QUIZ 1- feb.

10,2021

AN INTRODUCTION TO COST TERMS AND PURPOSES

QUIZ 2- feb. 17,2021

AN INTRODUCTION TO COST TERMS AND PURPOSES

1. Which of the following accounts would be a period cost rather than a product cost?

A. Depreciation on manufacturing machinery.

B. Maintenance on factory machines.
C. Production manager's salary.
 D. Direct Labor.
E. Freight out.
Freight out is a selling cost while all the others are production costs.

2. A company which manufactures custom-made machinery routinely incurs sizable telephone

costs in the process of taking sales orders from customers. Which of the following is a proper
classification of this cost?
A. Product cost
B. Period cost
C. Conversion cost
D. Prime cost
Telephone costs are a selling cost rather than a production cost.

3. For a manufacturing company, which of the following is an example of a period cost rather than
a product cost?
A. Wages of salespersons.
B. Salaries of machine operators.
C. Insurance on factory equipment.
D. Depreciation of factory equipment.
Wages of salespeople would be a selling cost which is a period cost.

4. XYZ Company manufactures a single product. The product's prime costs consist of
A. direct material and direct labor.
B. direct material and factory overhead.
C. direct labor and factory overhead.
D. direct material, direct labor and factory overhead.
E. direct material, direct labor and variable factory overhead.
This is the definition of prime cost.

5. Which of the following costs is both a prime cost and a conversion cost?
A. direct materials
B. direct labor
C. manufacturing overhead
D. administrative costs
E. marketing costs
This item in fact is the only item that fits both terms.
6. Marketing costs include all of the following except:
A. Advertising.
B. Shipping costs.
C. Sales commissions.
D. Legal and accounting fees.
E. Office space for sales department.
Legal and accounting are administrative rather than marketing.
7. Classifying a cost as either direct or indirect depends upon
A. whether an expenditure is unavoidable because it cannot be changed regardless of any action
taken.
B. whether the cost is expensed in the period in which it is incurred.
C. the behavior of the cost in response to volume changes.
D. the cost object to which the cost is being related.
This is the definition for classifying a cost as either direct or indirect.

8. The beginning Work-in-Process inventory plus the total of the manufacturing costs equals
A. total finished goods during the period.
B. cost of goods sold for the period.
C. total work-in-process during the period.
D. cost of goods manufactured for the period.
Total work-in-process during the period is equal to the beginning Work-in-Process inventory plus
the total of the manufacturing costs.

9. The cost of the direct labor will be treated as an expense on the income statement when the
resulting:
A. payroll costs are paid.
B. payroll costs are incurred.
C. products are completed.
D. products are sold.
This solution supports the matching principle.

10. Inventoriable costs:

A. include only the prime costs of manufacturing a product.
B. include only the conversion costs of providing a service.
C. exclude fixed manufacturing costs.
D. are regarded as assets until the units are sold.
E. are regarded as expenses when the costs are incurred.
This statement is in compliance with the definition of an asset.

11. A product cost is deducted from revenue when

A. the finished goods are sold.
B. the expenditure is incurred.
C. the production process takes place.
D. the production process is completed.
E. the finished goods are transferred to the Finished Goods Inventory.
This solution supports the matching principle.
12. The amount of direct materials issued to production is found by
A. subtracting ending work in process from total work in process during the period.
B. adding beginning direct materials inventory and the delivered cost of direct materials.
C. subtracting ending direct materials from direct materials available for production.
D. adding delivered cost of materials, labor, and manufacturing overhead.
E. subtracting purchases discounts and purchases returns and allowances from purchases of
direct material plus freight-in.
This statement describes the flow of cost through the inventory account.

13. The beginning Finished Goods Inventory plus the cost of goods manufactured equals
A. ending finished goods inventory.
B. cost of goods sold for the period.
C. total work-in-process during the period.
D. total cost of goods manufactured for the period.
E. cost of goods available for sale for the period.
This is the sum of the two terms indicated in the statement.

14. Direct labor would be part of the cost of the ending inventory for which of these accounts?
A. Work-in-Process.
B. Finished Goods.
C. Direct Materials and Work-in-Process.
D. Work-in-Process and Finished Goods.
E. Direct Materials, Work-in-Process, and Finished Goods.
This choice accurately explains the role of direct labor in the inventory accounts.

15. The Work-in-Process Inventory of the Rapid Fabricating Corp. was $3,000 higher on December
31, 2012 than it was on January 1, 2012. This implies that in 2012
A. cost of goods manufactured was higher than cost of goods sold.
B. cost of goods manufactured was less than total manufacturing costs.
C. manufacturing costs were higher than cost of goods sold.
D. manufacturing costs were less than cost of goods manufactured.
E. cost of goods manufactured was less than cost of goods sold.
This statement accurately reflects the explanation for the change in the work-in-process account
during the year.
16. Which of the following is not a product cost under full-absorption costing?

A. Direct materials used in the current period

B. Rent for the warehouse used to store direct materials
C. Salaries paid to the top management in the company
D. Vacation pay accrued for the production workers
Management salaries are a period cost.
17. The term "gross margin" for a manufacturing firm refers to the excess of sales over:

A. cost of goods sold, excluding fixed indirect manufacturing costs.

B. all variable costs, including variable marketing and administrative costs.
C. cost of goods sold, including fixed indirect manufacturing costs.
D. variable costs, excluding variable marketing and administrative costs.
E. total manufacturing costs, including fixed indirect manufacturing costs.
This statement is a definition of the term "gross margin."

18. How would property taxes paid on a factory building be classified in a manufacturing company?

A. Fixed, period cost.

B. Fixed, product cost.
C. Variable, period cost.
D. Variable, product cost.
Taxes are fixed in behavior, and since they are in the manufacturing area, they are a product
cost.

