Mock Exam 1 Chapters 1 4

1. A cost that has already been incurred is called a(n) _______________ cost.
A. indirect
B. sunk
C. relevant
D. opportunity

2. For a cost to be relevant, it must

A. differ between decision alternatives.
B. have already been incurred.
C. not influence a decision.
D. not be a differential cost.

3. A cost is $50,000 when 25,000 units are produced, and $50,000 when 50,000 units are
produced. This is an example of a(n)
A. fixed cost.
B. direct cost.
C. variable cost.
D. indirect cost.

4. Manufacturing overhead was estimated to be $200,000 for the year along with 20,000
direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours
were 21,000. The predetermined overhead rate would be
A. $10.00
B. $1.05
C. $10.75
D. $10.24

5. A predetermined overhead rate is calculated using which formula?

A. Actual manufacturing overhead cost/estimated units in the allocation base
B. Estimated units in the allocation base/estimated manufacturing overhead cost
C. Estimated manufacturing overhead cost/actual units in the allocation base
D. Estimated manufacturing overhead cost/estimated units in the allocation base

6. Which of the following types of firms would most likely use process costing?
A. Superior Auto Body & Repair
B. Crammond Custom Cabinets
C. Sunshine Soft Drinks
D. Jackson & Taylor Tax Service

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7. Which of the following is a characteristic of a manufacturing environment that would
use job order costing?
A. Standardized production process
B. Continuous manufacturing
C. Homogenous products
D. Differentiated products

8. Towson Co. uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. For the month of July, Towsons estimated
manufacturing overhead cost was $300,000 based on an estimated activity level of
100,000 direct labor-hours. Actual overhead amounted to $325,000 with actual direct
labor-hours totaling 110,000 for the month. How much was the overapplied or
underapplied overhead?
A. $5,000 overapplied
B. $5,000 underapplied
C. $25,000 overapplied
D. $25,000 underapplied

9. Conversion costs consist of

A. all costs of production.
B. raw materials and direct labor.
C. direct labor and manufacturing overhead.
D. raw materials and manufacturing overhead.

10. In a traditional volume-based cost system, total manufacturing costs are calculated by
A. adding manufacturing overhead cost, direct material cost, and direct labor cost.
B. subtracting manufacturing overhead from selling price.
C. adding direct material cost and direct labor cost.
D. adding activity cost, direct material cost, and direct labor cost.

11. Which of the following is not true of activity cost drivers?

A. They are measures of the underlying activity that occurs in each activity cost pool.
B. They ideally have a cause and effect relationship with underlying activities.
C. They are strictly volume-based allocation measures.
D. They are used in Stage 2 cost allocations.

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12. Bervine, Inc. produces two different products (bompers and woobles) using two
different activities: Machining, which uses machine hours as an activity driver, and
Inspection, which uses number of batches as an activity driver. The activity rate for
Machining is $125 per machine hour, and the activity rate for Inspection is $500 per
batch. Usage of the activity drivers are as follows:

What is the amount of Inspection cost assigned to bompers?

A. $7,500
B. $22,500
C. $30,000
D. $125,000

13. The approach to cost management that calls for setting cost reduction goals across
numerous stages such as product introduction, growth, maturity, and decline is
A. Life cycle cost management
B. Total quality management
C. Target costing
D. Just-in-time inventory

14. A cost that changes, in total, in direct proportion to changes in activity levels is a(n)
A. absorption cost.
B. contribution margin.
C. fixed cost.
D. variable cost.

15. Which of the following is a variable cost?

A. A cost that is $20,000 when production is 50,000, and $20,000 when production is
70,000.
B. A cost that is $20,000 when production is 50,000, and $28,000 when production is
70,000.
C. A cost that is $20,000 when production is 50,000, and $40,000 when production is
70,000.
D. A cost that is $40,000 when production is 50,000, and $40,000 when production is
70,000

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16. Elliott Company uses a predetermined overhead rate based on machine-hours to apply
manufacturing overhead to jobs. The company manufactures tools to customer
specifications. The following data pertain to Job 1501:

Direct materials used...................................................... $4,200

Direct labor-hours worked.............................................. 300
Direct labor rate per hour............................................... $8.00
Machine-hours used....................................................... 200
Predetermined overhead rate per machine-hour........... $15.00
What is the total manufacturing cost recorded on Job 1501?
A. $8,800
B. $9,600
C. $10,300
D. $11,100

17. Which of the following companies would most likely use process costing?
A. An automobile manufacturer
B. A ship building company
C. A computer printer manufacturer
D. A home remodeling company

18. When Sherka, Inc. sells 40,000 units, its total fixed cost is $96,000. What is its total fixed
cost when it sells 45,000 units?
A. $84,000
B. $96,000
C. $108,000
D. It cannot be determined from the information given.

19. Job 910 was recently completed. The following data have been recorded on its job cost
sheet:

Direct materials.................................. $3,193

Direct labor-hours............................... 21 labor-hours
Direct labor wage rate........................ $12 per labor-hour
Machine-hours................................... 166 machine-hours

The company applies manufacturing overhead on the basis of machine-hours. The

predetermined overhead rate is $15 per machine-hour. The total cost that would be
recorded on the job cost sheet for Job 910 would be:
A. $3,220
B. $3,760
C. $5,935

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D. $3,445

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20. Which of the following relationships is correct?
A. Beginning units in process + units started = units completed + ending units in process
B. Units started = beginning units in process + units completed + ending units in process
C. Units started - beginning units in process = units completed + ending units in process
D. Ending units in process + beginning units in process = units started - units completed

21. An activity that is performed to support a specific product line is a(n)

A. batch-level activity.
B. customer-level activity.
C. product-level activity.
D. unit-level activity.

22. A volume-based cost system is likely to assign more manufacturing overhead

costs to products
A. that are more complex or difficult to manufacture
23.
than others.
B. with higher per-unit materials costs than
others.
24. With higher
C. that sell more units than
25.
others
D. with more activity costs than
others.

23. Bervine, Inc. produces two different products (bompers and woobles) using two
different activities: Machining, which uses machine hours as an activity driver, and
Inspection, which uses number of batches as an activity driver. The activity rate for
Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch.
Usage of the activity drivers are as follows:

What is the amount of Machining cost assigned to bompers?

A. $22,500
B. $125,000
C. $375,000
D. $500,000

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 24. Bervine, Inc. produces two different products (bompers and woobles) using two
different activities: Machining, which uses machine hours as an activity driver, and
Inspection, which uses number of batches as an activity driver. The cost of Machining is
$500,000, while the cost of Inspection is $30,000. Usage of the activity drivers are as
follows:

What is the activity rate for Machining?

A. $125 per machine hour
B. $167 per machine hour
C. $200 per machine hour
D. $500 per machine hour

25. Under activity based management, cost management is achieved by

A. Managing the underlying activities.
B. Reducing production volume.
C. Eliminating value-added activities.
D. Assigning indirect costs to products based on their activities.

26. The approach to cost management that calls for setting cost reduction goals across
numerous stages such as product introduction, growth, maturity, and decline is
A. Life cycle cost management
B. Total quality management
C. Target costing
D. Just-in-time inventory

27. Which of the following is not a type of quality cost?

A. Development costs
B. Prevention costs
C. Internal failure costs
D. Appraisal or inspection costs

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