1)

How much of the indirect advertising costs will be allocated to the Shoes
Department if newspaper ad space is the activity driver?
a. $2,480
b. $4,000
c. $4,340
d. $1,520

2) A company incurred $40,000 of common fixed costs and $60,000 of common

variable costs. These costs are to be allocated to Departments A and B. Data on
capacity provided and capacity used are as follows:

Assume that common fixed costs are to be allocated to Departments A and B on the
basis of capacity provided and that common variable costs are to be allocated to
Departments A and B on the basis of capacity used. The fixed and variable costs
allocated to Department A are

a. Fixed: $20,000
Variable: $37,500
b. Fixed: $25,000
Variable: $30,000
c. Fixed: $25,000
Variable: $37,500
d. Fixed: $20,000
Variable: $30,000

3) If the allocation is for product costing, the allocation of variable support

department costs would be calculated as
a. Budgeted rate x Actual usage.
b. Actual rate x Actual usage.
c. Actual rate x Budgeted usage.
d. Budgeted rate x Budgeted usage.

4) Gerald Company manufactures books. Manufacturing a book takes 10 units of A1

and 1 unit of A2. Scheduled production of books for the next two months is 1,000
and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units
of A2. The ending inventory of A1 is planned to decrease 500 units in each of the
next two months, and the A2 inventory is expected to increase 5 units in each of the
next two months.

Based on this information, the number of units of A1 that needs to be purchased by

Gerald during the first month is
a. 10,500 units.
b. 10,000 units.
c. 1,000 units.
d. 9,500 units.

5) The split-off point can best be defined as

a. the point at which a secondary product is recovered in the course of
manufacturing a primary product.
b. the point in the production process where no further processing is
needed.
c. the point at which you can get more of one product and less of
another product.
d. the point at which joint products become separate and identifiable.

6) Which of the following would be the most appropriate base for allocating the
costs of the maintenance department?
a. square feet
b. number of employees
c. direct labor hours
d. machine hours

7) Which of the following departments is NOT a support department?

a. health services
b. food services
c. security
d. bottling

8) Which of the following is NOT a component of the master budget?

a. Budget to Actual Variance Analysis
b. Capital Budget
c. Cost of Goods Sold Budget
d. Sales Budget

9) A common cost occurs

a. when different resources are used to produce one output.
b. when the same resource is used in the output of two or more outputs.
c. when a resource is used by two or more companies.
d. when only one product or service is benefited.

10) Fixed support department costs should be allocated based on

 a. current budgeted usage of service.
b. current actual usage of service.
c. practical capacity of user departments.
d. all of these.

11) Joint costs are allocated because of

a. financial reporting requirements.
b. tax reporting requirements.
c. IMA requirements.
d. financial reporting requirements and tax reporting requirements.

12) If production was budgeted at 400 units and the actual production was 420
units, what would be the static budget variance for materials if the actual cost of
materials was $4,150 and the budgeted cost per unit is $10?
a. $150 U
b. $100 F
c. $200 U
d. $50 F

13) Participative budgeting has which of the following potential problems?

a. encourages individual behavior that is in basic conflict with the goals
of the organization
b. building slack into a budget
c. managers take action that will improve performance in the short run
but has long-term consequences
d. using budgets as a part of performance evaluations could lead to
unethical behavior

14) Examples of producing departments include all of the following EXCEPT

a. accounting.
b. mixing.
c. packaging.
d. molding.

15) Month Sales

April $200,000
May $250,000
June $150,000
July $100,000

Finished goods inventory as of March 31 4000 units

The company has a selling price of $10 per unit and expects to maintain ending
inventories equal to 20 percent of the next month's sales.

How many units are expected to be produced in April?

a. 20,000 units
 b. 25,000 units
c. 19,000 units
d. 21,000 units

16) The cost of crude oil used in producing gasoline products is an example of
a. a by-product.
b. joint costs.
c. joint products.
d. common cost allocation.

17) Which of the following would generally be a by-product?

a. canned fish
b. cow hides
c. pineapples
d. hamburger

18) In a merchandising organization, the merchandise purchases budget replaces

what budget from a manufacturing firm?
a. the pro-forma income statement
b. the production budget
c. the cost of goods sold budget
d. the administrative expense budget

19) Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in
the year 2012 and had 1,000 pillows in finished goods inventory at the end of 2011.
Canceco would like to complete operations in the year 2012 with at least 1,250
completed pillows in inventory. There is no ending work-in-process inventory. The
pillows sell for $5 each.

Refer to Figure 8-1. What would be the total sales for the year 2012?
a. $55,000
b. $51,250
c. $50,000
d. $56,250

20)

Utter Company does not divide costs into fixed and variable components. Personnel
costs are allocated based on the number of employees, and maintenance costs are
allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct
labor hours.

What is the amount of maintenance costs allocated to the Assembly Department

using the direct method? (Round amounts to dollars.)
a. $48,000.
b. $38,160.
c. $28,800.
d. $14,400.