19. How would miscellaneous supplies used in assembling a product be classified for a
manufacturing company?

A. Fixed, period cost.

B. Fixed, product cost.
C. Variable, period cost.
D. Variable, product cost.
Supplies are variable in behavior, and since they are in the assembly area they are a product
cost.

20. How would a 5% sales commission paid to sales personnel be classified in a manufacturing
company?

A. Fixed, period cost.

B. Fixed, product cost.
C. Variable, period cost.
D. Variable, product cost.
The use of a percentage implies a variable cost and being paid to sales personnel it is a period
cost.

21. Which of the following statements is (are) true?

(1). The term full cost refers to the cost of manufacturing and selling a unit of product and
includes both fixed and variable costs.
(2). The fixed cost per unit is considered constant despite changes in volume of activity within
the relevant range.
 A. Only (1) is true.
B. Only (2) is true.
C. Both (1) and (2) are true.
D. Neither (1) nor (2) are true.
Part (1) is true-full cost is both product and selling costs; part (2) is false because fixed cost per
unit varies inversely with volume while total fixed cost is constant.

22. A company had beginning inventories as follows:

Direct Materials, $300; Work-in-Process, $500; Finished Goods, $700. It had ending inventories
as follows: Direct Materials, $400; Work-in-Process, $600; Finished Goods, $800. Material
Purchases (net including freight) were $1,400, Direct Labor $1,500, and Manufacturing
Overhead $1,600. What is the Cost of Goods Sold for the period?
A. $4,100.
B. $4,200.
C. $4,300.
D. $4,400.
$300 + $1,400 - $400 = $1,300 (Direct materials used in production) $500 + $1,300 + $1,500 +
$1,600 - $600 = $4,300 (COGM) $700 + $4,300 - $800 = $4,200 (COGS)

23. The difference between variable costs and fixed costs is (CMA adapted)

A. Unit variable costs fluctuate and unit fixed costs remain constant.
B. Unit variable costs are fixed over the relevant range and unit fixed costs are variable.
C. Total variable costs are constant over the relevant range, while fixed costs change in the long-
term.
D. Total variable costs are variable over the relevant range but fixed in the long-term, while fixed
costs never change.
E. Unit variable costs change in varying increments, while unit fixed costs change in equal
increments.
Unit variable costs are constant, total variable costs fluctuate; unit fixed costs fluctuate, total
fixed costs are constant.

24. Which one of the following costs is classified as a period cost? (CIA adapted)

A. The wages of the workers on the shipping docks who load completed products onto
outgoing trucks.
B. The wages of a worker paid for idle time resulting from a machine breakdown in the molding
department.
C. The payments for employee (fringe) benefits paid on behalf of the workers in the
manufacturing plant.
 D. The wages paid to workers for reworking defective products that failed the quality inspection
upon completion.
Shipping to customers is a selling (period) cost.

25. An opportunity cost is

A. a cost that is charged against revenue in an accounting period.

B. the foregone benefit from the best alternative course of action.
C. the excess of operating revenues over operating costs.
D. the cost assigned to the products sold during the period.
E. the cost assigned to the products produced during the period.
This is a definition of opportunity cost which is not attached to products.

26. The process of assigning indirect costs to products, services, people, business units, etc., is

A. cost object.
B. cost pool.
C. cost allocation.
D. opportunity cost.
This statement is a definition of allocation.

27. A ___________________ is any end to which a cost is assigned.

A. cost object
B. cost pool
C. cost allocation
D. opportunity cost
This statement is a definition of a cost object.

28. Under full absorption costing, which of the following are included in product costs?

A. Only direct materials and direct labor.

B. Only variable manufacturing costs.
C. Only conversion costs.
D. All fixed and variable manufacturing costs.
Full absorption includes all fixed and variable manufacturing costs.

29.
30. P
31.
QUIZ 3- feb. 24,2021

COST-VOLUME-PROFIT ANALYSIS

1. Expense A is a fixed cost expense, B is a variable cost. During the current year the volume of
output has decreased. In terms of cost per unit of output, we would expect that
A. expense A has remained unchanged.
B. expense B has decreased.
C. expense A has decreased.
D. expense B has remained unchanged.
VC per unit does not change while FC per unit does change with volume changes.

2. Cost-volume-profit (CVP) analysis is a simple but powerful tool to assist management make
operating decisions. Which of the following does not represent a potential use of CVP analysis?
A. Ability to compute the break-even point.
B. Ability to determine optimal sales volumes.
C. Aids in evaluating tax planning alternatives.
D. Aids in determining optimal pricing policies.
CVP addresses pricing and volume, it does not address tax planning

3. A company's break-even point will not be increased by:

A. an increase in total fixed costs.
B. a decrease in the selling price per unit.
C. an increase in the variable cost per unit.
D. a decrease in the contribution margin ratio.
E. an increase in the number of units produced and sold.
Units sold does not affect break-even—it will affect the margin of safety.

