
same topic often differs rendering memory a distant second choice to
understanding.
The Questions:
Long Problem Type:
Problem 1
Global Defense is a manufacturer of military equipment. Its Santa Fe plant manufactures the
Interceptor Missile under contract to the U.S. government and friendly countries. All
Interceptors go through an identical manufacturing process. Every effort is made to ensure that
all Interceptors are identical and meet many demanding performance specifications. The
process-costing system at the Santa Fe plant has a single direct-cost category (direct materials)
and a single indirect-cost category (conversion costs). Each Interceptor passes through two
departments: the Assembly Department and the Testing Department. Direct materials are added
at the beginning of the process in Assembly. Conversion costs are added evenly during the
Assembly Departments process. When the Assembly Department finishes work on each
Interceptor, it is immediately transferred to Testing.
Exam #1

Practice Questions

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AMIS 525

Cost Accounting

Global Defense uses the FIFO method of process costing. Data for the Assembly
Department for October 2007 are:
Physical
Units
Direct
Conversion
(Missiles)
Materials
Costs
Work in process, October 1a
Completed during October 2007

20
90

Work in process, October 31b

Total costs added during October 2007

10

460,000

$ 120,000

$ 2,000,000

$ 935,000

Degree of Completion: direct materials, ?%; conversion costs, 60%.

Degree of completion: direct materials, ?%; conversion costs, 70%.

Required
1. For each cost category, compute equivalent units in the Assembly Department.
2. For each cost category, calculate cost per equivalent unit.
3. Summarize total Assembly Department costs for October 2007, and assign total costs to
units completed and transferred out and to units in ending work in process.
Problem 2
The controller for Knoxsville Photographic Supply Company has established the following
activity cost pools and cost drivers.

Activity Cost Pool

Machine setups.
Material Handling
Hazardous waste
control
Quality control...
Other overhead costs..
Total...

Budgeted
Overhead
Cost
$250,000
75,000
25,000
75,000
200,000
$625,000

Cost Driver
Number of Setups
Weight of raw material
Weight of hazardous
chemicals used
Number of Inspections
Machine hours.....

Budgeted
Level for
Cost Driver
125
37,500 lb.
5,000 lb.
1,000
20,000

An order for 1,000 boxes of film development chemicals has the following production
requirements.
Machine setups.. 5 setups
Raw material. 10,000 pounds
Hazardous materials.. 2,000 pounds
Inspections. 10 inspections
Machine hours... 500 machine hours

Exam #1

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AMIS 525

Cost Accounting

Required:
1. Compute the total overhead that should be assigned to the development-chemical order.
2. What is the overhead cost per box of chemicals?
3. Suppose Knoxville Photographic Supply Company were to use a single predetermined
overhead rate based on machine hours. Compute the rate per hour.
4. Under the approach in requirement (3), how much overhead would be assigned to the
development chemical order?
a. In total.
b. Per box of chemicals.
5. Explain why these two product-costing systems result in such widely differing
costs. Which system do you recommend? Why?

Problem 3
Fidelity Sound, Inc., which uses a job-order costing system, had two jobs in process at the start
of 20x1: job no. 64 ($84,000) and job no. 65 ($53,500). The following information is available:
a. The company applies manufacturing overhead on the basis of machine hours. Budgeted
overhead and machine activity for the year were anticipated to be $840,000 and 16,000
hours, respectively.
b. The company worked on four jobs during the first quarter. Direct Materials used, direct
labor incurred, and machine hours consumed were as follows:
Job
No.
64
65
66
67

Direct Material
$21,000
44,000
15,000

Direct Labor
$35,000
22,000
65,000
8,800

Machine Hours
1,200
700
2,000
500

c.

Manufacturing overhead during the first quarter included charges for depreciation
($34,000), indirect labor ($60,000), indirect materials used ($5,000), and other factory
costs ($139,500).
d. During the first quarter, Fidelity Sound completed job no. 64 and job no. 65. Also, Job
no. 65 was sold on account, producing a gross profit (margin) of $34,700 for the firm.
Required:
1. Determine the companys predetermined overhead application rate.
2. Prepare journal entries for the first quarter to record the following:
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AMIS 525

a.
b.
c.
d.
e.

