Cost Accounting Test Bank

Which of the following statements is true?
A. The word "cost" has the same meaning in all situations in which it is used.
B. Cost data, once classified and recorded for a specific application, are appropriate for use in any
application.
C. Different cost concepts and classifications are used for different purposes.
D. All organizations incur the same types of costs.
E. Costs incurred in one year are always meaningful in the following year.
Product costs are:

A. expensed when incurred.
B. inventoried.
C. treated in the same manner as period costs.
D. treated in the same manner as advertising costs.
E. subtracted from cost of goods sold.
Which of the following is a product cost?

A. Glass in an automobile.
B. Advertising.
C. The salary of the vice president-finance.
D. Rent on a factory.
E. Both "A" and "D."
Which of the following would not be classified as a product cost?

A. Direct materials.
B. Direct labor.
C. Indirect materials.
D. Insurance on the manufacturing plant.
E. Sales commissions.
The accounting records of Tacoma Company revealed the following costs: direct materials used,
$170,000; direct labor, $350,000; manufacturing overhead, $400,000; and selling and administrative
expenses, $220,000. Tacoma's product costs total:
A. $520,000.
B. $750,000.
C. $920,000.
D. $1,140,000.
E. some other amount.
C
Costs that are expensed when incurred are called:
A. product costs.
B. direct costs.
C. inventoriable costs.
D. period costs.
E. indirect costs.
Which of the following is a period cost?

A. Direct material.
B. Advertising expense.
C. Depreciation on cars driven by a firm's president and treasurer.
D. Miscellaneous supplies used in production activities.
E. Both "B" and "C."
Which of the following is not a period cost?

A. Legal costs.
B. Public relations costs.
C. Sales commissions.
D. Wages of assembly-line workers.
E. The salary of a company's chief financial officer (CFO).
The accounting records of Hill Corporation revealed the following selected costs: Sales commissions,
$40,000; plant supervision, $94,000; and administrative expenses, $185,000. Hill's period costs total:
A. $40,000.
B. $94,000.
C. $185,000.
D. $225,000.
E. $319,000.
Which of the following entities would most likely have raw materials, work in process, and finished
goods?
A. Exxon Corporation.
B. Macy's Department Store.
C. Wendy's.
D. Southwest Airlines.
E. Columbia University.
Selling and administrative expenses would likely appear on the balance sheet of:
A. The Gap.
B. Texas Instruments.
C. Turner Broadcasting System.
D. all of the above firms.
E. none of the above firms
Which of the following inventories would a discount retailer such as Wal-Mart report as an asset?
A. Raw materials.
B. Work in process.
C. Finished goods.
D. Merchandise inventory.
E. All of the above.
Which of the following inventories would a company ordinarily hold for sale?
A. Raw materials.
B. Work in process.
C. Finished goods.
D. Raw materials and finished goods.
E. Work in process and finished goods.
Zeno Corporation engages in mass customization and direct sales, the latter by accepting customer
orders over the Internet. As a result, Zeno:
A. would probably begin the manufacturing process upon receipt of a customer's order.
B. would typically have fairly low inventory levels for the amount of sales revenue generated.
C. would typically have fairly high inventory levels for the amount of sales revenue generated.
D. would likely find choices "A" and "B" to be applicable.
E. would likely find choices "A" and "C" to be applicable.
Companies that engage in mass customization:

A. tend to have a relatively low production volume.
B. tend to have a high production volume that involves highly standardized end-products.
C. tend to have a high production volume, many standardized components, and customer-specified
combinations of components.
D. tend to have a high production volume, many unique components, and customer-specified
combinations of components.
E. could be typified by the refining operations of Shell Oil.
Midwest Motors manufactures automobiles. Which of the following would not be classified as direct
materials by the company?
A. Sheet metal used in the automobile's body.
B. Tires.
C. Interior leather.
D. CD player.
E. Wheel lubricant.
Which of the following employees of a commercial printer/publisher would be classified as direct labor?
A. Book binder.
B. Plant security guard.
C. Sales representative.
D. Plant supervisor.
E. Payroll supervisor.
Norwood Appliance produces washers and dryers in an assembly-line process. Labor costs incurred
during a recent period were: corporate executives, $100,000; assembly-line workers, $80,000; security
guards, $18,000; and plant supervisor, $30,000. The total of Norwood's direct labor cost was:
A. $80,000.
B. $98,000.
C. $110,000.
D. $128,000.
E. $228,000.
Which of the following employees would not be classified as indirect labor?

A. Custodian.
B. Salesperson.
C. Assembler of wooden furniture.
D. Plant security guard.
E. Choices "B" and "C."
Depreciation of factory equipment would be classified as:

A. operating cost.
B. "other" cost.
C. manufacturing overhead.
D. depreciation expense.
E. administrative cost.
Which of the following costs is not a component of manufacturing overhead?

A. Indirect materials.
B. Factory utilities.
C. Factory equipment.
D. Indirect labor.
E. Property taxes on the manufacturing plant.
The accounting records of Westcott Company revealed the following costs:
Costs that would be considered in the calculation of manufacturing overhead total:

A. $164,000.
B. $215,000.
C. $385,000.
D. $430,000.
Which of the following statements is (are) correct?

A. Overtime premiums should be treated as a component of manufacturing overhead.
B. Overtime premiums should be treated as a component of direct labor.
C. Idle time should be treated as a component of direct labor.
D. Idle time should be accounted for as a special type of loss.
E. Both "B" and "C" are correct.
Conversion costs are:

A. direct material, direct labor, and manufacturing overhead.
B. direct material and direct labor.
C. direct labor and manufacturing overhead.
D. prime costs.
E. period costs.
Prime costs are comprised of:

A. direct materials and manufacturing overhead.
B. direct labor and manufacturing overhead.
C. direct materials, direct labor, and manufacturing overhead.
D. direct materials and direct labor.
E. direct materials and indirect materials.

A. Product costs affect only the balance sheet.
B. Product costs affect only the income statement.
C. Period costs affect only the balance sheet.
D. Period costs affect both the balance sheet and the income statement.
E. Product costs eventually affect both the balance sheet and the income statement.
In a manufacturing company, the cost of goods completed during the period would include which of the
following elements?
A. Raw materials used.
B. Beginning finished goods inventory.
C. Marketing costs.
D. Depreciation of delivery trucks.
E. More than one of the above.
Which of the following equations is used to calculate cost of goods sold during the period?
A. Beginning finished goods + cost of goods manufactured + ending finished goods.
B. Beginning finished goods - ending finished goods.
C. Beginning finished goods + cost of goods manufactured.
D. Beginning finished goods + cost of goods manufactured - ending finished goods.
E. Beginning finished goods + ending finished goods - cost of goods manufactured.
Work-in-process inventory is composed of:

A. direct material and direct labor.
B. direct labor and manufacturing overhead.
C. direct material and manufacturing overhead.
D. direct material only.
E. direct material, direct labor, and manufacturing overhead.
Fort Walton Industries began July with a finished-goods inventory of $48,000. The finished-goods
inventory at the end of July was $41,000 and the cost of goods sold during the month was $125,000. The
cost of goods manufactured during July was:
A. $77,000.
B. $84,000.
C. $118,000.
D. $132,000.
Kansas Plating Company reported a cost of goods manufactured of $260,000, with the firm's year-end
balance sheet revealing work in process and finished goods of $35,000 and $67,000, respectively. If
supplemental information disclosed raw materials used in production of $40,000, direct labor of
$70,000, and manufacturing overhead of $120,000, the company's beginning work in process must have
been:
A. $5,000.
B. $37,000.
C. $65,000.
D. $97,000.
The accounting records of Bronco Company revealed the following information:
Bronco's cost of goods manufactured is:

A. $519,000.
B. $522,000.
C. $568,000.
D. $571,000.
he accounting records of Dolphin Company revealed the following information:
Dolphin's cost of goods sold is:

A. $508,000.
B. $529,000.
C. $531,000.
D. $553,000.
For the year just ended, Cole Corporation's manufacturing costs (raw materials used, direct labor, and
manufacturing overhead) totaled $1,500,000. Beginning and ending work-in-process inventories were
$60,000 and $90,000, respectively. Cole's balance sheet also revealed respective beginning and ending
finished-goods inventories of $250,000 and $180,000. On the basis of this information, how much would
the company report as cost of goods manufactured (CGM) and cost of goods sold (CGS)?
A. CGM, $1,430,000; CGS, $1,460,000.
B. CGM, $1,470,000; CGS, $1,540,000.
C. CGM, $1,530,000; CGS, $1,460,000.
D. CGM, $1,570,000; CGS, $1,540,000.
E. Some other amounts.
B
Leggio Industries reported the following data for the year just ended: sales revenue, $950,000; cost of
goods sold, $420,000; cost of goods manufactured, $330,000; and selling and administrative expenses,
$170,000. Leggio's gross margin would be:
A. $30,000.
B. $200,000.
C. $360,000.
D. $530,000.
E. $620,000.
Pumpkin Enterprises began operations on January 1, 20x1, with all of its activities conducted from a
single facility. The company's accountant concluded that the year's building depreciation should be
allocated as follows: selling activities, 20%; administrative activities, 35%; and manufacturing activities,
45%. If Pumpkin sold 60% of 20x1 production during that year, what percentage of the depreciation
would appear (either directly or indirectly) on the 20x1 income statement?
A. 27%.
B. 45%.
C. 55%.
D. 82%.
E. 100%.
An employee accidentally overstated the year's advertising expense by $50,000. Which of the following
correctly depicts the effect of this error?
A. Cost of goods manufactured will be overstated by $50,000.
B. Cost of goods sold will be overstated by $50,000.
C. Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
D. Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated
by $50,000.
E. None of the above.
Which of the following would likely be a cost driver for the amount of direct materials used?
A. The number of units sold.
B. The number of direct labor hours worked.
C. The number of machine hours worked.
D. The number of employees working in the factory.
E. The number of units produced.
The choices below depict five costs of Benton Corporation and a possible driver for each cost. Which of
these choices likely contains an inappropriate cost driver?
A. Gasoline consumed; number of miles driven.
B. Manufacturing overhead incurred in a heavily automated facility; direct labor hours.
C. Sales commissions; gross sales revenue.
D. Building maintenance cost; building square footage.
E. Personnel department cost; number of employees.
Variable costs are those costs that:

A. vary inversely with changes in activity.
B. vary directly with changes in activity.
C. remain constant as activity changes.
D. decrease on a per-unit basis as activity increases.
E. increase on a per-unit basis as activity increases.
As activity decreases, unit variable cost:

A. increases proportionately with activity.
B. decreases proportionately with activity.
C. remains constant.
D. increases by a fixed amount.
E. decreases by a fixed amount.
Which of the following is not an example of a variable cost?

A. Straight-line depreciation on a machine that has a five-year service life.
B. Wages of manufacturing workers whose pay is based on hours worked.
C. Tires used in the production of tractors.
D. Aluminum used to make patio furniture.
E. Commissions paid to sales personnel.
Fixed costs are those costs that:

A. vary directly with changes in activity.
B. vary inversely with changes in activity.
C. remain constant on a per-unit basis.
D. increase on a per-unit basis as activity increases.
E. remain constant as activity changes.
The fixed cost per unit:

A. will increase as activity increases.
B. will increase as activity decreases.
C. will decrease as activity increases.
D. will remain constant.
E. will exhibit the behavior described in choices "B" and "C."
E
Which of the following is an example of a fixed cost?