4. If Donnelly Corporation wishes to earn $22,500 in after tax net income for the coming year, the
company's sales volume in dollars must be
A. $213,750.
B. $257,625.
C. $207,000.
D. $229,500.
$22,500/(1 - .40) = $37,500
($115,500 + $37,500)/($9 - 3) = 25,500 units
25,500 × $9 = $229,500

5. Sales for the coming year are expected to exceed last year's by 1,000 units. If this occurs,
Donnelly's sales volume in the coming year will be
A. 22,600 units.
B. 21,960 units.
C. 23,400 units.
D. 21,000 units.
$5,040/(1 - .40) = $8,400
 ($105,000 + $8,400)/($7.50 - 2.25) = 21,600 units sold last year
21,600 + 1,000 = 22,600

6. KR Sales had $1,200,000 in sales last month. The variable cost ratio was 60% and operating
profits were $80,000. What is KR's margin of safety?
A. $200,000
B. $300,000
C. $500,000
D. Cannot determine with the information given.
Fixed costs = $1,200,000 × (1 - .6) - 80,000 = $400,000
$400,000/(1 - .6) = $1,000,000
$1,200,000 - 1,000,000 = $200,000

7. KR Sales had $1,200,000 in sales last month. The variable cost ratio was 60% and operating
profits were $80,000. What is KR's break-even sales volume?
A. $800,000
B. $1,000,000
C. $1,200,000
D. $2,000,000
Fixed costs = $1,200,000 × (1 - .6) - 80,000 = $400,000
$400,000/(1 - .6) = $1,000,000

8. The Blue Company is currently selling its single product for $15. Variable costs are estimated to
remain at 70% of the current selling price and fixed costs are estimated to be $4,800 per month.
If Blue increases its selling price by 10%, its variable cost ratio will
A. not change
B. decrease
C. increase
$15(.70) = $10.50
$15(1.10) = $16.50
$10.50/$16.50 = 63.6% (vs. 70%)

9. The following pertains to Clove Co. for the year ending December 31, 2008:
Budgeted Sales $1,000,000
Breakeven Sales 700,000
Budgeted Contribution Margin 600,000
Cashflow Breakeven 200,000

Clove's margin of safety is: (CPA adapted)

A. $300,000
B. $400,000
C. $500,000
 D. $800,000
$1,000,000 - $700,000 = $300,000

10. Kanmore produces and sells three products. Last month's results are as follows:
P1 P2 P3
Revenues $100,000 $200,000 $200,000
Variable 40,000 140,000 80,000

Fixed costs total $200,000. What sales volume would generate an operating profit of $150,000?
(Assume the current prodcut mix)
A. $650,000
B. $610,000
C. $729,167
D. $850,000
CM = (100,000 - 40,000) + (200,000 - 140,000) + (200,000 - 80,000) = $240,000
CM% = 240,000/500,000 = 48%
($200,000 + 150,000)/.48 = $729,167

11. Acme Sales has two store locations. Store A has fixed costs of $125,000 per month and a
variable cost ratio of 60%. Store B has fixed costs of $200,000 per month and a variable cost
ratio of 30%. At what sales volume would the two stores have equal profits?
A. $250,000
B. $325,000
C. $361,111
D. Cannot determine with the information given.
(1 - .6)TR - 125,000 = (1 - .3)TR - 200,000; TR = $250,000

12. The number of T-shirts Donnelly Corporation must sell to break even in the coming year is

Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans.
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 after tax net income last
year was $5,040. Donnelly's expectations for the coming year include the following: (CMA
adapted)
• The sales price of the T-shirts will be $9
• Variable cost to manufacture will increase by one-third
• Fixed costs will increase by 10%
• The income tax rate of 40% will be unchanged.

A. 17,000 units.
B. 19,250 units.
C. 20,000 units.
D. 22,000 units.
FC (last year) = ($7.50 - 2.25) × 20,000 units = $105,000
 FC (this year) = $105,000 × 1.10 = $115,500
$115,500/(9 - 3) = 19,250

Misa Corporation manufactures circuit boards and is in the process of preparing next year's
budget. The pro forma income statement for the current year is presented below.

Sales $3,500,000
Cost of Sales:
Direct Material $500,000
Direct labor 250,000
Variable overhead 275,000
Fixed overhead 600,000 1,625,000
Gross profit $1,875,000
Selling and G&A:
Variable 750,000
Fixed 250,000 1,000,000
Operating income $875,000

13. For the coming year, the management of Misa Corporation anticipates a 5 percent decrease in
sales, a 10 percent increase in variable costs, and a $45,000 increase in fixed expenses. The
break-even point for next year would be
A. $3,022,500.
B. $2,947,500.
C. $2,668,750.
D. $2,168,225.
($3,500,000 × .95) - ($1,775,000 × 1.10)/($3,500,000 × .95) = .41278
($850,000 + 45,000)/.41278 = $2,168,225
14. The contribution margin ratio for the current year is
A. 53.6%
B. 49.3%
C. 46.4%
D. 25%
$500,000 + 250,000 + 275,000 + 750,000 = $1,775,000
($3,500,000 - 1775,000)/3,500,000 = 49.3%

15. For the coming year, the management of Misa Corporation anticipates a 5 percent decrease in
sales, a 10 percent increase in all variable costs, and a $45,000 increase in fixed expenses. The
operating profit for next year would be
A. $477,500.
B. $492,500.
C. $552,500.
D. $831,250.
 ($3,500,000 × .95) - ($1,775,000 × 1.10) - ($850,000 + 45,000) = $477,500

16. Sanfran has the following data: If Sanfran produces and sells 30,000 units, what is the margin of
safety?
Selling Price $40
Variable Manufacturing Costs $22
Fixed manufacturing costs $150,000 per month
Variable Selling & Administrative costs $6
Fixed Selling & administrative costs $120,000 per month

A. 5,000 units
B. 7,500 units
C. 22,500 units
D. 30,000 units
30,000 - 22,500 = 7,500 units

17. Given the following information:

Sales $5,000
Fixed Expenses 2,000
Variable Expenses 1,750

What would expected net income be if the company experienced a 10 percent increase in fixed
costs and 10 percent increase in sales volume?
A. $1,750.
B. $1,550.
C. $1,250.
D. $1,375.
[($5,000 - $1,750)(1.10)] - [($2,000)(1.10)] = $1,375

18. A company's break-even point will not be increased by:

A. an increase in the number of units produced and sold.
B. a decrease in the selling price per unit.
C. an increase in the variable cost per unit.
D. an increase in the variable cost ratio.
E. an increase in total fixed costs.
Volume changes do not affect the break-even.
19. A company's break-even point will not be changed by:
A. a change in total fixed costs.
B. a change in the selling price per unit.
C. a change in the variable cost per unit.
D. a change in the contribution margin ratio.
E. a change in the income tax rate.
Income taxes do not affect break-even; taxes are based on before tax profit
20. A company's break-even point will not be changed by:
A. a change in total fixed costs.
B. a change in the number of units produced and sold.
C. a change in the variable cost ratio.
D. a change in the contribution margin ratio.
E. a change in the product mix.
Volume changes do not affect the break-even.

