1. Freight costs incurred in shipping products to customers is properly referred to as a product rather than period cost of the selling company.
True
False
2. Period costs include all selling and administrative costs, both variable and fixed.
True
False
3. The salary of a manufacturing quality control inspector would typically be accounted for as manufacturing overhead.
True
False
4. A retail merchandising company's cost of goods sold typically includes part of store utility costs.
True
False
5. A manufacturing company's cost of goods sold includes only product costs.
True
False
6. The basis used to apply manufacturing overhead in a job order cost system based on a predetermined overhead rate should be a measurable activity which correlates with or drives overhead costs.
True
False
7. Managerial accounting is governed by rules issued by the AICPA
True
False
8. If sales price and fixed costs remain constant while variable costs per unit increase, the number of units needed to be sold to reach the break-even point increases.
True
False
9. Unrecoverable past costs are always irrelevant in evaluating future business decision alternatives.
True
False
10. The manufacturing operation most likely to use job-order costing rather than process costing is:
cereal manufacturing.
candy manufacturing.
crude oil refining.
office building construction.
11. In a manufacturing company the proper journal entry (without numbers) to record the purchase of direct materials would be:
|
Option A
|
Finished Goods Inventory
|
xx
|
|
|
Raw Materials Inventory
|
|
xx
|
|
Option B
|
Raw Materials Inventory
|
xx
|
|
|
Work in Process Inventory
|
|
xx
|
|
Option C
|
Work in Process Inventory
|
xx
|
|
|
Raw Materials Inventory
|
|
xx
|
|
Option D
|
Raw Materials Inventory
|
xx
|
|
|
Finished Goods Inventory
|
|
xx
|
Option A
Option B
Option C
Option D
None of these
12. In a job order cost system, work-in-process inventory is debited when
actual manufacturing overhead is incurred.
raw materials are purchased.
direct labor costs are incurred.
actual manufacturing overhead and direct labor costs are incurred.
all of the these.
13. In a job-order cost system, direct materials requisitioned and introduced into production are recorded with a debit to
Manufacturing Overhead.
Finished Goods Inventory.
Direct Labor Expense.
Work-in-Process Inventory.
none of these.
14. In a job-order cost system, the application of manufacturing overhead based on a predetermined overhead rate would be recorded as a debit to
Cost of Goods Sold.
Work-in-Process Inventory.
Manufacturing Overhead.
Finished Goods Inventory.
none of these.
15. In a job order cost system, the introduction of indirect materials into production is recorded with a debit to
Work-in-Process Inventory.
Finished Goods Inventory.
Raw Materials Inventory.
Cost of Goods Sold
none of these.
16. In a job order cost system, work-in process inventory is credited when
manufactured goods are sold.
manufactured goods are completed.
raw materials are used in production.
none of these.
17. If a company uses a predetermined overhead rate to apply overhead cost to production, a debit balance in the Manufacturing Overhead account indicates that to date
more overhead cost has been applied to production than has actually been incurred.
more overhead cost has actually been incurred during the period than has been applied to production.
the amount of overhead cost applied is greater than the estimated overhead cost for the period.
the amount of overhead cost applied is less than the estimated overhead cost for the period.
18. Johansen Company has the following estimated costs for the next year:
|
Direct materials
|
$ 6,000
|
|
Direct labor
|
$ 100,000
|
|
Rent on factory building
|
$ 15,000
|
|
Sales salaries
|
$ 25,000
|
|
Depreciation on factory equipment
|
$ 8,000
|
|
Indirect manufacturing materials
|
$ 12,000
|
|
Production supervisor's salary
|
$ 15,000
|
Johansen pays $5 per hour for direct labor. If manufacturing overhead is applied on the basis of direct labor hours, the predetermined overhead rate per direct labor hour will be
$2.50.
$3.50.
$3.75.
$5.05.
none of these.
19. A proper journal entry (without numbers) to record the adjustment of overapplied overhead to Cost of Goods Sold would be:
|
Option A
|
Cost of Goods Sold
|
xx
|
|
|
Work in Process
|
|
xx
|
|
Option B
|
Cost of Goods Sold
|
xx
|
|
|
Manufacturing Overhead
|
|
xx
|
|
Option C
|
Cost of Goods Sold
|
xx
|
|
|
Finished Goods
|
|
xx
|
|
Option D
|
Manufacturing Overhead
|
xx
|
|
|
Cost of Goods Sold
|
|
xx
|
Option A
Option B
Option C
Option D
None of these.