21) Activity-based budgeting is most useful when

a. production processes are simple.
b. diverse products are produced.
c. volume levels are stable.
d. output is homogeneous.

22) Judy's Company has a sales budget for next month of $150,000. Cost of goods
sold is expected to be 40 percent of sales. All goods are purchased in the month used
and paid for in the month following purchase. The beginning inventory of
merchandise is $5,000, and an ending inventory of $6,000 is desired. Beginning
accounts payable is $38,000.

The cost of goods sold for next month is expected to be

a. $40,000.
b. $60,000.
c. $89,000.
d. $90,000.

23) Oriental Lamp Company manufactures lamps. The estimated number of lamp
sales for the last three months of 2011 are as follows:

Month Sales
October 10,000
November 14,000
December 13,000

Finished goods inventory at the end of September was 3,000 units. Ending finished
goods inventory is budgeted to equal 25 percent of the next month's sales. Oriental
Lamp expects to sell the lamps for $25 each. January 2011 sales is projected at
16,000 lamps.

Refer to Figure 8-2. How many lamps should be produced in November?

a. 13,750 lamps
b. 10,500 lamps
c. 11,000 lamps
 d. 14,000 lamps

24) A budget that is developed around one particular level of activity is

a. a continuous budget.
b. a static budget.
c. an incremental budget.
d. none of these.

25) Suppose that a sawmill processes logs into four grades of lumber totaling
500,000 board feet as follows at a joint cost of $300,000:

Grade Board Feet Final Sales Value

First and second 75000 56250
No. 1 common 200000 180000
No. 2 common 100000 105000
No. 3 common 125000 127500
What amount of joint costs will be allocated to first and second using the physical
units method?
a. $36,000
b. $45,000
c. $225,000
d. $300,000

26) Which of the following is NOT a component of the Cash Budget?

a. Cash Disbursements
b. Cash excess or deficiency
c. Financing
d. Sales forecast

27) Jordan Manufacturing Company expects to incur the following per unit costs for
1,000 units of production:

What is the total amount of direct labor included in the direct labor budget?
a. $28,500
b. $7,500
c. $6,000
d. $6
28) Staff Company allocates common Building Department costs to producing
departments (P1 and P2) based on space occupied, and it allocates common
Personnel Department costs based on the number of employees. Space occupancy
and employee data are as follows:

Building Personn Dept. P1 Dept. P2

el
Space occupied 2,000 ft. 10,000 ft. 120,000 70,000 ft.
ft.
Employees 6 10 80 50

If Staff Company uses the sequential allocation method and the support department
with the highest percentage of interdepartmental services is allocated first, the ratio
representing the portion of Personnel Department costs allocated to Department P2
is
a. 50/130.
b. 50/140.
c. 90/140.
d. 50/146.

29) Which of the following is a financial budget?

a. budgeted balance sheet
b. cost of goods sold budget
c. production budget
d. marketing expense budget

30) Oaks Company has two support departments, Maintenance Department (MD)
and Personnel Department (PD), and two producing departments, P1 and P2. The
Maintenance Department costs of $30,000 are allocated on the basis of standard
service used. The Personnel Department costs of $4,500 are allocated on the basis of
number of employees. The direct costs of Departments P1 and P2 are $9,000 and
$15,000, respectively.

Using the sequential method, if the support department with the highest percentage
of interdepartmental service is allocated first, the cost of the Maintenance
Department allocated to Department P1 is
a. $30,000.
b. $4,500.
c. $20,000.
d. $18,000.
31) Which of the following methods allocates support department costs?
a. reciprocal allocation method
b. sequential allocation method
c. direct allocation method
d. all of these

32) Wilson and Lewis, a large law firm, utilizes an internal centralized printing
center to serve its three departments: Individuals, Corporate, Trust. The costs of the
printing department include fixed costs of $69,190 and variable costs of $0.04 per
page. Total estimated print pages are estimated to be 330,000 pages. Individuals are
estimated to use 130,000; Corporate will use
165,000 and 35,000 from the trust area.

Refer to Figure 7-3. If the Corporate Department used 190,000 pages, what would
be the printing charges for the Corporate Department? (round to the nearest cent)
a. $39,900
b. $7,600
c. $42,195
d. $47,500

33) Rust Company has two support departments (S1 and S2) and two producing
departments (X and Y). Department S1 serves Departments S2, X, and Y in the
following percentages, respectively: 10%, 35%, 55%. Department S2 serves
Departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and
44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and
$97,500, respectively.

What are the total costs to be allocated from Department S1?

a. $15,000
b. $800
c. $15,573
d. $9,500

34) Which of the following industries would most likely have joint costs in
production?
a. flour milling
b. dairy products
c. commercial fishing
d. all of these

35) Which of the following factors is NOT an advantage of preparing operating

budgets?
a. It improves communication and coordination.
b. It aids in the use of resources and employees by setting a benchmark
that can be used for the subsequent evaluation of performance.
 c. It provides resource information that can be used to improve decision
making.
d. It saves time and resources.

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