21. If both the variable cost per unit and the selling price per unit increase, the new contribution
margin ratio in relation to the old contribution margin ratio will be:
A. Lower.
B. Higher.
C. Unchanged.
D. Not enough information to tell.
Need to know size of increase of each.

22. Which of the following would not cause the break-even point to change?
A. Sales price increases.
B. Sales volume increases.
C. Fixed cost increases.
D. Variable costs per unit decreases.
E. Product mix shifts towards the cheaper products.
Volume changes do not affect the break-even.
23. Which of the following would not cause the break-even point to change?
A. Variable costs per unit increases.
B. Fixed costs increases.
C. Product mix shifts towards the more expensive products.
D. Sales volume decreases.
Volume changes do not affect the break-even.

Budgeted break-even point Budgeted margin of safety

a. Increase Increase
b. Increase decrease
c. decrease decrease
d. decrease Increase

24. On January 1, 2006, Lake Co. increased its direct labor wage rates. All other budgeted costs and
revenues were unchanged. How did this increase affect Lake's budgeted break-even point and
budgeted margin of safety? (CPA adapted)
A. a
B. b
 C. c
D. d
Direct labor is a variable cost, so the unit contribution margin will decrease, increasing the
break-even point. Since break-even increases and sales are unchanged, the margin of safety
decreases.

25. If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars)
decrease, what will be the effect on the contribution margin ratio and the break-even point
respectively?
Contribution Margin Ratio Break-even point
a. decreased Increased
b. Increased decreased
c. decreased decreased
d. increased Increased
A. a
B. b
C. c
D. d
If VC decreases, CM% increases, if FC decreases, the break-even will also decrease.

26. During 2006, Thor Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a
volume of 80,000 kits, Thor had fixed costs of $1,000,000 and a profit before income taxes of
$200,000. Due to an adverse legal decision, Thor's 2007 liability insurance increased by
$1,200,000 over 2006. Assuming the volume and other costs are unchanged, what should the
2007 price be if Thor is to make the same $200,000 profit before income taxes? (CPA adapted)
A. $122.50
B. $135.00
C. $152.50
D. $240.00
[($120 - VC) × 80,000] - $1,000,000 = $200,000
VC = $105
[($SP - $105) × 80,000] - $2,200,000 = $200,000
SP = $135

You have been provided with the following information:

Per Unit Total
Sales $15 $45,000
Less Variable Expenses 9 27,000
Contribution Margin 6 18,000
Less fixed expenses 12,000
Operating profits $6,000
27. If sales decrease by 500 units, how much will fixed expenses have to be reduced by to maintain
the current operating profit of $6,000?
 A. $9,000.
B. $7,500.
C. $6,000.
D. $3,000.
$45,000/15 = 3,000 units
[($15 - 9)(3,000 - 500)] - FC = $6,000
FC = $9,000; thus FC will have to decrease by $3,000
28. Given the following data:
Per Unit Total
Sales $15 $45,000
Less Variable Expenses 9 27,000
Contribution Margin 6 18,000
Less fixed expenses 12,000
Net income $6,000

If sales decrease by 500 units, by what % would fixed expenses have to be reduced by to
maintain current net income?
A. 50.0%.
B. 33.3%.
C. 25.0%.
D. 16.7%.
$45,000/15 = 3,000 units
[($15 - 9) × (3,000 - 500)] - FC = $6,000
FC = $9,000; thus FC will have to decrease by $3,000
$3,000/12,000 = 25%

29. A decrease in the margin of safety would be caused by a(n):

A. increase in the total fixed costs.
B. increase in total revenue (sales).
C. decrease in the break-even point.
D. decrease in the variable cost per unit.
An increase in fixed costs will increase the break-even point which lowers the margin of safety,
all the others decrease the break-even point.

30. EM Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and
operating profits were $180,000. What is EM's margin of safety?
A. $480,000
B. $600,000
C. $2,020,000
D. Cannot determine with the information given.
Fixed costs = $2,200,000 × .3 - 180,000 = $480,000
$480,000/.3 = $1,600,000
$2,200,000 - 1,600,000 = $600,000
31.
32.
33. P
34.
35. D
QUIZ 4- Mar. 03,2021

JOB COSTING

A.