A. Paper used in the manufacture of textbooks.
B. Property taxes paid by a firm to the City of Los Angeles.
C. The wages of part-time workers who are paid $8 per hour.
D. Gasoline consumed by salespersons' cars.
E. Surgical supplies used in a hospital's operating room.
The variable costs per unit are $4 when a company produces 10,000 units of product. What are the
variable costs per unit when 8,000 units are produced?
A. $4.00.
B. $4.50.
C. $5.00.
D. $5.50.
E. Some other amount.
The fixed costs per unit are $10 when a company produces 10,000 units of product. What are the fixed
costs per unit when 12,500 units are produced?
A. $4.
B. $6.
C. $8.
D. $10.
Total costs are $120,000 when 10,000 units are produced; of this amount, variable costs are $48,000.
What are the total costs when 12,000 units are produced?
A. $57,600.
B. $72,000.
C. $120,000.
D. $129,600.
E. $144,000.
Baxter Company, which pays a 10% commission to its salespeople, reported sales revenues of $210,000
for the period just ended. If fixed and variable sales expenses totaled $56,000, what would these
expenses total at sales of $168,000?
A. $16,800.
B. $35,000.
C. $44,800.
D. $51,800.
Which of the following would not be characterized as a cost object?

A. An automobile manufactured by General Motors.
B. The New York Fire Department.
C. A Burger King restaurant located in Cleveland, Ohio.
D. A Delta Airlines flight from Atlanta to Miami.
E. All of the above are examples of cost objects.
Costs that can be easily traced to a specific department are called:

A. direct costs.
B. indirect costs.
C. product costs.
D. manufacturing costs.
E. processing costs.
Which of the following would not be considered a direct cost with respect to the service department of
a new car dealership?
A. Wages of repair techniques.
B. Property taxes paid by the dealership.
C. Repair parts consumed.
D. Salary of the department manager.
E. Depreciation on new equipment used to analyze engine problems.
Indirect costs:
A. can be traced to a cost object.
B. cannot be traced to a particular cost object.
C. are not important.
D. are always variable costs.
E. may be indirect with respect to Disney World but direct with respect to one its major components,
Epcot Center.
The salary that is sacrificed by a college student who pursues a degree full time is a(n):
A. sunk cost.
B. out-of-pocket cost.
C. opportunity cost.
D. differential cost.
E. marginal cost.
C
The tuition that will be paid next semester by a college student who pursues a degree is a(n):
A. sunk cost.
B. out-of-pocket cost.
C. indirect cost.
D. average cost.
E. marginal cost.
Which of the following costs should be ignored when choosing among alternatives?
A. Opportunity costs.
B. Sunk costs.
C. Out-of-pocket costs.
D. Differential costs.
If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then $16,000 is
termed the:
A. opportunity cost.
B. average cost.
C. sunk cost.
D. out-of-pocket cost.
E. differential cost.
Wee Care is a nursery school for pre-kindergarten children. The school has determined that the
following biweekly revenues and costs occur at different levels of enrollment:
58. The marginal cost when the twenty-first student enrolls in the school is:
A. $55.
B. $155.
C. $300.
D. $3,045.
E. $3,255.
Wee Care is a nursery school for pre-kindergarten children. The school has determined that the
following biweekly revenues and costs occur at different levels of enrollment:
59. The average cost per student when 16 students enroll in the school is:
A. $100.
B. $125.
C. $175.
D. $300.
E. $400.
The costs that follow all have applicability for a manufacturing enterprise. Which of the choices listed
correctly denotes the costs' applicability for a service provider?
A=Acceptable NA=Not Acceptable

A. A,A,NA
B. A,NA,A
C. A,A,A
D. NA,A,A
E. NA,A,NA
Look at doc for rest
...
Consider the three firms that follow: (1) Continental Airlines, (2) BMW, and (3) Target. These firms,
examples of service providers, manufacturers, and merchandisers, tend to have different characteristics
with respect to costs and financial-statement disclosures.
Required:
Determine which of the preceding firms (1, 2, and/or 3) would likely:
Disclose operating expenses on the income statement.
Have product costs.
Have period costs.
Disclose cost of cost good sold on the income statement.
Have no meaningful investment in inventory.
Maintain raw-material, work-in-process, and finished-goods inventories.
Have variable and fixed costs.
A. 1, 2, 3 E. 1
B. 2, 3 F. 2
C. 1, 2, 3 G. 1, 2, 3
D. 2, 3
Consider the following cost items:
1. Sales commissions earned by a company's sales force.

2. Raw materials purchased during the period.
3. Current year's depreciation on a firm's manufacturing facilities.
4. Year-end completed production of a carpet manufacturer.
5. The cost of products sold to customers of an apparel store.
6. Wages earned by machine operators in a manufacturing plant.
7. Income taxes incurred by an airline.
8. Marketing costs of an electronics manufacturer.
9. Indirect labor costs incurred by a manufacturer of office equipment.
Required:
Evaluate the costs just cited and determine whether the associated dollar amounts would be found on
the firm's balance sheet, income statement, or schedule of cost of goods manufactured.
What major asset will normally be insignificant for service enterprises and relatively substantial for
retailers, wholesalers, and manufacturers? Briefly discuss.
Briefly explain the similarity and difference between the merchandise inventory of a retailer and the
finished-goods inventory of a manufacturer.
A. 1. Income statement
2. Schedule of cost of goods manufactured
4. Balance sheet
5. Income statement
7. Income statement
8. Income statement
The asset that differs among these businesses is inventory. Service businesses typically carry no (or very
little) inventory. Retailers and wholesalers normally stock considerable inventory. Manufacturers also
carry significant inventories, typically subdivided in three categories: raw materials, work in process, and
finished goods.
The similarity: Both inventories are carried for sale by the respective businesses. The difference:
Retailers purchase merchandise inventory; in contrast, manufacturing firms produce their goods.
Eastside Manufacturing produces small electric engines. Identify the following costs as direct materials
(DM), direct labor (DL), manufacturing overhead (MOH), or a period cost (PC). Also indicate whether the
cost is variable (V) or fixed (F) with respect to behavior.
A. Commissions paid to salespeople

B. Straight-line depreciation on the factory building
C. Salary of the plant supervisor
D. Wages of the assembly-line workers
E. Machine lubricant used in production activities
F. Engine casings used in production activities
G. Advertising placed in trade journals
H. Lease payments for the president's automobile
I. Property taxes paid on the factory facilities
PC, V
MOH, F
MOH, F
DL, V
MOH, V
DM, V
PC, F
PC, F
MOH, F
look at doc
...
The following selected costs were extracted from the accounting records of Los Angeles Machining
(LAM):
1. Direct materials used in production

2. Wages of machine operators
3. Factory utilities
4. Sales commissions
5. Salary of LAM's president
6. Factory depreciation
7. Wages of plant security guards
8. Uncollectible accounts expense
9. Machine lubricant used in production
Required:
By the use of numbers, identify the costs that would be used to calculate:
cost of goods manufactured.
manufacturing overhead.
total period costs.
total conversion costs.
total direct costs of LAM's credit and collections department.
LAM's inventory valuation.
Answer:
1, 2, 3, 6, 7, 9
3, 6, 7, 9
4, 5, 8
2, 3, 6, 7, 9
8
1, 2, 3, 6, 7, 9
Process costing is used to account for:

A. large numbers of identical products that are produced in a continuous manufacturing environment.
B. small numbers of products that are produced in batches.
C. raw materials that are converted directly to finished goods.
D. finished goods that are refined and processed further.
E. large numbers of products that are produced in a non-repetitive process.
Which of the following manufacturers would most likely not use a process-cost accounting system?
A. A producer of computer monitors.
B. A paint manufacturer.
C. A producer of frozen orange juice.
D. A builder of customized yachts.
E. A lumber mill
Process costing would be used in all of the following industries except:

A. petroleum refining.
B. chemicals.
C. truck tire manufacturing.
D. wood pulp production.
E. automobile repair
E. automobile repair
Companies that use a process-cost accounting system would:

A. establish a separate Work-in-Process Inventory account for each manufacturing department.
B. establish a separate Finished-Goods Inventory account for each manufacturing department.
C. pass completed production directly to Cost of Goods Sold.
D. charge goods produced with actual overhead amounts rather than applied overhead amounts.
E. eliminate the need for the Finished-Goods Inventory account
A. establish a separate Work-in-Process Inventory account for each manufacturing department
In a process-costing system, manufacturing costs are accumulated by:

A. batch.
B. batch and time period.
C. department.
D. department and time period.
E. department or process, and time period
E. department or process, and time period. not by batch
Unit costs in a process-costing system are derived by using:

A. in-process units.
B. completed units.
C. physical units.
D. equivalent units.
E. a measure of activity other than those listed above.
Barnett Corporation had 6,500 units of work in process on April 1. During April, 19,100 units were
completed and as of April 30, 5,100 units remained in production. How many units were started during
April?
A. 11,600.
B. 17,700.
C. 20,500.
D. 30,700.
B. 17,700.
XYZ Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 10,000
units were completed and as of April 30, 4,000 units that were 40% complete remained in production.
How many units were started during April?
A. 8,600.
B. 9,800.
C. 11,000.
D. 12,200.
C. 11,000. (Ignore %)
Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of the current
year. The company incurs conversion cost evenly throughout manufacturing. If Ohio started work on
3,000 units during the period and these units were 70% of the way through manufacturing, it would be
correct to say that the company has:
A. 3,000 physical units in production.
B. 2,100 completed units.
C. 900 in-process units.
D. 900 equivalent units of production.
E. 3,000 equivalent units of production
Which of the following data are needed to calculate total equivalent units under the weighted-average
method?
A. Work-to-date on ending work in process, units started during the period.
B. Units completed during the period, work-to-date on ending work in process.
C. Work to complete beginning work in process, work-to-date on ending work in process.
D. Work to complete beginning work in process, units completed, work done on ending work in process.
E. Units completed, work to complete beginning work in process.
Kentucky Corporation uses a process-cost accounting system. The company adds direct materials at the
start of its production process; conversion cost, on the other hand, is incurred evenly throughout
manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40%
complete. Which of the following sets of percentages would be used to calculate the correct number of
equivalent units in the ending work-in-process inventory?
A. Materials, 40%; conversion cost, 40%.
B. Materials, 40%; conversion cost, 100%.
C. Materials, 100%; conversion cost, 40%.
D. Materials, 100%; conversion cost, 60%.
E. Materials, 100%; conversion cost, 100%.
C. Materials, 100%; conversion cost, 40%
Columbia Corporation adds all materials at the beginning of production and incurs conversion cost
evenly throughout manufacturing. The company completed 50,000 units during the year and had 15,000
units in process at December 31, 30% complete with respect to conversion cost. Equivalent units for the
year total:
A. materials, 50,000; conversion, 50,000.
B. materials, 50,000; conversion, 4,500.
C. materials, 54,500; conversion, 54,500.
D. materials, 65,000; conversion, 54,500.
E. materials, 65,000; conversion, 65,000.
Upgrade to remove adverts
Only US$35.99/year
Gorski began operations on January 1 of the current year. The company uses a process-costing system,
and conversion cost is incurred evenly throughout manufacturing. By January 31, the firm had
completed 56,000 units. Which of the following statements could be true about the ending work-in-
process inventory if equivalent units for conversion cost totaled 59,000 units?
A. There is no ending work-in-process inventory.
B. The ending work-in-process inventory totaled 3,000 physical units.
C. The ending work-in-process inventory of 10,000 physical units was 30% complete.
D. The ending work-in-process inventory of 20,000 physical units was 85% complete.
E. More than one of the above could be true.
C. The ending work-in-process inventory of 10,000 physical units was 30% complete
Majestic, which uses a process-costing system, adds material at the beginning of production and incurs
conversion cost evenly throughout manufacturing. The following selected information was taken from
the company's accounting records:
Total equivalent units of materials: 5,000