20. A "pro-forma" financial statement means the financial statement is
in proper GAAP format.
used primarily by outside investors and creditors.
a projected financial statement.
based on historical information.
prepared by professional CPA's in correct format.
21. Within the relevant range
variable cost per unit decreases as the volume of sales decreases.
fixed cost per unit increases as the volume of sales decreases.
fixed costs per unit decreases as the volume of sales decreases.
variable cost per unit increases as the volume of sales decreases.
22. Within the relevant range, as the number of units sold increases, variable costs per unit sold are assumed to
increase.
decrease.
remain the same.
23. When using the scattergraph method to analyze mixed costs, the slope of the resulting line represents the
variable cost per unit.
fixed cost.
opportunity cost per unit.
total variable cost.
none of these.
24. If total sales are $100,000, total variable costs are $30,000, and total fixed costs are $40,000, the contribution margin is
$100,000.
$ 40,000.
$ 60,000.
$ 70,000.
none of these.
25. Which of the following is NOT commonly found on a functional income statement prepared in accordance with GAAP?
Cost of Goods Sold
Selling Expenses
Contribution Margin
Administrative Expenses
Gross Margin
26. The following cost data are available for Miner Company:
|
Month
|
Total Utility Costs
|
Number of Units Sold
|
|
January
|
$28,000
|
4,000 units
|
|
February
|
$22,000
|
3,000 units
|
|
March
|
$25,000
|
3,500 units
|
|
April
|
$39,000
|
6,500 units
|
|
May
|
$41,000
|
7,000 units
|
|
June
|
$42,000
|
8,000 units
|
Given this data and using the high-low method of mixed cost analysis, the monthly fixed cost portion of utility costs amounts to
$13,000.
$10,000.
$ 7,000.
$ 4,000.
none of these.
27. Smith Company sells a single product at a selling price of $30 per unit. Variable costs are $12 per unit and fixed costs are $14,000. Smith's break-even point in either units or sales dollars is
1,380 units.
$69,000.
3,450 units.
$207,000.
none of these.
28. Last year Easton Company reported sales revenues of $720,000, a contribution margin as a percentage of sales revenue of 30% and fixed costs of $240,000. Based on this information, the break-even point in sales dollars was
$640,000.
$880,000.
$744,000.
$800,000.
none of these.
29. If variable costs are $15 per unit, sales revenues are $20 per unit, and the break-even point is 2,500 units, fixed costs are
$ 500.
$ 2,500.
$12,500.
$37,500.
none of these.
30. Grate Corporation's product has a selling price per unit of $15 and a per-unit variable cost of $8. Its fixed costs are $14,000. How many units must the company sell to earn a profit of $35,000?
2,334 units
3,000 units
6,000 units
6,125 units
none of these
31. When other factors remain constant, a decrease in fixed costs
increases the breakeven units.
decreases the breakeven units.
has no effect on the breakeven units.
32. Star of the Sea School has annual fixed costs of $150,000 and variable costs of $550 per student. Star of the Sea expects 345 students for the upcoming year. If the school wishes to earn a profit of $10,000, what should tuition per student be (round answer to nearest $)?
$ 957
$1,014
$1,233
$1,346
none of these
33. The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $200,000. If Grain Company desires net income of $60,000, sales revenues would have to be
$260,000.
$440,000.
$280,000.
$240,000.
None of these.
34. The following cost information is for Rocky Company.
|
Actual results:
|
|
Total cost of purchasing material
|
$15,000
|
|
Number of labor hours worked
|
450 hours
|
|
Number of material pounds used in production
|
2,000 pounds
|
|
Number of units produced
|
200 units
|
|
Number of material pounds purchased
|
1,500 pounds
|
|
Total labor cost
|
$12,500
|
|
|
Leslie Company has established the following standards:
|
|
Price per pound of materials
|
$8.00 per pound
|
|
Standard labor rate
|
$30.00 per hour
|
During the year, Rocky Company DEBITED Work-in-Process Inventory for a total of $12,000 of direct labor cost. Given these data, which ONE of the following PAIRS would be included in the summary journal entry needed to record the information related to DIRECT LABOR? Note: Assume that the wages have not yet been paid in cash.