1. W
2. Which of the following is not a difference between job costing for service firms and job costing
for manufacturing companies?
A. Service firms generally use fewer direct materials that manufacturing companies.
B. Service firms' overhead accounts have slightly different titles (e.g., Applied Service Overhead).
C. Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods
Sold.
D. Service firms' costs are immediately expensed since all work is completed during a period.
Not all service jobs are completed in a period. There may very well be a work-in-process.
3. Which of the following statements is (are) true regarding the application of manufacturing
overhead?
(A) Manufacturing overhead is only recorded on the job cost sheets when (a) financial
statements are prepared or a job is completed.
(B) Overapplied overhead occurs when the actual overhead costs incurred during a period are
greater than the overhead costs applied during the period.
A. Only A is true.
B. Only B is true.
C. Both A and B are true.
D. Neither A nor B is true.
(B) is false because overapplied is when actual is less than applied.
4. F
5. Which of the following documents is used as the basis for posting to the direct labor section of
the job cost sheet?
A. Purchase requisition.
B. Materials requisition.
C. Receiving report.
D. Purchase order.
E. Time card.
Only the time card has to do with labor—the other four are materials documents
6. Which of the following documents is used as the basis for posting to the direct materials section
of the job cost sheet?
A. Purchase requisition.
B. Materials requisition.
C. Receiving report.
D. Purchase order.
E. Time card.
Purchase requisition, purchase order, and receiving report are documents when the materials
are purchased and received. This question asks about usage of materials.
7. Which of the following actions do not cause an impropriety in job costing?
A. Misstating the stage of completion.
 B. Choosing to use normal costing rather than actual costing.
C. Charging costs to the wrong job.
D.Choosing an allocation method based on the results rather than choosing the method based
on resource usage.
The choice between normal costing and actual costing is not an ethical issue.
8. Complex jobs that take multiple time periods and require the work of many different
departments, divisions, or subcontractors are called
A. clients.
B. projects.
C. customers.
D. contracts.
E. vendors.
This is the definition of a project.
9. Which of the following accounts is used to accumulate the actual manufacturing overhead costs
incurred during a period?
A. Applied Manufacturing Overhead
B. Work-in-Process Inventory
C. Manufacturing Overhead Control
D. Cost of Goods Sold
E. Finished Goods Inventory
Since this is "actual" overhead it would not go to "Applied". Manufacturing Overhead Control
would get the actual overheads.
10. F
11. Which of the following companies would most likely use job costing?
A. Paper manufacturer
B. Paint producer
C. Breakfast cereal maker
D. Advertising agency
Every advertising client has different requirements. The other three strive to have a uniform
product.
12. F
13. F
14. It is possible that the total cost of a job started in April and completed in May will not include:
A. direct material added in April.
B. direct labor added in May.
C. applied overhead in April.
D. applied overhead in May.
E. direct material purchased in May.
Materials purchased in the month of May may not make it into production that month.
15. Lw
16. W
17. In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs
from Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to
all jobs
 A. sold during the period.
B. completed during the period.
C. in process during the period.
D. started in process during the period.
E. completed and sold during the period.
Goods produced enter the finished goods; goods sold leave the account.
18. L
19. For which of the following businesses would the job order cost system be appropriate?
A. Auto repair shop
B. Crude oil refinery
C. Drug manufacturer
D. Root beer producer
In auto repair, each job will require different resources.

20. If a company multiplies its actual overhead rate by the actual activity level of its allocation base,
it is using
A. standard costing.
B. normal costing.
C. actual costing.
D. budget costing.
E. ideal costing.
Actual overhead rate implies an actual costing system.

21. H
22. What are the transfers-out from the Finished Goods Inventory called?
A. Cost of Goods Manufactured
B. Cost of Goods Available
C. Cost of Goods Completed
D. Cost of Goods Sold
Product leaves finished goods when it is sold.

23. Which of the following is not a characteristic of job costing?

A. Each job is distinguishable from other jobs.
B. Identical units are produced on an ongoing basis.
C. Job cost data are used for setting prices and bids.
D. It is not possible to compare actual costs with estimated costs.
Job costing is used when there is variety in the units produced

24. Underapplied overhead occurs when the balance in the Manufacturing Overhead Control
account is:
A. greater than the balance in the Applied Manufacturing Overhead account.
B. equal to the balance in the Applied Manufacturing Overhead account.
C. less than the balance in the Applied Manufacturing Overhead account.
D. less than the balance in the Finished Goods Inventory account.
 Underapplied means less is applied than is actual; the balance in the applied would be smaller
than the actual amount.

25. G
26. The journal entry to record the completion of a job in a job costing system is
a. Finished goods inventory xxx
Materials inventory xxx
b. Work-in-process inventory xxx
Applied manufacturing overhead xxx
c. Manufacturing overhead control xxx
Finished goods inventory xxx
d. Finished goods inventory xxx
Work-in-process inventory xxx
e. Cost of goods sold xxx
Finished goods inventory xxx

The completed goods go to finished goods, they come from work-in-process.

27. G
28. Which of the following approaches allocates overhead by multiplying a predetermined overhead
rate × actual activity?
A. Actual costing
B. Normal costing
C. Regression costing
D. Standard costing
Normal costing still applies overhead based on actual activity; standard costing uses standard
activity.

29. G
30. H

B. TRUE OR FALSE

1. Actual costing does not use a predetermined overhead rate to apply manufacturing overhead costs to
jobs completed during the period. TRUE

The application rate is determined at the end of the period based on actual costs.

2.

3. Job shops have three types of inventory accounts: Finished Goods, Work-in-Process, and Direct
Materials. TRUE

A fourth account, overhead, is not an inventory.

4. A job is a product or service that can be easily and conveniently distinguished from other products/
services. TRUE

This is the definition of a job.

5. It is unethical to intentionally charge costs to the wrong job. TRUE

It is unethical to knowingly do something wrong.

6.

7. Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead
costs. TRUE

This is due to the traceability of direct costs.

8.Under a job-order cost system the Work in Process account is debited with the cost of materials
purchased. TRUE

9.A job cost sheet is used to accumulate costs charged to a job. TRUE

10. The process of assigning overhead cost to jobs is known as overhead application. TRUE

11. When a job has been completed, the goods are transferred from the production department to the
finished goods warehouse and the journal entry would include a credit to Work in Process. TRUE

12.If manufacturing overhead applied exceeds the actual manufacturing overhead costs of the period,
then manufacturing overhead is overapplied. TRUE

13. The predetermined overhead rate is computed by dividing the estimated activity of the allocation
base into the estimated manufacturing overhead costs. TRUE

Rate = estimated overhead/estimated activity.

14. Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process
account. TRUE

Job cost sheets contain the details of the unfinished work

15. The cost in the ending Finished Goods inventory account consists of the direct materials, direct
labor, and manufacturing overhead of all jobs still in process at the end of the period. FALSE

Cost of all jobs that are completed but unsold.

16. A debit balance in the Manufacturing Overhead account at the end of the year means that
manufacturing overhead is overapplied. TRUE

17.Advertising costs should be charged to the Manufacturing Overhead account. FALSE

18. Overapplied overhead occurs when the actual overhead costs incurred during a period are greater
than the overhead costs applied during the period. FALSE

Overapplied is when actual is less than applied.

19. The journal entry to record actual manufacturing overhead for indirect labor debits Manufacturing
Overhead (Control) and credits Work-in-Process inventory. FALSE

The credit would be to Payroll or Wages Payable, not Work-in-process.

20. Period costs are expensed as incurred, rather than going into the Work in Process account. FALSE

QUIZ 4- Mar. 10,2021

ACTIVITY- BASED COSTING AND ACTIVITY-BASED MANAGEMENT

1. If a company has a great deal of product diversity, activity-based costing will generally yield
more accurate product costs than traditional overhead application rates based on direct labor or
machine hours. TRUE
2. In the second stage allocation in activity-based costing, costs that were not allocated in the first
stage are assigned to the company’s most profitable products. FALSE
3. When a company shifts from a traditional cost system in which manufacturing overhead is
applied based on direct labor-hours to an activity-based costing system in which there are batch
level and product-level costs, the unit product costs of high-volume products typically decrease
whereas the unit product costs of low volume products typically increase. TRUE
4. Direct labor-hours should never be used as a measure of activity in an activity-based costing
system. FALSE
5. The activity rates in activity-based costing are computed by dividing the overhead in each
production department by its direct labor-hours. FALSE
6. Costs classified as batch-level costs should depend on the number of batches processed rather
than on the number of units produced, the number of units sold, or other measures of volume.
TRUE
7. The first-stage allocation in activity-based costing is the process by which overhead costs are
assigned to activity cost pools. TRUE
8. The activity rates in activity-based costing are not intended to set targets for how quickly a task
should be completed. TRUE
9. Facility-level activities are activities that support specific products. FALSE
10. In activity-based costing, unit product costs computed for external financial reports include
manufacturing overhead costs that are computed by multiplying activity rates by the direct
labor-hours required to produce a product. FALSE
11. Product-level activities relate to specific products and typically must be carried out regardless of
how many batches are run or units of product are made. TRUE
12. In activity-based costing, there are a number of activity cost pools, each of which is allocated to
products using its own unique measure of activity. TRUE
MULTIPLE CHOICE
1. K
2. Gaucher Corporation has provided the following data from its activity-based costing
accounting system:
The activity rate for the "designing products" activity cost pool is closest to:
A. $78 per product design hour
B. $582,016 per product design hour
C. $128 per product design hour
D. $89 per product design hour
3. K
4. K
5. Butscher Company allocates materials handling cost to the company's two products using
the below data:
The total materials handling cost for the year is expected to be $9,072. If the materials
handling cost is allocated on the basis of material moves, how much of the total materials
handling cost should be allocated to the modular homes? (Round off your answer to the
nearest whole dollar.)
A. $5,885 B. $7,056 C. $7,938 D. $4,536

6. Accola Company uses activity-based costing. The company has two products:
A and B. The annual production and sales of Product A is 1,100 units and of Product B is 700
units. There are three activity cost pools, with estimated costs and expected activity as
follows: The activity rate for Activity 3 is closest to:
A. $119.72 B. $116.18 C. $26.67 D. $56.70
7. Would plant security and assembly activities be best classified at an appliance
manufacturing plant as unitlevel, batch-level, product-level, or facility-level?
A. Product Unit
B. Batch Batch
C. Facility Unit
D. Facility Product
8.
QUIZ 5- Mar. 17,2021

MASTER BUDGET AND RESPONSIBILITY ACCOUNTING

1. The following data have been taken from the budget reports of Brandon company, a
merchandising company.

Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in
each of the next two months. Purchases for the previous November and December were
$150,000 per month. Employee wages are 10% of sales for the month in which the sales occur.
Selling and administrative expenses are 20% of the following month's sales. (July sales are
budgeted to be $220,000.) Interest payments of $20,000 are paid quarterly in January and April.
Brandon's cash disbursements for the month of April would be:
A. $140,000 B. $254,000 C. $200,000 D. $248,000
2. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and
70,000 units in June. The company desires that the inventory on hand at the end of each month
be equal to 40% of the next month's expected unit sales. Due to excessive production during
March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this
information, Walsh Company's production of Product W for the month of April should be:
A. 60,000 units B. 65,000 units C. 75,000 units D. 66,000 units