Total equivalent units of conversion: 4,400
Units started and completed during the period: 3,500
On the basis of this information, the ending work-in-process inventory's stage of completion is:
A. 40%.
B. 60%.
C. 70%.
D. 80%.
E. some other percentage not listed above
B. 60%
Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following
procedures that must be performed by the close of business on Friday:
1—Calculation of equivalent units

2—Analysis of physical flows of units
3—Assignment of costs to completed units and units still in process
4—Calculation of unit costs
Which of the following choices correctly expresses the proper order of the preceding tasks?
A. 1, 2, 3, 4.
B. 1, 2, 4, 3.
C. 1, 4, 3, 2.
D. 2, 1, 4, 3.
E. 2, 1, 3, 4
D. 2, 1, 4, 3.
When calculating unit costs under the weighted-average process-costing method, the unit cost is based
on:
A. only the current period's manufacturing costs.
B. only costs in the period's beginning work-in-process inventory.
C. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current
period.
D. only costs incurred in previous accounting periods.
E. a summation of the costs in the beginning work-in-process inventory plus costs to be incurred in the
upcoming period.
period
Garrison Company uses a weighted-average process-costing system. Company records disclosed that the
firm completed 50,000 units during the month and had 10,000 units in process at month-end, 25%
complete. Conversion costs associated with the beginning work-in-process inventory amounted to
$105,000, and amounts that relate to the current month totaled $840,000. If conversion is incurred
uniformly throughout manufacturing, Garrison's equivalent-unit cost is:
A. $15.75.
B. $16.43.
C. $18.00.
D. $18.90.
C. $18.00.
Equivalent-unit calculations are necessary to allocate manufacturing costs between:

A. units completed and ending work in process.
B. beginning work in process and units completed.
C. units sold and ending work in process.
D. cost of goods manufactured and beginning work in process.
E. cost of goods manufactured and cost of goods sold.
Which of the following is a key document in a typical process-costing system?

A. Departmental production report.
B. Master schedule.
C. Production budget.
D. Sequential product report.
E. Materials requirement report
The first processing department in a sequence of three production departments must account for which
of the following costs?
A. Direct material and transferred-in costs.
B. Direct material costs only.
C. Conversion and transferred-in costs.
D. Direct material and conversion costs.
E. Direct material, conversion, and transferred-in costs.
D. Direct material and conversion costs

The second processing department in a sequence of three production departments would typically
account for which of the following costs?
C. Transferred-in costs only.
Consider the following statements regarding traditional costing systems:
1. Overhead costs are applied to products on the basis of volume-related measures.

2. All manufacturing costs are easily traceable to the goods produced.
3. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made
that have widely varying production requirements.
Which of the above statements is (are) true?

A. I only.
B. II only.
C. III only.
D. I and III.
E. II and III.
D.
Only US$35.99/year
The following tasks are associated with an activity-based costing system:
1—Calculation of cost application rates

2—Identification of cost drivers
3—Assignment of cost to products
4—Identification of cost pools
A. 1, 2, 3, 4.
B. 2, 4, 1, 3.
C. 3, 4, 2, 1.
D. 4, 2, 1, 3.
E. 4, 2, 3, 1.
D. 4, 2, 1, 3.
Which of the following is not a broad, cost classification category typically used in activity-based costing?
A. Unit-level.
B. Batch-level.
C. Product-sustaining level.
D. Facility-level.
E. Management-level.
In an activity-based costing system, direct materials used would typically be classified as a:

A. unit-level cost.
B. batch-level cost.
C. product-sustaining cost.
D. facility-level cost.
E. matrix-level cost.
A. unit-level cost
Which of the following is least likely to be classified as a batch-level activity in an activity-based costing
system?
A. Shipping.
B. Receiving and inspection.
C. Production setup.
D. Property taxes.
E. Quality assurance.
D. Property taxes.
In an activity-based costing system, materials receiving would typically be classified as a:

A. unit-level activity.
B. batch-level activity.
C. product-sustaining activity.
D. facility-level activity.
E. period-level activity.
Foster, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser
technology. The research and testing costs associated with the new ovens is said to arise from a:
E. competitive-level activity.
C. product-sustaining activity
Consider the following statements regarding product-sustaining activities:
1. They must be done for each batch of product that is made.

2. They must be done for each unit of product that is made.
3. They are needed to support an entire product line.

A. I only.
B. II only.
C. III only.
D. I and II.
E. II and III.
C. III only.
They are needed to support an entire product line.
Which of the following is least likely to be classified as a facility-level activity in an activity-based costing
system?
A. Plant maintenance.
B. Property taxes.
C. Machine processing cost.
D. Plant depreciation.
E. Plant management salaries
The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories
is commonly known as a cost:
hierarchy
Process costing is used to account for
Which of the following manufacturers would most likely not use a process-cost accounting
A builder of customized yachts
automobile repair.
Which of the following statements regarding similarities between process costing and job-order costing
are true?
I. Both systems assign production costs to units of output.

II. Both systems require extensive knowledge of financial accounting.
III. The flow of costs through the manufacturing accounts is essentially the same.
I and III.
establish a separate Work-in-Process Inventory account for each manufacturing department.

Which of the following statements is false?
D. In process costing, the total cost of each unit is found by dividing the total factory costs by the
number of units completed.
In a process-costing system, manufacturing costs are accumulated by:
department or process, and time period.
9. Which of the following choices correctly shows how costs are accumulated in a process-costing
system?
By Batch-By Time Period-By Process or Department
A. Yes Yes Yes
B. Yes Yes No
C. No Yes No
D. No Yes Yes
E. No No Yes
Answer: D
Morrison, Inc., which uses a process-cost accounting system, passes completed production from
Department A to Department B for further manufacturing. The journal entry to record completed
production in Department A requires:
a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory:

Department A.
Greene, Inc., which uses a process-costing system, transfers completed production from Department no.
1 to Department no. 2 for further work. Which of the following best describes the account that would be
debited to record this transfer?
Work-in-Process Inventory: Department no. 2.
Barnes, Inc., which uses a process-costing system, transfers completed production from Department no.
credited to record this transfer?
Work-in-Process Inventory: Department no. 1.
Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000
on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead
of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of
goods were still in production at year-end, Hamilton should make a journal entry on December 31 that
includes:
a credit to Work-in-Process Inventory for $432,000.
equivalent units.
April?
17,700
11,000.
3,000 physical units in production.
method?
Units completed during the period, work-to-date on ending work in process.
Materials, 100%; conversion cost, 40%.
Agora Company uses a process-cost system for its single product. Material A is added at the beginning of
the process; in contrast, material B is added when the units are 75% complete. The firm's ending work-
in-process inventory consists of 6,000 units that are 80% complete. Which of the following correctly
expresses the equivalent units of production with respect to materials A and B in the ending work-in-
process inventory?
E. A, 6,000; B, 6,000.
21. Willingham uses a process-costing system for its single product, which is manufactured from
Material X and Material Y. X and Y are introduced to the product as follows:
Material X: Added at the beginning of manufacturing

Material Y: Added at the 75% stage of completion
The company started and completed 40,000 units during the period, and had an ending work-in-process
inventory amounting to 8,000 units, 20% complete. Which of the following choices correctly expresses
the total equivalent units of production with respect to Material X and Material Y?
Material X Material Y
A. 46,000 41,600
B. 46,000 46,000
C. 48,000 40,000
D. 48,000 41,600
E. 48,000 46,000
Answer: C
Use for 22-23: Hampton Textile Co., manufactures a variety of fabrics. All materials are introduced at the
beginning of production; conversion cost is incurred evenly through manufacturing. The Weaving
Department had 2,000 units of work in process on April 1 that were 30% complete as to conversion
costs. During April, 9,000 units were completed and on April 30, 4,000 units remained in production,
40% complete with respect to conversion costs.
22. The equivalent units of direct materials for April total:
B. 13,000.
23. The equivalent units of conversion for April total:
B. 10,600.
year total:
materials, 65,000; conversion, 54,500.
25. Gregory, which uses a process-costing system, adds all material at the beginning of production and
incurs conversion cost evenly throughout manufacturing. The information that follows relates to the
period just ended:
Units started and completed: 75,000

Units in ending work-in-process inventory: 15,000, 60% complete
Which of the following choices correctly expresses the total equivalent units of production with respect
to material and conversion cost?
Material-Conversion
A. 75,000 75,000
B. 84,000 84,000
C. 90,000 81,000
D. 90,000 84,000
E. 90,000 90,000
Answer: C
The ending work-in-process inventory of 10,000 physical units was 30% complete.
60%.
Corruption, Inc., overstated the percentage of work completed with respect to conversion cost on the
ending work-in-process inventory. What is the effect of this overstatement on conversion-cost
equivalent units and physical units manufactured, respectively?
Overstated, none.
29. Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following

D. 2, 1, 4, 3
on:
a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current
period
When computing the conversion cost per equivalent unit under the weighted-average method of
process costing, all of the following information would be needed except:
the conversion work performed during the current period on the beginning work-in-process inventory
32. Tulsa Corporation, which adds materials at the beginning of production, uses a weighted-average
process-costing system. Consider the data that follow.
Number of Units Cost of Materials
Beginning work in process 40,000 $ 80,600
Started in June 60,000 124,400
Production completed 75,000
Ending work in process 25,000
The company's cost per equivalent unit for materials is:
D. $2.05.
C. $18.00
Use the following to answer questions 34-35:
Universal Manufacturing uses a weighted-average process-costing system. All materials are introduced
at the start of manufacturing, and conversion costs are incurred evenly throughout the process. The
company's beginning and ending work-in-process inventories totaled 10,000 units and 15,000 units,
respectively, with the latter units being 2/3 complete at the end of the period. Universal started 30,000
units into production and completed 25,000 units. Manufacturing costs follow.
Beginning work in process: Materials, $60,000; conversion cost, $150,000