Cost Accounting

The issuance of direct material to production and the direct labor incurred.
The manufacturing overhead incurred during the quarter.
The application of manufacturing overhead to production.
The completion of jobs no. 64 and no. 65.
The sale of job no. 65

3. Determine the cost of jobs still in production as of March 31.

4. Did the finished-goods inventory increase or decrease during the first quarter?
By how much?

5. Was manufacturing overhead under- or overapplied for the first quarter of the year? By
how much?

Short Problem Type:

4. Jersey Company has a process costing system in which it uses the weighted-average method.
The equivalent units for conversion costs for the month were 47,500 units. The beginning
work in process inventory consisted of 15,000 units, 60% complete with respect to
conversion costs. The ending work in process inventory consisted of 10,000 units, 75%
complete with respect to conversion costs. What were the number of units started during the
month ?
Answer: ____________
5. Brabec Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 19,700 hours. At the end of the year,
actual direct labor-hours for the year were 17,700 hours, the actual manufacturing overhead for
the year was $392,940, and manufacturing overhead for the year was underapplied by $35,400.
What was the estimated manufacturing overhead at the beginning of the year that was used in the
predetermined overhead rate calculation?
Answer: ____________
6. For the year just ended, Cole Corporation's manufacturing costs (raw materials used, direct
labor, and manufacturing overhead) totaled $1,500,000. Beginning and ending work-inprocess inventories were $60,000 and $90,000, respectively. Cole's balance sheet also
revealed respective beginning and ending finished-goods inventories of $250,000 and
$180,000. On the basis of this information, how much would the company report as cost of
goods manufactured (CGM) and cost of goods sold (CGS)?
Answers: ____________ and ____________

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AMIS 525

Cost Accounting

7. Extron, Inc., has only variable costs and fixed costs. A review of the company's records
disclosed that when 100,000 units were produced, fixed manufacturing costs amounted to
$200,000 and the cost per unit manufactured totaled $5. On the basis of this information,
how much cost would the firm anticipate at an activity level of 97,000 units?
Answer: ____________

Multiple Choice Type:

8. Sharp Companys records show that overhead was overapplied by $10,000 last year. This
overapplied overhead was closed out to the Cost of Goods Sold account at the end of the
year. In trying to determine why overhead was overapplied by such a large amount, the
company has discovered that $6,000 of depreciation on factory equipment was charged
to administrative expense in error. Given the above information, which of the following
statements is true?
A. Manufacturing overhead was actually overapplied by $16,000 for the year.
B. The companys operating income is understated by $6,000 for the year.
C. Under the circumstances posed above, the error in recording depreciation would have
no effect on operating income for the year.
D. The $6,000 in depreciation should have been charged to Work in Process rather than
to administrative expense
9. Pelican Corporation uses a weighted-average process costing system to collect costs related to
production. The following selected information relates to production for March:
Units completed and transferred out
Units in work in process, March 31
Equivalent units, materials
Equivalent units, conversion costs

5,000
800
5,800
5,200

Costs in work in process on March 1

Costs added to production during March
Total cost

Materials Conversion
$ 2,900
$ 4,680
71,050
131,040
$73,950 $135,720

All materials at Pelican are added at the beginning of the production process. Conversion
costs are incurred uniformly over the production process. What total amount of cost should
be assigned to the units in work in process at the end of March?
a.
b.
c.
d.

$14,840
$15,420
$24,920
$25,860

10. In producing cellular phones, Sonya Company incurs three different costs (XX, YY, and
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AMIS 525

Cost Accounting

ZZ). Per unit costs for two different activity levels are as follows:
5,000 phones
7,500 phones

Type XX
$8
$8

Type YY
$18
$12

Type ZZ
$8
$6

Total
$34
$26

The cost function that expresses the behavior of Sonyas total costs is:
a.
b.
c.
d.

Y = $ 40,000 + $26X
Y = $ 45,000 + $18X
Y = $ 90,000 + $ 8X
Y = $120,000 + $10X

11. Kirk Manufacturing Company uses a job-order costing system. At the beginning of April,
Kirk only had one job in process, Job #898. This job was finished during April by incurring
additional direct costs of $350 for materials and $700 for labor. Also during April, Job #899
was started and finished. The direct costs assigned to this job were $1,200 for materials and
$950 for labor. Job #900 was started during April but was not finished by the end of the
month. The direct costs assigned to this job were $820 for materials and $540 for labor.
Kirk applies manufacturing overhead to its products at a rate of 300% of direct labor cost.
Kirk's cost of goods manufactured for April was $14,570. What was Kirk's work in process
inventory balance at the beginning of April?
a.
b.
c.
d.

$3,440
$6,420
$6,590
$9,570

12. Montgomery Company has a mixed selling cost. If sales volume increases, how will the total mixed
cost and the mixed cost per unit behave?

A.
B.
C.
D.
E.

Total
Mixed Cost
Increase
Increase
Increase
Remain constant
Decrease

Mixed
Cost Per Unit
Increase
Remain constant
Decrease
Decrease
Increase

Exam #1

Practice Questions

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