3. Budgeted sales in Allen Company over the next four months are given below:

Twenty-five percent of the company's sales are for cash and 75% are on account. Collections for
sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in
the month of sale, 30% are collected in the month following sale, and 15% are collected in the
second month following sale. The remainder are uncollectible. Given these data, cash collections
for December should be:
A. $138,000 B. $133,500 C. $120,000 D. $103,500
4. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct
labor budget indicates that 8,100 direct labor-hours will be required in May. The variable
overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing
overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed
manufacturing overhead costs represent current cash flows. The May cash disbursements for
manufacturing overhead on the manufacturing overhead budget should be:
A. $102,870 B. $11,340 C. $91,530 D. $111,780
5. Which of the following represents the normal sequence in which the indicated budgets are
prepared?
A. Direct Materials, Cash, Sales
B. Production, Cash, Income Statement
C. Sales, Balance Sheet, Direct Labor
D. Production, Manufacturing Overhead, Sales
6. National Telephone company has been forced by competition to put much more emphasis on
planning and controlling its costs. Accordingly, the company's controller has suggested initiating
 a formal budgeting process. Which of the following steps will NOT help the company gain
maximum acceptance by employees of the proposed budgeting system?
A. Implementing the change quickly.
B. Including in departmental responsibility reports only those items that are under the
department manager's control.
C. Demonstrating top management support for the budgeting program.
D. Ensuring that favorable deviations of actual results from the budget, as well as unfavorable
deviations, are discussed with the responsible managers.
7. Self-imposed budgets typically are:
A. not subject to review by higher levels of management since to do so would contradict the
participative aspect of the budgeting processing.
B. not subject to review by higher levels of management except in specific cases where the input
of higher management is required.
C. subject to review by higher levels of management in order to prevent the budgets from
becoming too loose.
D. not critical to the success of a budgeting program.
8. Expected cash collections in December are:
A. $59,400 B. $140,000 C. $199,400 D. $200,000
9. A continuous (or perpetual) budget:
A. is prepared for a range of activity so that the budget can be adjusted for changes in activity.
B. is a plan that is updated monthly or quarterly, dropping one period and adding another.
C. is a strategic plan that does not change.
D. is used in companies that experience no change in sales.
10. The budgeted amount of raw materials to be purchased is determined by:
A. adding the desired ending inventory of raw materials to the raw materials needed to meet
the production schedule.
B. subtracting the beginning inventory of raw materials from the raw materials needed to meet
the production schedule.
C. adding the desired ending inventory of raw materials to the raw materials needed to meet
the production schedule and subtracting the beginning inventory of raw materials.
D. adding the beginning inventory of raw materials to the raw materials needed to meet the
production schedule and subtracting the desired ending inventory of raw materials.
11. Veltri Corporation is working on its direct labor budget for the next two months. Each unit of
output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour.
The production budget calls for producing 7,100 units in October and 6,900 units in November.
The company guarantees its direct labor workers a 40-hour paid work week. With the number of
workers currently employed, that means that the company is committed to paying its direct
labor work force for at least 5,480 hours in total each month even if there is not enough work to
keep them busy. What would be the total combined direct labor cost for the two months?
A. $122,752.00
B. $120,736.00
C. $120,881.60
D. $122,606.40
12. Shown below is the sales forecast for Cooper Inc. for the first four months of the coming year.
On average, 50% of credit sales are paid for in the month of the sale, 30% in the month
following sale, and the remainder are paid two months after the month of the sale. Assuming
there are no bad debts, the expected cash inflow in March is:
A. $138,000 B. $122,000 C. $119,000 D. $108,000
13. The Willsey Merchandise Company has budgeted $40,000 in sales for the month of December.
The company's cost of goods sold is 30% of sales. If the company has budgeted to purchase
$18,000 in merchandise during December, then the budgeted change in inventory levels over
the month of December is:
A. $6,000 increase B. $10,000 decrease C. $22,000 decrease D. $15,000 increase
14. Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth
rate in sales of 5% per month. The desired monthly ending inventory in units of finished product
is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on
June 30. Berol Company's production requirement in units of finished product for the three-
month period ending September 30 is:
A. 712,025 units B. 630,500 units C. 664,000 units D. 665,720 units
15. Which of the following statements is not correct?
A. The sales budget is the starting point in preparing the master budget.
B. The sales budget is constructed by multiplying the expected sales in units by the sales price.
C. The sales budget generally is accompanied by a computation of expected cash receipts for the
forthcoming budget period.
D. The cash budget must be prepared prior to the sales budget because managers want to
know the expected cash collections on sales made to customers in prior periods before
projecting sales for the current period.
16. Avril Company makes collections on sales according to the following schedule: The following
sales are expected: Cash collections in March should be budgeted to be:
A. $110,000 B. $110,800 C. $105,000 D. $113,000
17. Which of the following is not a benefit of budgeting?
A. It reduces the need for tracking actual cost activity.
B. It sets benchmarks for evaluation performance.
C. It uncovers potential bottlenecks.
D. It formalizes a manager's planning efforts.
18. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of
output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The
production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct
labor work force is fully adjusted to the total direct labor-hours needed each month, what
would be the total combined direct labor cost for the two months?
A. $15,792.00 B. $15,002.40 C. $16,581.60 D. $31,584.00
19. The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct labor-
hours. The direct labor budget indicates that 2,800 direct labor-hours will be required in
September. The variable overhead rate is $7.00 per direct labor-hour. The company's budgeted
fixed manufacturing overhead is $43,120 per month, which includes depreciation of $3,640. All
other fixed manufacturing overhead costs represent current cash flows. The September cash
disbursements for manufacturing overhead on the manufacturing overhead budget should be:
 A. $59,080 B. $62,720 C. $19,600 D. $39,480
20. Which of the following represents the correct order in which the indicated budget documents
for a manufacturing company would be prepared?
A. Sales budget, cash budget, direct materials budget, direct labor budget
B. Production budget, sales budget, direct materials budget, direct labor budget
C. Sales budget, cash budget, production budget, direct materials budget
D. Selling and administrative expense budget, cash budget, budgeted income statement,
budgeted balance sheet
21. Deschambault Inc. is working on its cash budget for December. The budgeted beginning cash
balance is $14,000. Budgeted cash receipts total $127,000 and budgeted cash disbursements
total $126,000. The desired ending cash balance is $40,000. To attain its desired ending cash
balance for December, the company needs to borrow:
A. $25,000 B. $0 C. $55,000 D. $40,000
22. Prestwich Company has budgeted production for next year as follows: Two pounds of material A
are required for each unit produced. The company has a policy of maintaining a stock of
material A on hand at the end of each quarter equal to 25% of the next quarter's production
needs for material A. A total of 30,000 pounds of material A are on hand to start the year.
Budgeted purchases of material A for the second quarter would be:
A. 82,500 pounds B. 165,000 pounds C. 200,000 pounds D. 205,000 pounds
23. The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells
for $24 dollars and has a unit variable cost of $18. The company has budgeted the following
data for November: • Sales of $1,152,200, all in cash. • A cash balance on November 1 of
$48,000. • Cash disbursements (other than interest) during November of $1,160,000. • A
minimum cash balance on November 30 of $60,000. If necessary, the company will borrow cash
from a bank. The borrowing will be in multiples of $1,000 and will bear interest at 2% per
month. All borrowing will take place at the beginning of the month. The November interest will
be paid in cash during November. The amount of cash needed to be borrowed on November 1
to cover all cash disbursements and to obtain the desired November 30 cash balance is:
A. $20,000 B. $21,000 C. $37,000 D. $38,000
24. Mosbey Inc. is working on its cash budget for June. The budgeted beginning cash balance is
$16,000. Budgeted cash receipts total $188,000 and budgeted cash disbursements total
$187,000. The desired ending cash balance is $40,000. The excess (deficiency) of cash available
over disbursements for June will be:
A. $15,000 B. $1,000 C. $17,000 D. $204,000
25. Budgeted production needs are determined by:
A. adding budgeted sales in units to the desired ending inventory in units and deducting the
beginning inventory in units from this total.
B. adding budgeted sales in units to the beginning inventory in units and deducting the desired
ending inventory in units from this total.
C. adding budgeted sales in units to the desired ending inventory in units.
D. deducting the beginning inventory in units from budgeted sales in units.
26. The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-
hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August.
The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed
 manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. All
other fixed manufacturing overhead costs represent current cash flows. The company
recomputes its predetermined overhead rate every month. The predetermined overhead rate
for August should be:
A. $8.60 B. $27.30 C. $23.80 D. $18.70
27. Avitia Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct
labor budget indicates that 3,700 direct labor-hours will be required in September. The variable
overhead rate is $5.70 per direct labor-hour. The company's budgeted fixed manufacturing
overhead is $48,100 per month, which includes depreciation of $5,550. All other fixed
manufacturing overhead costs represent current cash flows. The company recomputes its
predetermined overhead rate every month. The predetermined overhead rate for September
should be:
A. $5.70 B. $13.00 C. $18.70 D. $17.20
28. The selling and administrative expense budget of Breckinridge Corporation is based on budgeted
unit sales, which are 5,500 units for June. The variable selling and administrative expense is
$1.00 per unit. The budgeted fixed selling and administrative expense is $101,200 per month,
which includes depreciation of $6,050 per month. The remainder of the fixed selling and
administrative expense represents current cash flows. The cash disbursements for selling and
administrative expenses on the June selling and administrative expense budget should be:
A. $100,650 B. $106,700 C. $5,500 D. $95,150
29. Lunderville Inc. bases its selling and administrative expense budget on budgeted unit sales. The
sales budget shows 3,200 units are planned to be sold in December. The variable selling and
administrative expense is $3.10 per unit. The budgeted fixed selling and administrative expense
is $60,800 per month, which includes depreciation of $6,720 per month. The remainder of the
fixed selling and administrative expense represents current cash flows. The cash disbursements
for selling and administrative expenses on the December selling and administrative expense
budget should be:
A. $70,720 B. $54,080 C. $64,000 D. $9,920
30. Which of the following is not correct regarding the manufacturing overhead budget?
A. Total budgeted cash disbursements for manufacturing overhead is equal to the total of
budgeted variable and fixed manufacturing overhead.
B. Manufacturing overhead costs should be broken down by cost behavior.
C. The manufacturing overhead budget should provide a schedule of all costs of production
other than direct materials and direct labor.
D. A schedule showing budgeted cash disbursements for manufacturing overhead should be
prepared for use in developing the cash budget.