Current costs: Materials, $180,000; conversion cost, $480,000
34. Universal's equivalent-unit cost for materials is:
$6.00
35. Universal's equivalent-unit cost for conversion cost is:
$18.00
36. Gilbert adds materials at the beginning of production and incurs conversion cost uniformly
throughout manufacturing. Consider the data that follow.
Units
Beginning work in process 20,000
Started in August 60,000
Production completed 55,000

Ending work in process, 40% complete 25,000
Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion
cost totaled $270,000. Assuming use of the weighted-average method, which of the following choices
correctly depicts the number of equivalent units for materials and the conversion cost per equivalent
unit?
Equivalent Units: Materials-Conversion Cost Per Equivalent Unit
A. 55,000 $4.91
B. 65,000 $4.88
C. 65,000 $6.00
D. 80,000 $4.88
E. 80,000 $6.00
Answer: E
Which of the following are needed to calculate the total cost of the ending work-in-process inventory
under the weighted-average process-costing method?
Unit Cost-Equivalent Units
A. Yes Yes
Which of the following are needed under weighted-average process costing to calculate the cost of
goods completed during the period?
Unit Cost-Equivalent Units
A. Yes Yes
Units completed and ending work in process.
South River Chemical manufactures a product called Zbek. Direct materials are added at the beginning
of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-
process inventory is 60% complete with respect to conversion; the ending work-in-process inventory is
20% complete. The following data pertain to May:
Units
Work in process, May 1 15,000
Units started during May 60,000
Units completed and transferred out 68,000
Work in process, May 31 7,000
Total Direct Materials Conversion Costs
Costs:
Work in process, May 1 $ 41,250 $16,500 $ 24,750
Costs incurred during May 234,630 72,000 162,630
Totals $275,880 $88,500 $187,380
40. Using the weighted-average method of process costing, the equivalent units of direct materials total:
75,000
Using the weighted-average method of process costing, the equivalent units of conversion activity total:
69,400
Using the weighted-average method of process costing, the cost per unit of direct materials is:
$1.18.
Using the weighted-average method of process costing, the cost per unit of conversion activity is:
$2.70
Using the weighted-average method of process costing, the cost of goods completed and transferred
during May is:
$263,840
Using the weighted-average method of process costing, the total costs remaining in work in process on
May 31 are:
$12,040
Chen Corporation, a new company, adds material at the beginning of its production process; conversion
cost, in contrast, is incurred evenly throughout manufacturing. During May, the firm completed 15,000
units and had ending work in process of 2,000 units, 60% complete. Equivalent-unit costs were:
materials, $15; conversion, $22.
46. The cost of Chen's completed production is:
$555,000
47. The cost of the company's ending work-in-process inventory is:
$56,400.`
Copley uses a weighted-average process-costing system. All materials are added at the beginning of the
process; conversion costs are incurred evenly throughout production. The company finished 40,000
units during the period and had 15,000 units in progress at year-end, the latter at the 40% stage of
completion. Total material costs amounted to $220,000; conversion costs were $414,000.
48. The cost of goods completed is:
$520,000
49. The cost of the ending work in process is:
$114,000
Departmental production report
Which of the following statements about operation costing is (are) true?
I. Conversion costs are accumulated by department.
II. Direct material costs are accumulated by batch.
III. Operation costing is a hybrid product-costing system.
I, II, and III.
Operation costing:
tends to parallel process costing with respect to the treatment of conversion cost.
53. Which of the following best describes the procedures used in operation costing to assign direct-
material and conversion costs to production?
Direct-Material Costs-Conversion Costs
Similar to those in job costing-Similar to those in process costing
When determining the cost of a manufactured good under an operation-costing system, a company
would:
trace direct-material cost to each product produced and use a predetermined application rate for
conversion cost.
Direct material and conversion costs.
Direct material, conversion, and transferred-in costs.

Department no. 2 receives goods from Department no. 1, adds material, completes the units, and
transfers the units to Department no. 3 for final processing. The cost of goods completed by Department
no. 2 would include charges for:
transferred-in costs, direct materials, and conversion cost.
Roberts uses process costing and has two manufacturing departments. Goods are started in Department
no. 1, passed along to Department no. 2 where additional parts are attached and processing occurs, and
then transferred out to the finished-goods warehouse. The following equivalent-unit costs relate to
Department no. 2 for the current period:
Transferred-in $19
Parts 11
Conversion cost 6
Production that is completed and transferred to the finished-goods warehouse should be assigned a unit
cost of:
$36
Product costing in a manufacturing firm is the process of:

A. accumulating the company period costs.
B. allocating costs among the firm& departments.
C. placing a value on the company fixed assets.
D. assigning costs to the firm inventory.
E. assigning costs to the company managers.
D. assigning costs to the firm inventory.

A. Service firms have little need for determining the cost of their services.
B. The concept of product costing is relevant only for manufacturing firms.
C. The cost of year-end inventory appears on the balance sheet as an expense.
D. Service companies use cost information for planning and control purposes.
E. Mining and petroleum companies have no inventoriable costs.
Which of the following manufacturers would most likely use job-order costing?
A. Chemical manufacturers.
B. Microchip processors.
C. Custom-furniture manufacturers.
D. Gasoline refiners.
E. Fertilizer manufacturers.
C. Custom-furniture manufacturers
A custom-home builder would likely utilize:

A. job-order costing.
B. process costing.
C. mass customization.
D. process budgeting.
E. joint costing.
Which of the following types of companies would most likely use process costing?
A. Aircraft manufacturers.
B. Textile manufacturers.
C. Textbook publishers.
D. Custom-machining firms.
E. Shipbuilders.
A manufacturing firm produces goods in accordance with customer specifications, commencing

production upon receipt of a purchase order. To accumulate the cost of each order, the company
would use a:
A. job-cost record.
B. cost allocation matrix.
C. production log.
D. overhead sheet.
E. manufacturing cost record.
A. job-cost record.
A typical job-cost record would provide information about all of the following items related to an
order except:
A. the cost of direct materials used.
B. administrative costs.
C. direct labor costs incurred.
D. applied manufacturing overhead.
E. direct labor hours worked.
Which of the following statements about material requisitions is false?

A. Material requisitions are often computerized.
B. Material requisitions are a common example of source documents.
C. Material requisitions contain information that is useful to the cost accounting department.
D. Material requisitions authorize the transfer of materials from the production floor to the raw
materials warehouse.
E. Material requisitions are routinely linked to a bill of materials that lists all of the materials
needed to complete a job.
Pruitt Company has developed an integrated system that coordinates the flow of all goods,
services, and information into and out of the organization, working with raw material vendors as
well as customers to improve service and reduce costs. The firm is said to be using:
A. participative management.
B. top-down management.
C. strategic cost management.
D. supply chain management.
E. management by objectives (MBO).
The assignment of direct labor cost to individual jobs is based on:

A. an estimate of the total time spent on the job.
B. actual total payroll cost divided equally among all jobs in process.
C. estimated total payroll cost divided equally among all jobs in process.
D. the actual time spent on each job multiplied by the wage rate.
E. the estimated time spent on each job multiplied by the wage rate.
The total production cost of a job is composed of:

B. direct material, direct labor, manufacturing overhead, and outlays for selling costs.
C. direct material, direct labor, manufacturing overhead, and outlays for both selling and
administrative costs.
D. direct material, direct labor, and applied manufacturing overhead.
E. direct material, direct labor, and actual manufacturing overhead.
Manufacturing overhead:
A. includes direct materials, indirect materials, indirect labor, and factory depreciation.
B. is easily traced to jobs.
C. includes all selling costs.
D. should not be assigned to individual jobs because it bears no obvious relationship to them.
E. is a pool of indirect production costs that must somehow be attached to each unit
manufactured.
E. is a pool of indirect production costs that must somehow be attached to each unit
manufactured.
Only US$35.99/year
As production takes place, all manufacturing costs are added to the:

A. Work-in- Process Inventory account.
B. Manufacturing-Overhead Inventory account.
C. Cost-of- Goods-Sold account.
D. Finished-Goods Inventory account.
E. Production Labor account.
A. Work-in- Process Inventory account.
Which of the following statements regarding work in process is not correct?

A. Work in process is partially completed inventory.
B. Work in process consists of direct labor, direct material, and manufacturing overhead.
C. Work-in- Process Inventory is debited to record direct material used and direct labor incurred.
D. Work-in- Process Inventory appears on the year-end balance sheet.
E. Work-in- Process Inventory is credited when goods are sold.
E. Work-in- Process Inventory is credited when goods are sold.
Which of the following statements about manufacturing cost flows is false?

A. Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-
Process Inventory account.
B. The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold
during the period.
C. The cost of units sold during the period will typically appear on the income statement.
D. When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an
account entitled Profit on Sale.
E. Units are normally transferred from Work-in- Process Inventory to Finished-Goods Inventory.
D. When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account
entitled Profit on Sale.
Which of the following statements about materials is false?

A. Acquisitions of materials are normally charged to the Purchases account.
B. The use of direct materials gives rise to a debit to Work-in- Process Inventory.
C. The use of indirect materials gives rise to a debit to Manufacturing Overhead.
D. The use of indirect materials gives rise to a credit to Manufacturing Supplies Inventory.
E. Direct materials are accounted for in a different manner than indirect materials.
Longview Corporation recently used $72,000 of direct materials and $3,000 of indirect materials
in production activities. The journal entries reflecting these transactions would include:
A. a debit to Raw-Material Inventory for $72,000.
B. a debit to Manufacturing Overhead for $3,000.
C. a credit to Manufacturing Overhead for $3,000.
D. a debit to Work-in- Process Inventory for $75,000.
E. a debit to Manufacturing Overhead for $75,000.
A review of a company's Work-in- Process Inventory account found a debit for materials of
$67,000. If all procedures were performed in the correct manner, this means that the firm:
A. also recorded a credit to Raw-Material Inventory.
B. also recorded a credit to Manufacturing Supplies Inventory.
C. was accounting for the usage of direct materials.
D. was accounting for the usage of indirect materials.
E. was accounting for the usage of direct materials by also crediting the Raw-Material Inventory
account.
E. was accounting for the usage of direct materials by also crediting the Raw-Material Inventory account.
Oregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The
proper journal entry to record these events would include a debit to Work in Process for:
A. $0 because Work in Process should be credited.
B. $0 because Work in Process is not affected.
C. $11,000.
D. $106,000.
E. $117,000.
D. $106,000.
The following information relates to October:

Production supervisor's salary: $2,500
Factory maintenance wages: 250 hours at $8 per hour
The journal entry to record the preceding information is:
A. Manufacturing Overhead 4,500
Wages Payable 4,500
B. Wages Payable 4,500
Manufacturing Overhead 4,500
C. Work-in- Process Inventory 4,500
Wages Payable 4,500
D. Wages Payable 4,500
Work-in- Process Inventory 4,500
E. Work-in- Process Inventory 2,500
Wages Payable 4,500
A. Manufacturing Overhead 4,500 Wages Payable 4,500
Electricity costs that were incurred by a company production processes should be debited to:
A. Utilities Expense.
B. Accounts Payable.
C. Cash.
D. Manufacturing Overhead.
E. Work-in- Process Inventory.
The journal entry needed to record $5,000 of advertising for Westwood Manufacturing would
include:
A. a debit to Advertising Expense.
B. a credit to Advertising Expense.
C. a debit to Manufacturing Overhead.
D. a credit to Manufacturing Overhead.
E. a debit to Projects-in- Process.
A. a debit to Advertising Expense
Only US$35.99/year
Regency Company incurred $90,000 of depreciation for the year. Eighty percent relates to the
firm's production facilities, and 20% relates to sales and administrative offices. If all items are
handled in the proper manner, a review of the company's accounting records should reveal a:
A. debit to Depreciation Expense for $90,000.
B. debit to Manufacturing Overhead for $90,000.
C. debit to Manufacturing Overhead for $72,000.
D. debit to Work-in- Process Inventory for $18,000.
E. credit to Cash for $90,000.
The process of assigning overhead costs to the jobs that are worked on is commonly called:
A. service department cost allocation.
B. overhead cost distribution.
C. overhead application.
D. transfer costing.
E. overhead cost apportionment.
Which of the following is the correct method to calculate a predetermined overhead rate?
A. Budgeted total manufacturing cost ÷ budgeted amount of cost driver.
B. Budgeted overhead cost ÷ budgeted amount of cost driver.
C. Budgeted amount of cost driver ÷ budgeted overhead cost.
D. Actual overhead cost ÷ budgeted amount of cost driver.
E. Actual overhead cost ÷ actual amount of cost driver.
Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this
figure, the company's accountant used:
A. a denominator of budgeted machine hours for the current accounting period.
B. a denominator of actual machine hours for the current accounting period.
C. a denominator of actual machine hours for the previous accounting period.
D. a numerator of budgeted machine hours for the current accounting period.
E. a numerator of actual machine hours for the current accounting period.

