10) An activity that has a direct cause-effect relationship with the resources consumed is a(n) A. B. C. D.

product activity overhead rate cost driver cost pool

11) Which would be an appropriate cost driver for the ordering and receiving activity cost pool? A. B. C. D. Inspections Purchase orders Machine setups Machine hours

12) The first step in activity-based costing is to A. identify the cost driver that has a strong correlation to the activity cost pool B. C. D. compute the activity-based overhead rate per cost driver

assign manufacturing overhead costs for each activity cost pool to product identify and classify the major activities involved in the manufacture of specific products

13) Which of the following is a value-added activity? A. B. C. D. Inspections Machinery repair Engineering design Inventory storage

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

A. B.

attempting to reduce or eliminate nonvalue-added activities identifying activities, activity cost plus, and cost drivers C. the labeling of activities as value-added

D.

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

15) Which of the following is a nonvalue-added activity? A. B. C. D. Packaging Machining Engineering design Inspection

16) Which of the following factors would suggest a switch to activity-based costing? A. B. C. Production managers use data provided by the existing system. Overhead costs constitute a significant portion of total costs. Product lines similar in volume and manufacturing complexity. D. The manufacturing process has been stable.

17) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is: Mini A Maxi B Direct labor hours 15,000 25,000 Machine setups Machine hours Inspections 600 800 400 700 24,000 26,000

Overhead applied to Maxi B using traditional costing using direct labor hours is A. B. $2,000,000 $1,536,000

A. C. D.

$2,000,000 $1,280,000 $1,670,000

18) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is: Mini A Maxi B Direct labor hours 15,000 25,000 Machine setups Machine hours Inspections 600 800 400 700 24,000 26,000

Overhead applied to Mini A using traditional costing using direct labor hours is A. B. C. D. $1,920,000 $1,536,000 $1,200,000 $1,670,000

19) Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12 per unit; however, $5 per unit is avoidable. Should Truckel make or buy the wickets?

A. B. C. D.

Make; savings = $10,000 Buy; savings = $10,000 Buy; savings = $25,000 Make; savings = $20,000

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

A. B. C. D.

$10 $45 $3.33 $5

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

A. B. C. D.

Process further; the company will save $16 per unit. Process further; the company will save $1 per unit. Sell before assembly; the company will save $15 per unit. Sell before assembly; the company will save $1 per unit.

22) Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartleys contribution margin ratio?

A. B. C. D.

266.6% 150%. 37.5% 62.5%.

23) Disneys variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase?

A. B. C. D.

$6,000 $12,000 $28,000 $18,000

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

A. B.

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

There should be a correlation between changes in the level of activity and changes in costs. C. D. The activity should always be a fixed amount.

The activity level should be an approved GAAP activity base.

25) Variable costing

A. B.

is also known as full costing

treats fixed manufacturing overhead as a period cost C. D. is required under GAAP

is used for external reporting purposes

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

A. B.

Fixed manufacturing overhead Variable manufacturing overhead C. D. Direct labor Direct materials

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

A. B.

Fixed administrative expenses Variable manufacturing overhead C. D. Direct labor Direct materials

28) If a company is concerned with the potential negative effects of establishing standards, they should

A.

set tight standards in order to motivate people B. not employ any standards

C. D.

offer wage incentives to those meeting standards set loose standards that are easy to fulfill

29) A standard cost is

A.

the historical cost of producing a product last year B. C. a predetermined cost the average cost in an industry

D.

a cost which is paid for a group of similar products

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

A.

standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system B. C. D. a budget expresses a total amount while a standard expresses a unit amount

a budget expresses management's plans, while a standard reflects what actually happened a budget expresses what costs were, while a standard expresses what costs should be

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

A. B. C. D.

$4,000 $1,000 $3,000 $2,000

A.

$4,000

32) A company developed the following per-unit standards for its product: 2 pounds of direct materials at $6 per pound. Last month, 2,000 pounds of direct materials were purchased for $11,400. The direct materials price variance for last month was

A. B. C. D.

$600 unfavorable $11,400 favorable $300 favorable $600 favorable

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

A. B. C. D.

$500 favorable $400 unfavorable $500 unfavorable $400 favorable

34) Manufacturing overhead costs are applied to work in process on the basis of

A. B. C. D.

actual overhead costs incurred actual hours worked

ratio of actual variable to fixed costs standard hours allowed

35) Which of the following statements is FALSE?

A.

The overhead volume variance is favorable if standard hours allowed for output is greater than the standard hours at normal capacity. B. The overhead volume variance indicates whether plant facilities were used efficiently during the period. C. D. The overhead volume variance relates solely to fixed costs.

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

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

A. B. C. D.

variable overhead costs will be overapplied the overhead volume variance will be unfavorable the overhead controllable variance will be favorable variable overhead costs will be underapplied

37) Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April. Each mug requires 2 pounds of resin and a half hour of direct labor. Resin costs $1 per pound and employees of the company are paid $12.50 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor costs. Gottberg has 2,000 pounds of resin in beginning inventory and wants to have 2,400 pounds in ending inventory. How much is the total amount of budgeted direct labor for April?

A. B. C. D.

$27,500 $12,500 $25,000 $13,750

38) At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates it will sell 35,000 units during the first quarter of 2004 with a 10% increase in sales each quarter. Barrys policy is to maintain an ending inventory equal to 25% of the next quarters sales. Each widget costs $1 and is sold for $1.50. How much is budgeted sales revenue for the third quarter of 2004?

A. B. C.

$42,350 $57,525 $63,525

A. D.

$42,350 $63,000

39) Wacos Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during July. Waco keeps 10% of the next months sales as ending inventory. How many units should Waco produce during June?

A. B. C. D.

19,000 18,900 19,100 21,000

40) In cost-plus pricing, the target selling price is computed as

A.

variable cost per unit + fixed manufacturing cost per unit + desired ROI per unit B. C. D. variable cost per unit + desired ROI per unit total unit cost + desired ROI per unit fixed cost per unit + desired ROI per unit

41) In most cases, prices are set by the

A. B. C. D.

selling company customers largest competitor competitive market

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

A.

it can be used to determine a products target cost B. C. it considers customer demand it is simple to compute

D.

that sales volume has no effect on per unit costs