TRUE OR FALSE
1. Sales forecasts are drawn up after the cash budget has been completed because only then
are the funds available for marketing known. FALSE
2. Both variable and fixed manufacturing overhead costs are included in the manufacturing
overhead budget. TRUE
 3. A sales budget is a detailed schedule showing the expected sales for the budget period;
typically, it is expressed in both dollars and units of product. TRUE
4. In the selling and administrative budget, the non-cash charges (such as depreciation) are
added to the total budgeted selling and administrative expenses to determine the expected
cash disbursements for selling and administrative expenses. FALSE
5. One benefit of budgeting is that it coordinates the activities of the entire organization. TRUE
6. Planning and control are essentially the same thing. FALSE
7. One difficulty with self-imposed budgets is that they are not subject to any type of review.
FALSE
8. The production budget is typically prepared prior to the sales budget. FALSE
9. Both planning and control are needed for an effective budgeting system. TRUE
10. The master budget is a network consisting of many separate budgets that are
interdependent. TRUE

QUIZ 6- Mar. 24,2021

FLEXIBLE BUDGETS, COST VARIANCES AND MANAGEMENT CONTROL

1. Flexible budgeting relies on the assumption that unit variable costs will remain constant within
the relevant range of activity. TRUE
2. Flexible budgets are widely used in production and service departments. TRUE
3. L
4. L
5. L
6. L
7. L
8. A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and
fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total
overhead costs of $210,000. FALSE
9. Flexible budgets reflect a company's anticipated costs based on variations in activity levels. TRUE
10. K

MULTIPLE CHOICE