Horton Company applies overhead based on direct labor hours. At the beginning of 20x1, the company
estimated that manufacturing overhead would be $500,000, and direct labor hours
would be 10,000. Actual overhead by the conclusion of 20x1 amounted to $400,000. On the basis of this
information, Horton's 20x1 predetermined overhead rate is:
A. $0.02 per direct labor hour.
B. $0.025 per direct labor hour.
C. $40 per direct labor hour.
D. $50 per direct labor hour.
E. none of the above.
Dale Company, which applies overhead at the rate of 190% of direct labor cost, began work on job no.
101 during June. The job was completed in July and sold during August, having
accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis
of this information, the total overhead applied to job no. 101 amounted to:
A. $0.
B. $28,500.
C. $51,300.
D. $70,500.
E. $79,800.
B. $28,500.
Huxtable charges manufacturing overhead to products by using a predetermined application rate,

computed on the basis of machine hours. The following data pertain to the current year: Budgeted
manufacturing overhead: $480,000 Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000 Actual machine hours: 16,000
Overhead applied to production totaled:
A. $352,000.
B. $384,000.
C. $550,000.
D. $600,000.
B. $384,000.
Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. Nos.
401 and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A
review of job no. 403's cost record revealed direct material charges of $20,000 and total
manufacturing costs of $25,000. If Treetops applies overhead at 150% of direct labor cost, the
overhead applied to job no. 403 must have been:
A. $0.
B. $2,000.
C. $3,000.
D. $3,333.
E. $5,000.
C. $3,000.
The left side of the Manufacturing Overhead account is used to accumulate:

A. actual manufacturing overhead costs incurred throughout the accounting period.
B. overhead applied to Work-in- Process Inventory.
C. underapplied overhead.
D. predetermined overhead.
E. overapplied overhead.
Throughout the accounting period, the credit side of the Manufacturing Overhead account is used
to accumulate:
A. actual manufacturing overhead costs.
C. overapplied overhead.
D. underapplied overhead.
E. predetermined overhead.
Only US$35.99/year
An accountant recently debited Work-in- Process Inventory and credited Manufacturing

Overhead. The accountant was:
A. applying a predetermined overhead amount to production.
B. recognizing receipt of the factory utilities bill.
C. recording a year-end adjustment for an insignificant amount of underapplied overhead.
D. recognizing actual overhead incurred during the period.
E. recognizing the completion of production.
The final step in recognizing the completion of production requires a company to:
A. debit Finished-Goods Inventory and credit Work-in- Process Inventory.
B. debit Work-in- Process Inventory and credit Finished-Goods Inventory.
C. add direct labor to Work-in- Process Inventory.
D. add direct materials, direct labor, and manufacturing overhead to Work-in- Process Inventory.
E. add direct materials to Finished-Goods Inventory.
A. debit Finished-Goods Inventory and credit Work-in- Process Inventory.
Job no. C12 was completed in November at a cost of $18,500, subdivided as follows: direct
material, $3,500; direct labor, $6,000; and manufacturing overhead, $9,000. The journal entry to
record this information is:
A. Finished-Goods Inventory 18,500
Work-in- Process Inventory 18,500
B. Work-in- Process Inventory 18,500
Finished-Goods Inventory 18,500
C. Work-in- Process Inventory 18,500
Raw-Material Inventory 3,500
Wages Payable 6,000
D. Cost of Goods Sold 18,500
Finished-Goods Inventory 18,500
E. Finished-Goods Inventory 18,500
Cost of Goods Sold 18,500
A. Finished-Goods Inventory 18,500 Work-in- Process Inventory 18,500
If a company sells goods that cost $70,000 for $82,000, the firm will:
A. reduce Finished-Goods Inventory by $70,000.
B. reduce Finished-Goods Inventory by $82,000.
C. report sales revenue on the balance sheet of $82,000.
D. reduce Cost of Goods Sold by $70,000.
E. follow more than one of the above procedures.
Selto Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The journal entries
to record this transaction would include:
A. a credit to Work-in- Process Inventory for $35,000.
B. a debit to Sales Revenue for $45,000.
C. a credit to Profit on Sale for $10,000.
D. a debit to Finished-Goods Inventory for $35,000.
E. a credit to Sales Revenue for $45,000.
A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and
billed the customer $30,000. Which of the following options correctly expresses the accounts
that are debited and credited to record this transaction?
A. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of
Goods Sold.
B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods
Inventory.
C. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods
Inventory.
D. Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of
Goods Sold.
E. Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.
B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory.
Barney Company applies manufacturing overhead by using a predetermined rate of 200% of
direct labor cost. The data that follow pertain to job no. 764:
Direct material cost $55,000
Direct labor cost 40,000
If Barney adds a 40% markup on total cost to generate a profit, which of the following choices
depicts a portion of the accounting needed to record the sale of job no. 764?
Account Debited Amount
A. Cost of Goods Sold $175,000
B. Cost of Goods Sold $245,000
C. Finished-Goods Inventory $175,000
D. Finished-Goods Inventory $245,000
E. Sales Revenue $245,000
A. Cost of Goods Sold $175,000
Armada Company applies manufacturing overhead by using a predetermined rate of 150% of

direct labor cost. The data that follow pertain to job no. 831:
Direct material cost $72,000
Direct labor cost 38,000
If Armada adds a 30% markup on total cost to generate a profit, which of the following choices
depicts a portion of the accounting needed to record the sale of job no. 831?
Account Debited Amount
A. Accounts Receivable $167,000
B. Accounts Receivable $217,100
C. Finished-Goods Inventory $167,000
D. Finished-Goods Inventory $217,100
E. Sales Revenue $217,100
B. Accounts Receivable $217,100
Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional
labor hours. Overhead was estimated to be $150,000, direct professional labor hours were
estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During
the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours
of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:
A. $1,000 underapplied.
B. $1,000 overapplied.
C. $4,000 underapplied.
D. $4,000 overapplied.
E. $5,000 underapplied.
Maher, Inc., applies manufacturing overhead at the rate of $60 per machine hour. Budgeted
machine hours for the current period were anticipated to be 80,000; however, a lengthy strike
resulted in actual machine hours being worked of only 65,000. Budgeted and actual
manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On
the basis of this information, the company's year-end overhead was:
A. overapplied by $280,000.
B. underapplied by $280,000.
C. overapplied by $620,000.
D. underapplied by $620,000.
E. underapplied by $900,000.
Only US$35.99/year
Carlson charges manufacturing overhead to products by using a predetermined application rate,

computed on the basis of labor hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $1,600,000
Actual manufacturing overhead: $1,632,000
Budgeted labor hours: 50,000
Actual labor hours: 48,000
Which of the following choices denotes the correct status of manufacturing overhead at year-end?
A. Overapplied by $32,000.
B. Underapplied by $32,000.
C. Overapplied by $68,000.
D. Overapplied by $96,000.
E. Underapplied by $96,000.
Sanger Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-
end. On the basis of this information, one can conclude that:
A. budgeted overhead exceeded actual overhead.
B. budgeted overhead exceeded applied overhead.
C. budgeted overhead was less than applied overhead.
D. actual overhead exceeded applied overhead.
E. actual overhead was less than applied overhead.
Howard Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given
the firm's size. The year-end journal entry to record this amount would include:
A. a debit to Cost of Goods Sold.
B. a debit to Manufacturing Overhead.
C. a debit to Work-in- Process Inventory.
D. a credit to Cost of Goods Sold.
E. a credit to Work-in- Process Inventory.

Fog Company, which uses labor hours to apply overhead to manufacturing, may have increased
amounts of underapplied overhead at month-end if:
A. suppliers of direct materials have an across-the- board price increase.
B. an accountant failed to record the period's charges for plant maintenance and security.
C. employees are hit hard with a widespread outbreak of the flu.
D. direct laborers are granted a wage increase.
E. outlays for advertising expenditures are increased.
The estimates used to calculate the predetermined overhead rate will virtually always:
A. prove to be correct.
B. result in a year-end balance of zero in the Manufacturing Overhead account.
C. result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in
amount.
D. result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in
amount.
E. result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it
is immaterial in amount.
E. result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is
immaterial in amount.
Under- or overapplied manufacturing overhead at year-end is most commonly:

A. charged or credited to Work-in- Process Inventory.
B. charged or credited to Cost of Goods Sold.
C. charged or credited to a special loss account.
D. prorated among Work-in- Process Inventory, Finished-Goods Inventory, and Cost of Goods
Sold.
E. ignored because there is no effect on the Cash account.
When underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned

to which of the following accounts?
A. Raw-Material Inventory, Manufacturing Overhead, and Direct Labor.
B. Cost of Goods Sold, Work-in- Process Inventory, and Finished-Goods Inventory.
C. Work-in- Process Inventory, Raw-Material Inventory, and Cost of Goods Sold.
D. Raw-Material Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
E. Raw-Material Inventory, Work-in- Process Inventory, and Finished-Goods Inventory
B. Cost of Goods Sold, Work-in- Process Inventory, and Finished-Goods Inventory.
Fletcher, Inc., disposes of under- or overapplied overhead at year-end as an adjustment to cost of

goods sold. Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when
manufacturing overhead was underapplied by $15,000. If sales revenue totaled $1,400,000,
determine (1) Fletcher's adjusted cost of goods sold and (2) gross margin.
Adjusted Cost
of Goods Sold Gross Margin
A. $575,000 $810,000
B. $575,000 $825,000
C. $590,000 $810,000
D. $605,000 $795,000
E. $605,000 $810,000
D. $605,000 $795,000
Which of the following statement(s) is (are) correct regarding overhead application?