Credit Labor Efficiency Variance for $1,000; Debit Labor Rate Variance for $1,500
Debit Labor Efficiency Variance for $1,000; Credit Labor Rate Variance for $1,500
Credit Labor Efficiency Variance for $1,500; Debit Labor Rate Variance for $1,000
Credit Labor Efficiency Variance for $500; Debit Labor Rate Variance for $1,000
Debit Labor Efficiency Variance for $500; Credit Labor Rate Variance for $1,000
Debit Labor Efficiency Variance for $1,500; Credit Labor Rate Variance for $1,000
Debit Labor Efficiency Variance for $1,000; Credit Labor Rate Variance for $500
Credit Labor Efficiency Variance for $1,000; Debit Labor Rate Variance for $500
35. The following information is available for Aina Company.
|
Estimated for Year 1:
|
|
Estimated total manufacturing overhead
|
$100,000
|
|
Estimated direct labor hours
|
40,000 hours
|
|
|
Actual data for Year 1 are as follows:
|
|
Actual total manufacturing overhead
|
$90,000
|
|
Variable overhead spending variance
|
$22,500 favorable
|
The number of units produced during Year 1 was 1,000. The standard number of direct labor hours to be worked to produce each unit is 50. Given this information, the variable manufacturing overhead efficiency variance is
$10,000 unfavorable
$10,000 favorable
$25,000 unfavorable
$25,000 favorable
$12,500 unfavorable
$12,500 favorable
$32,500 unfavorable
$32,500 favorable
36. Solar Salt Company has two divisions. Sales, direct materials cost, and direct labor cost data for Solar Salt's two divisions are not available. However, manufacturing overhead and gross profit data for the two divisions are available, as follows.
|
Agricultural Products
|
Retail Products
|
|
Manufacturing overhead*
|
$450,000
|
$250,000
|
|
Gross profit
|
150,000
|
100,000
|
*Manufacturing overhead is allocated to production based on the amount of direct labor cost. Solar Salt has determined that its total manufacturing overhead cost of $700,000 is a mixture of unit-level costs, batch-level costs, and product line costs. Solar Salt has assembled the following information concerning the manufacturing overhead costs, the annual number of units produced, production batches, and number of product lines in each division.
|
Total Manufacturing Overhead Costs
|
Agricultural Products
|
Retail Products
|
|
Unit-level overhead
|
$210,000
|
7,500 units
|
13,500 units
|
|
Batch-level overhead
|
280,000
|
50 batches
|
90 batches
|
|
Product line overhead
|
210,000
|
10 lines
|
18 lines
|
|
$700,000
|
|
|
How much will GROSS PROFIT in each of the divisions be if Solar Salt adopts an activity-based costing system?
Agricultural, $50,000; Retail, $200,000
Agricultural, loss of $50,000; Retail, $300,000
Agricultural, $350,000; Retail, loss of$100,000
Agricultural, $350,000; Retail, $100,000
Agricultural, $350,000; Retail, $300,000
Agricultural, $250,000; Retail, $450,000
Agricultural, loss of $50,000; Retail, loss of$100,000
Agricultural, $150,000; Retail, $100,000
37. The following information is for Harold Company. The "percent completed" numbers are for conversion costs; all direct materials are added at the beginning of the production process. For the beginning inventory, the percentage given is the percentage that was already completed as of the beginning of the period. For the ending inventory, the percentage given is the percentage that was completed as of the end of the period.
|
Units
|
Percent Completed
|
Direct Materials Costs
|
Conversion Costs
|
|
Beginning work in process
|
6,000 units
|
20%
|
$10,000
|
$5,000
|
|
Costs added this period
|
|
|
$52,800
|
$43,600
|
|
Ending work in process
|
10,000 units
|
30%
|
|
|
|
Units completed and transferred during the period
|
20,000 units
|
|
|
|
Compute the TOTAL COST TRANSFERRED OUT DURING THE PERIOD THAT WAS ASSOCIATED WITH THE 6,000 BEGINNING WIP INVENTORY UNITS. Assume a FIFO flow of costs.
$24,600
$27,100
$25,200
$20,160
38. The following information is for Stahc Company. The "percent completed" numbers are for conversion costs; all direct materials are added at the beginning of the production process. For the beginning inventory, the percentage given is the percentage that was already completed as of the beginning of the period. For the ending inventory, the percentage given is the percentage that was completed as of the end of the period.
|
Units
|
Percent Completed
|
Direct Materials Costs
|
Conversion Costs
|
|
Beginning work in process
|
12,000 units
|
70%
|
$10,000
|
$5,000
|
|
Costs added this period
|
|
|
$56,000
|
$49,200
|
|
Ending work in process
|
6,000 units
|
80%
|
|
|
|
Units completed and transferred during the period
|
20,000 units
|
|
|
|
Compute the total cost of goods STARTED AND COMPLETED during the period. Assume a FIFO flow of costs.
$56,000
$64,200
$101,600
$41,000