I. Actual overhead rates result in more accurate but less timely information.
II. Predetermined overhead rates result in less accurate but more timely information.
III. Predetermined overhead rates tend to smooth product costs over time.
A. III only.
B. I and II.
C. I and III.
D. II and III.
E. I, II, and III.
E. I, II, and III.
The term "normal costing" refers to the use of:

A. job-costing systems.
B. computerized accounting systems.
C. targeted overhead rates.
D. predetermined overhead rates.
E. actual overhead rates.
Only US$35.99/year
Which of the following statements about the use of direct labor as a cost driver is false?
A. Direct labor is the most commonly used cost driver when calculating a predetermined
overhead rate.
B. Direct labor is gaining in importance in many manufacturing applications with respect to
being a significant cost driver.
C. Direct labor is an inappropriate cost driver to use if a company is highly automated.
D. If direct labor is a good cost driver, increases in direct labor are matched with increases in
E. Companies can use either direct labor cost or direct labor hours as a cost driver.
B. Direct labor is gaining in importance in many manufacturing applications with respect to being a
significant cost driver.
If the amount of effort and attention to products varies substantially throughout a firm's various
manufacturing operations, the firm might consider the use of:
A. a plant-wide overhead rate.
B. departmental overhead rates.
C. actual overhead rates instead of predetermined overhead rates.
D. direct labor hours to determine the overhead rate.
E. machine hours to determine the overhead rate.
In the two-stage cost allocation process, costs are assigned:

A. from jobs, to service departments, to production departments.
B. from service departments, to jobs, to production departments.
C. from service departments, to production departments, to jobs.
D. from production departments, to jobs, to service departments.
E. from the balance sheet (when goods are produced), to the income statement (when goods are
sold).
C. from service departments, to production departments, to jobs
Which of the following entities would not likely be a user of job-costing systems?
A. Custom-furniture manufacturers.
B. Repair shops.
C. Hospitals.
D. Accounting firms.
E. None of the above, as all are likely users.
Which of the following would not likely be used by service providers to accumulate job costs?
A. Projects.
B. Contracts.
C. Clients.
D. Processes.
E. All of the above, as service providers cannot use job-costing systems.
D. Processes.
At the Nassau Advertising Agency, partner and staff compensation cost is a key driver of agency
overhead. In light of this fact, which of the following is the correct expression to determine the
amount of overhead applied to a particular client job?
A. (Budgeted overhead ÷ budgeted compensation) x budgeted compensation cost on the job.
B. (Budgeted overhead ÷ budgeted compensation) x actual compensation cost on the job.
C. (Budgeted compensation ÷ budgeted overhead) x budgeted compensation cost on the job.
D. (Budgeted compensation ÷ budgeted overhead) x actual compensation cost on the job.
E. None of the above, because service providers do not apply overhead to jobs.
In comparison with firms that use plantwide overhead rates and departmental overhead rates,
companies that have adopted activity-based costing will typically use:
A. more cost pools and more cost drivers.
B. more cost pools and fewer cost drivers.
C. fewer cost pools and more cost drivers.
D. fewer cost pools and fewer cost drivers.
E. only one cost pool and one cost driver.
one time money=
value of $1 graph
consecutive money=
value of a series of cash flow graph
CVP analysis can be used to study the effect of:

A. changes in selling prices on a companys profitability.
B. changes in variable costs on a companys profitability.
C. changes in fixed costs on a companys profitability.
D. changes in product sales mix on a companys profitability.
E. all of the above.
E. all of the above.
The break-even point is that level of activity where:

A. total revenue equals total cost.
B. variable cost equals fixed cost.
C. total contribution margin equals the sum of variable cost plus fixed cost.
D. sales revenue equals total variable cost.
E. profit is greater than zero.
A. total revenue equals total cost.
The unit contribution margin is calculated as the difference between:

A. selling price and fixed cost per unit.
B. selling price and variable cost per unit.
C. selling price and product cost per unit.
D. fixed cost per unit and variable cost per unit.
E. fixed cost per unit and product cost per unit.
B. selling price and variable cost per unit.
Which of the following would produce the largest increase in the contribution margin per unit?
A. A 7% increase in selling price.
B. A 15% decrease in selling price.
C. A 14% increase in variable cost.
D. A 17% decrease in fixed cost.
E. A 23% increase in the number of units sold.
A. A 7% increase in selling price.
Which of the following would take place if a company were able to reduce its variable cost per
unit?
Contribution
Margin
Break-even
Point
increase, decrease
Which of the following would take place if a company experienced an increase in fixed costs?
A. Net income would increase.
B. The break-even point would increase.
C. The contribution margin would increase.
D. The contribution margin would decrease.
E. More than one of the above events would occur.
B. The break-even point would increase.
Assuming no change in sales volume, an increase in a firms per-unit contribution margin would:
A. increase net income.
B. decrease net income.
C. have no effect on net income.
D. increase fixed costs.
E. decrease fixed costs.
A. increase net income.
A company that desires to lower its break-even point should strive to:
A. decrease selling prices.
B. reduce variable costs.
C. increase fixed costs.
D. sell more units.
E. pursue more than one of the above actions.
B. reduce variable costs.
A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of the
following statements is (are) true?
A. Each unit contributes $3 toward covering the fixed costs of $900.
B. The situation described is not possible and there must be an error.
C. Once the break-even point is reached, the company will make money at the rate of $3 per
unit.
D. The firm will definitely lose money in this situation.
E. Statements A&C are true
E. Statements A&C are true

Sanderson sells a single product for $50 that has a variable cost of $30. Fixed costs amount to $5
per unit when anticipated sales targets are met. If the company sells one unit in excess of its
break-even volume, the bottom-line profit will be:
A. $15.
B. $20.
C. $50.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices A B and C; but one that can be derived based on
the information presented.
B. $20.
At a volume of 15,000 units, Boston reported sales revenues of $600,000, variable costs of
$225,000, and fixed costs of $120,000. The companys contribution margin per unit is:
A. $17.
B. $25.
C. $47.
D. $55.
E. an amount other than those above.
B. $25.
A recent income statement of Banks Corporation reported the following data:
Sales revenue $8,000,000

Variable costs 5,000,000
Fixed costs 2,200,000
If these data are based on the sale of 20,000 units, the contribution margin per unit would be:
A. $40.
B. $150.
C. $290.
D. $360.
B. $150.
A recent income statement of Fox Corporation reported the following data:

If these data are based on the sale of 10,000 units, the break-even point would be:
A. 2,000 units.
B. 2,778 units.
C. 3,600 units.
D. 5,000 units.
D. 5,000 units.
A recent income statement of Yale Corporation reported the following data:

Fixed costs 800,000
If these data are based on the sale of 5,000 units, the break-even sales would be:
A. $2,000,000.
B. $2,206,000.
C. $2,500,000.
D. $10,000,000.
even sales would be:

A. $2,000,000.
Lawton, Inc., sells a single product for $12. Variable costs are $8 per unit and fixed costs total
$360,000 at a volume level of 60,000 units. Assuming that fixed costs do not change, Lawtons
break-even point would be:
A. 30,000 units.
B. 45,000 units.
C. 90,000 units.
D. negative because the company loses $2 on every unit sold.
E. a positive amount other than those given above.
C. 90,000 units.
Green, Inc., sells a single product for $20. Variable costs are $8 per unit and fixed costs total
$120,000 at a volume level of 5,000 units. Assuming that fixed costs do not change, Greens
break-even sales would be:
A. $160,000.
B. $200,000.
C. $300,000.
D. $480,000.
B. $200,000.
Orion recently reported sales revenues of $800,000, a total contribution margin of $300,000, and
fixed costs of $180,000. If sales volume amounted to 10,000 units, the companys variable cost
per unit must have been:
A. $12.
B. $32.
C. $50.
D. $92.
C. $50.
Strand has a break-even point of 120,000 units. If the firms sole product sells for $40 and fixed
costs total $480,000, the variable cost per unit must be:
A. $4.
B. $36.
C. $44.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices "A," "B," and "C" but one
that can be derived based on
the information presented.
B. $36.
Ribco Co., makes and sells only one product. The unit contribution margin is $6 and the break-
even point in unit sales is 24,000. The companys fixed costs are:
A. $4,000.
B. $14,400.
C. $40,000.
D. $144,000.
D. $144,000.
The contribution-margin ratio is:

A. the difference between the selling price and the variable cost per unit.
B. fixed cost per unit divided by variable cost per unit.
C. variable cost per unit divided by the selling price.
D. unit contribution margin divided by the selling price.
E. unit contribution margin divided by fixed cost per unit.
E. unit contribution margin divided by fixed cost per unit.
At a volume level of 500,000 units, Sullivan reported the following information:
Sales price $60

Variable cost per unit 20
Fixed cost per unit 4
The company's contribution-margin ratio is:
A. 0.33.
B. 0.40.
C. 0.60.
D. 0.67.
D. 0.67.
Which of the following expressions can be used to calculate the break-even point with the
contribution-margin ratio (CMR)?
A. CMR ÷ fixed costs.
B. CMR x fixed costs.
C. Fixed costs ÷ CMR.
D. (Fixed costs + variable costs) x CMR.
E. (Sales revenue - variable costs) ÷ CMR.
C. Fixed costs ÷ CMR.
A recent income statement of Oslo Corporation reported the following data:
Units sold 8,000

If the company desired to earn a target net profit of $480,000, it would have to sell:
A. 1,200 units.
B. 2,800 units.
C. 4,000 units.
D. 5,200 units.
D. 5,200 units.
Yellow, Inc., sells a single product for $10. Variable costs are $4 per unit and fixed costs total
$120,000 at a volume level of 10,000 units. What dollar sales level would Yellow have to
achieve to earn a target net profit of $240,000?
A. $400,000.
B. $500,000.
C. $600,000.
D. $750,000.
E. $900,000.
C. $600,000.
The difference between budgeted sales revenue and break-even sales revenue is the:
A. contribution margin.
B. contribution-margin ratio.
C. safety margin.
D. target net profit.
E. operating leverage.
C. safety margin.
Maxie's budget for the upcoming year revealed the following figures:
Sales revenue $840,000

Contribution margin 504,000
Net income 54,000
If the company's break-even sales total $750,000, Maxie's safety margin would be:
A. $(90,000).
B. $90,000.
C. $246,000.
D. $336,000.
E. $696,000.
B. $90,000.
If a company desires to increase its safety margin, it should:

A. increase fixed costs.
B. decrease the contribution margin.
C. decrease selling prices, assuming the price change will have no effect on demand.
D. stimulate sales volume.
E. attempt to raise the break-even point.
D. stimulate sales volume.
Dana sells a single product at $20 per unit. The firm's most recent income statement revealed
unit sales of 100,000, variable costs of $800,000, and fixed costs of $400,000. If a $4 drop in
selling price will boost unit sales volume by 20%, the company will experience:
A. no change in profit because a 20% drop in sales price is balanced by a 20% increase in
volume.
B. an $80,000 drop in profitability.
C. a $240,000 drop in profitability.
D. a $400,000 drop in profitability.
E. a change in profitability other than those above.
C. a $240,000 drop in profitability.
Gleason sells a single product at $14 per unit. The firm's most recent income statement revealed
unit sales of 80,000, variable costs of $800,000, and fixed costs of $560,000. Management
believes that a $3 drop in selling price will boost unit sales volume by 20%. Which of the
following correctly depicts how these two changes will affect the companys break-even point?
Drop in
Sales Price
Increase in
Sales Volume
increase, no effect
All other things being equal, a company that sells multiple products should attempt to structure its
sales mix so the greatest portion of the mix is composed of those products with the highest:
A. selling price.
B. variable cost.
C. contribution margin.
D. fixed cost.
E. gross margin.
C. contribution margin.
Wells Corporation has the following sales mix for its three products: A, 20%; B, 35%; and C,
45%. Fixed costs total $400,000 and the weighted-average contribution margin is $100. How
many units of product A must be sold to break-even?
A. 800.
B. 4,000.
C. 20,000.
D. An amount other than those above.
E. Cannot be determined based on the information presented.
A. 800.
Which of the following underlying assumptions form(s) the basis for cost-volume-profit analysis?
A. Revenues and costs behave in a linear manner.
B. Costs can be categorized as variable, fixed, or semivariable.
C. Worker efficiency and productivity remain constant.
D. In multiproduct organizations, the sales mix remains constant.
E. All of the above are assumptions that underlie cost-volume-profit analysis.
E. All of the above are assumptions that underlie cost-volume-profit analysis.
Cost-volume-profit analysis is based on certain general assumptions. Which of the following is

not one of these assumptions?
A. Product prices will remain constant as volume varies within the relevant range.
B. Costs can be categorized as fixed, variable, or semivariable.
C. The efficiency and productivity of the production process and workers will change to reflect
manufacturing advances.
D. Total fixed costs remain constant as activity changes.
E. Unit variable cost remains constant as activity changes.
C. The efficiency and productivity of the production process and workers will change to reflect
manufacturing advances.
The assumptions on which cost-volume-profit analysis is based appear to be most valid for
businesses:
A. over the short run.
B. over the long run.
C. over both the short run and the long run.
D. in periods of sustained profits.
E. in periods of increasing sales.
A. over the short run.

The contribution income statement differs from the traditional income statement in which of the
following ways?
A. The traditional income statement separates costs into fixed and variable components.
B. The traditional income statement subtracts all variable costs from sales to obtain the
contribution margin.
C. Cost-volume-profit relationships can be analyzed more easily from the contribution income
statement.
D. The effect of sales volume changes on profit is readily apparent on the traditional income
statement.
E. The contribution income statement separates costs into product and period categories.
C. Cost-volume-profit relationships can be analyzed more easily from the contribution income
statement.
Which of the following does not typically appear on a contribution income statement?
A. Net income.
B. Gross margin.
C. Contribution margin.
D. Total variable costs.
E. Total fixed costs.
B. Gross margin.
Which of the following does not typically appear on an income statement prepared by using a
traditional format?
A. Cost of goods sold.
B. Contribution margin.
C. Gross margin.
D. Selling expenses.
E. Administrative expenses.
B. Contribution margin.
The extent to which an organization uses fixed costs in its cost structure is measured by:
A. financial leverage.
B. operating leverage.
C. fixed cost leverage.
D. contribution leverage.
E. efficiency leverage.
B. operating leverage.
A manager who wants to determine the percentage impact on net income of a given percentage
change in sales would multiply the percentage increase/decrease in sales revenue by the:
A. contribution margin.
B. gross margin.
C. operating leverage factor.
D. safety margin.
E. contribution-margin ratio.
C. operating leverage factor.
Which of the following calculations can be used to measure a company's degree of operating
leverage?
A. Contribution margin ÷ sales.
B. Contribution margin ÷ net income.
C. Sales ÷ contribution margin.
D. Sales ÷ net income.
E. Sales ÷ fixed costs.
B. Contribution margin ÷ net income.
You are analyzing Becker Corporation and Newton Corporation and have concluded that Becker
has a higher operating leverage factor than Newton. Which one of the following choices
correctly depicts (1) the relative use of fixed costs (as opposed to variable costs) for the two
companies and (2) the percentage change in income caused by a change in sales?
Relative Use of Fixed

Costs as Opposed to
Variable Costs
Percentage Change in
Income Caused by
a Change in Sales
greater for Becker, greater for Becker
The following information relates to Day Company:

Contribution margin 4,800,000
Net income 800,000
Day's operating leverage factor is:
A. 0.067.
B. 0.167.
C. 0.400.
D. 2.500.
E. 6.000.
E. 6.000.
The following information relates to Paterno Company:

Contribution margin 4,000,000
Net income 1,000,000
If a manager at Paterno desired to determine the percentage impact on net income of a given
percentage change in sales, the manager would multiply the percentage increase/decrease in sales
revenue by:
A. 0.25.
B. 0.40.
C. 2.50.
D. 4.00.
E. 10.00.
D. 4.00.
When advanced manufacturing systems are installed, what effect does such installation usually
have on fixed costs and the break-even point?
Fixed Costs Break-even Point
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Do not change Does not change
A. Increase Increase
Which of the following statements is (are) true regarding a company that has implemented
flexible manufacturing systems and activity-based costing?
I. The company has erred, as these two practices used in conjunction with one another will
severely limit the firm's ability to analyze costs over the relevant range.
II. Costs formerly viewed as fixed under traditional-costing systems may now be considered
variable with respect to changes in cost drivers such as number of setups, number of
material moves, and so forth.
III. As compared with the results obtained under a traditional-costing system, the concept of
break-even analysis loses meaning.
A. I only.
B. II only.
C. III only.
D. I and II.
E. II and III.
B. II only.
A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income. How much
should the firm add to fixed costs when figuring the sales revenues necessary to produce this
income level?
A. $200,000.
B. $300,000.
C. $500,000.
D. $833,333.
E. $1,250,000.
D. $833,333.
Barney, Inc., is subject to a 40% income tax rate. The following data pertain to the period just
ended when the company produced and sold 45,000 units:
Variable costs 810,000
Fixed costs 432,000
How many units must Barney sell to earn an after-tax profit of $180,000?
A. 42,000.
B. 45,000.
C. 51,000.
D. 61,000.
E. An amount other than those above.
D. 61,000.
Product costing in a manufacturing firm is the process of:

A. accumulating the company's period costs.
B. allocating costs among the firm's departments.
C. placing a value on the company's fixed assets.
D. assigning costs to the firm's inventory.
E. assigning costs to the company's managers.

A. Service firms have little need for determining the cost of their services.
B. The concept of product costing is relevant only for manufacturing firms.
C. The cost of year-end inventory appears on the balance sheet as an expense.
E. Mining and petroleum companies have no inventoriable costs.
Which of the following manufacturers would most likely use job-order costing?
A. Chemical manufacturers.
B. Microchip processors.
C. Custom-furniture manufacturers.
D. Gasoline refiners.
E. Fertilizer manufacturers.
A custom-home builder would likely utilize:

B. process costing.
C. mass customization.
D. process budgeting.
E. joint costing.
Which of the following types of companies would most likely use process costing?
A. Aircraft manufacturers.
C. Textbook publishers.
D. Custom-machining firms.
E. Shipbuilders.
A manufacturing firm produces goods in accordance with customer specifications, commencing

production upon receipt of a purchase order. To accumulate the cost of each order, the company would
use a:
A. job-cost record.
B. cost allocation matrix.
C. production log.
D. overhead sheet.
E. manufacturing cost record.
A typical job-cost record would provide information about all of the following items related to an order
except:
A. the cost of direct materials used.
C. direct labor costs incurred.
D. applied manufacturing overhead.
E. direct labor hours worked.
Which of the following statements about material requisitions is false?

A. Material requisitions are often computerized.
B. Material requisitions are a common example of source documents.
C. Material requisitions contain information that is useful to the cost accounting department.
E. Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to
complete a job.
Pruitt Company has developed an integrated system that coordinates the flow of all goods, services, and
information into and out of the organization, working with raw material vendors as well as customers to
improve service and reduce costs. The firm is said to be using:
A. participative management.
B. top-down management.
C. strategic cost management.
E. management by objectives (MBO)
The assignment of direct labor cost to individual jobs is based on:

A. an estimate of the total time spent on the job.
B. actual total payroll cost divided equally among all jobs in process.
C. estimated total payroll cost divided equally among all jobs in process.
E. the estimated time spent on each job multiplied by the wage rate.
The total production cost of a job is composed of:

B. direct material, direct labor, manufacturing overhead, and outlays for selling costs.
C. direct material, direct labor, manufacturing overhead, and outlays for both selling and administrative
costs.
E. direct material, direct labor, and actual manufacturing overhead.
Manufacturing overhead:
A. includes direct materials, indirect materials, indirect labor, and factory depreciation.
B. is easily traced to jobs.
C. includes all selling costs.
D. should not be assigned to individual jobs because it bears no obvious relationship to them.
E. is a pool of indirect production costs that must somehow be attached to each unit manufactured.
As production takes place, all manufacturing costs are added to the:

A. Work-in-Process Inventory account.
B. Manufacturing-Overhead Inventory account.
C. Cost-of-Goods-Sold account.
D. Finished-Goods Inventory account.
E. Production Labor account.
Which of the following statements regarding work in process is not correct?

A. Work in process is partially completed inventory.
B. Work in process consists of direct labor, direct material, and manufacturing overhead.
C. Work-in-Process Inventory is debited to record direct material used and direct labor incurred.
D. Work-in-Process Inventory appears on the year-end balance sheet.
E. Work-in-Process Inventory is credited when goods are sold.
Which of the following statements about manufacturing cost flows is false?

A. Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-Process
Inventory account.
B. The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during
the period.
C. The cost of units sold during the period will typically appear on the income statement.
D. When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account
entitled Profit on Sale.
E. Units are normally transferred from Work-in-Process Inventory to Finished-Goods Inventory.
Which of the following statements about materials is false?

B. The use of direct materials gives rise to a debit to Work-in-Process Inventory.
C. The use of indirect materials gives rise to a debit to Manufacturing Overhead.
D. The use of indirect materials gives rise to a credit to Manufacturing Supplies Inventory.
E. Direct materials are accounted for in a different manner than indirect materials.
Longview Corporation recently used $72,000 of direct materials and $3,000 of indirect materials in
production activities. The journal entries reflecting these transactions would include:
A. a debit to Raw-Material Inventory for $72,000.
C. a credit to Manufacturing Overhead for $3,000.
D. a debit to Work-in-Process Inventory for $75,000.
E. a debit to Manufacturing Overhead for $75,000.
A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all
procedures were performed in the correct manner, this means that the firm:
A. also recorded a credit to Raw-Material Inventory.
B. also recorded a credit to Manufacturing Supplies Inventory.
C. was accounting for the usage of direct materials.
D. was accounting for the usage of indirect materials.
E. was accounting for the usage of direct materials by also crediting the Raw-Material Inventory account.
Oregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper
journal entry to record these events would include a debit to Work in Process for:
A. $0 because Work in Process should be credited.
B. $0 because Work in Process is not affected.
C. $11,000.
D. $106,000.
E. $117,000.
look at doc for 20
...
Electricity costs that were incurred by a company's production processes should be debited to:
A. Utilities Expense.
B. Accounts Payable.
C. Cash.
E. Work-in-Process Inventory.
The journal entry needed to record $5,000 of advertising for Westwood Manufacturing would include:
A. a debit to Advertising Expense.
B. a credit to Advertising Expense.
C. a debit to Manufacturing Overhead.
D. a credit to Manufacturing Overhead.
E. a debit to Projects-in-Process.
Regency Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's
production facilities, and 20% relates to sales and administrative offices. If all items are handled in the
proper manner, a review of the company's accounting records should reveal a:
A. debit to Depreciation Expense for $90,000.
B. debit to Manufacturing Overhead for $90,000.
D. debit to Work-in-Process Inventory for $18,000.
E. credit to Cash for $90,000.
The process of assigning overhead costs to the jobs that are worked on is commonly called:
A. service department cost allocation.
B. overhead cost distribution.
D. transfer costing.
E. overhead cost apportionment.
C
Which of the following is the correct method to calculate a predetermined overhead rate?
A. Budgeted total manufacturing cost ÷ budgeted amount of cost driver.
C. Budgeted amount of cost driver ÷ budgeted overhead cost.
D. Actual overhead cost ÷ budgeted amount of cost driver.
E. Actual overhead cost ÷ actual amount of cost driver.
Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this figure,
the company's accountant used:
B. a denominator of actual machine hours for the current accounting period.
C. a denominator of actual machine hours for the previous accounting period.
D. a numerator of budgeted machine hours for the current accounting period.
E. a numerator of actual machine hours for the current accounting period.
Horton Company applies overhead based on direct labor hours. At the beginning of 20x1, the company
estimated that manufacturing overhead would be $500,000, and direct labor hours would be 10,000.
Actual overhead by the conclusion of 20x1 amounted to $400,000. On the basis of this information,
Horton's 20x1 predetermined overhead rate is:
A. $0.02 per direct labor hour.
B. $0.025 per direct labor hour.
C. $40 per direct labor hour.
E. none of the above.
Dale Company, which applies overhead at the rate of 190% of direct labor cost, began work on job no.
101 during June. The job was completed in July and sold during August, having accumulated direct
material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the
total overhead applied to job no. 101 amounted to:
A. $0.
B. $28,500.
C. $51,300.
D. $70,500.
E. $79,800.
Huxtable charges manufacturing overhead to products by using a predetermined application rate,

computed on the basis of machine hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $480,000

Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:

A. $352,000.
B. $384,000.
C. $550,000.
D. $600,000.
Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. Nos. 401
and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of job no.
403's cost record revealed direct material charges of $20,000 and total manufacturing costs of $25,000.
If Treetops applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have
been:
A. $0.
B. $2,000.
C. $3,000.
D. $3,333.
E. $5,000.
The left side of the Manufacturing Overhead account is used to accumulate:

B. overhead applied to Work-in-Process Inventory.
C. underapplied overhead.
D. predetermined overhead.
E. overapplied overhead.
Throughout the accounting period, the credit side of the Manufacturing Overhead account is used to
accumulate:
A. actual manufacturing overhead costs.
B. overhead applied to Work-in-Process Inventory.
C. overapplied overhead.
D. underapplied overhead.
E. predetermined overhead.
An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead. The
accountant was:
B. recognizing receipt of the factory utilities bill.
C. recording a year-end adjustment for an insignificant amount of underapplied overhead.
D. recognizing actual overhead incurred during the period.
E. recognizing the completion of production.
The final step in recognizing the completion of production requires a company to:
A. debit Finished-Goods Inventory and credit Work-in-Process Inventory.
B. debit Work-in-Process Inventory and credit Finished-Goods Inventory.
C. add direct labor to Work-in-Process Inventory.
D. add direct materials, direct labor, and manufacturing overhead to Work-in-Process Inventory.
E. add direct materials to Finished-Goods Inventory.
look at doc for 35
...
If a company sells goods that cost $70,000 for $82,000, the firm will:
B. reduce Finished-Goods Inventory by $82,000.
C. report sales revenue on the balance sheet of $82,000.
D. reduce Cost of Goods Sold by $70,000.
E. follow more than one of the above procedures.
Selto Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The journal entries to
record this transaction would include:
A. a credit to Work-in-Process Inventory for $35,000.
B. a debit to Sales Revenue for $45,000.
C. a credit to Profit on Sale for $10,000.
A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the
customer $30,000. Which of the following options correctly expresses the accounts that are debited and
credited to record this transaction?
A. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold.
B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory.
C. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods Inventory.
D. Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of Goods Sold.
E. Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.
look at doc for 39

...
doc for 40
...
Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor
hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be
15,000, and direct professional labor cost was projected to be $225,000. During the year, Media
incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual
direct labor cost of $222,000. By year-end, the firm's overhead was:
B. $1,000 overapplied.
C. $4,000 underapplied.
D. $4,000 overapplied.
E. $5,000 underapplied.
Maher, Inc., applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine
hours for the current period were anticipated to be 80,000; however, a lengthy strike resulted in actual
machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for
the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's
year-end overhead was:
A. overapplied by $280,000.
C. overapplied by $620,000.
D. underapplied by $620,000.
E. underapplied by $900,000.
Carlson charges manufacturing overhead to products by using a predetermined application rate,

computed on the basis of labor hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $1,600,000

Actual manufacturing overhead: $1,632,000
Budgeted labor hours: 50,000
Actual labor hours: 48,000
Which of the following choices denotes the correct status of manufacturing overhead at year-end?
A. Overapplied by $32,000.
B. Underapplied by $32,000.
C. Overapplied by $68,000.
D. Overapplied by $96,000.
E
Sanger Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end. On
the basis of this information, one can conclude that:
A. budgeted overhead exceeded actual overhead.
B. budgeted overhead exceeded applied overhead.
C. budgeted overhead was less than applied overhead.
E. actual overhead was less than applied overhead.
Howard Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given the
firm's size. The year-end journal entry to record this amount would include:
B. a debit to Manufacturing Overhead.
C. a debit to Work-in-Process Inventory.
D. a credit to Cost of Goods Sold.
E. a credit to Work-in-Process Inventory.
Fog Company, which uses labor hours to apply overhead to manufacturing, may have increased
amounts of underapplied overhead at month-end if:
A. suppliers of direct materials have an across-the-board price increase.
B. an accountant failed to record the period's charges for plant maintenance and security.
D. direct laborers are granted a wage increase.
E. outlays for advertising expenditures are increased.
The estimates used to calculate the predetermined overhead rate will virtually always:
A. prove to be correct.
B. result in a year-end balance of zero in the Manufacturing Overhead account.
C. result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
D. result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
E. result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is
immaterial in amount.
Under- or overapplied manufacturing overhead at year-end is most commonly:

A. charged or credited to Work-in-Process Inventory.
C. charged or credited to a special loss account.
D. prorated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
E. ignored because there is no effect on the Cash account.
B
When underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned to
which of the following accounts?
A. Raw-Material Inventory, Manufacturing Overhead, and Direct Labor.
B. Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods Inventory.
C. Work-in-Process Inventory, Raw-Material Inventory, and Cost of Goods Sold.
D. Raw-Material Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
E. Raw-Material Inventory, Work-in-Process Inventory, and Finished-Goods Inventory
look at doc for 50
...
Which of the following statement(s) is (are) correct regarding overhead application?
Actual overhead rates result in more accurate but less timely information.
Predetermined overhead rates result in less accurate but more timely information.
Predetermined overhead rates tend to smooth product costs over time.
A. III only.
B. I and II.
C. I and III.
D. II and III.
E. I, II, and III.
The term "normal costing" refers to the use of:

A. job-costing systems.
B. computerized accounting systems.
C. targeted overhead rates.
E. actual overhead rates.
Which of the following statements about the use of direct labor as a cost driver is false?
A. Direct labor is the most commonly used cost driver when calculating a predetermined overhead rate.
B. Direct labor is gaining in importance in many manufacturing applications with respect to being a
significant cost driver.
C. Direct labor is an inappropriate cost driver to use if a company is highly automated.
D. If direct labor is a good cost driver, increases in direct labor are matched with increases in
E. Companies can use either direct labor cost or direct labor hours as a cost driver.
B
If the amount of effort and attention to products varies substantially throughout a firm's various
manufacturing operations, the firm might consider the use of:
A. a plant-wide overhead rate.
C. actual overhead rates instead of predetermined overhead rates.
D. direct labor hours to determine the overhead rate.
E. machine hours to determine the overhead rate.
In the two-stage cost allocation process, costs are assigned:

A. from jobs, to service departments, to production departments.
B. from service departments, to jobs, to production departments.
C. from service departments, to production departments, to jobs.
D. from production departments, to jobs, to service departments.
E. from the balance sheet (when goods are produced), to the income statement (when goods are sold).
Which of the following entities would not likely be a user of job-costing systems?
A. Custom-furniture manufacturers.
B. Repair shops.
C. Hospitals.
D. Accounting firms.
Which of the following would not likely be used by service providers to accumulate job costs?
Projects.
Contracts.
Clients.
Processes.
All of the above, as service providers cannot use job-costing systems.
At the Nassau Advertising Agency, partner and staff compensation cost is a key driver of agency
overhead. In light of this fact, which of the following is the correct expression to determine the amount
of overhead applied to a particular client job?
A. (Budgeted overhead ÷ budgeted compensation) x budgeted compensation cost on the job.
C. (Budgeted compensation ÷ budgeted overhead) x budgeted compensation cost on the job.
D. (Budgeted compensation ÷ budgeted overhead) x actual compensation cost on the job.
E. None of the above, because service providers do not apply overhead to jobs.
B
In comparison with firms that use plantwide overhead rates and departmental overhead rates,
companies that have adopted activity-based costing will typically use:
B. more cost pools and fewer cost drivers.
C. fewer cost pools and more cost drivers.
D. fewer cost pools and fewer cost drivers.
E. only one cost pool and one cost driver.
Process costing is used to account for:

B. small numbers of products that are produced in batches.
C. raw materials that are converted directly to finished goods.
D. finished goods that are refined and processed further.
E. large numbers of products that are produced in a non-repetitive process.
Which of the following manufacturers would most likely not use a process-cost accounting system?
A. A producer of computer monitors.
B. A paint manufacturer.
C. A producer of frozen orange juice.
E. A lumber mill.

A. petroleum refining.
B. chemicals.
C. truck tire manufacturing.
D. wood pulp production.
E. automobile repair.
#4 look at doc
...
Which of the following statements regarding similarities between process costing and job-order costing
are true?
Both systems assign production costs to units of output.

Both systems require extensive knowledge of financial accounting.
The flow of costs through the manufacturing accounts is essentially the same.
A. I only.
B. I and III.
C. II and III.
D. III only.
E. I, II, and III.

A. establish a separate Work-in-Process Inventory account for each manufacturing department.
B. establish a separate Finished-Goods Inventory account for each manufacturing department.
C. pass completed production directly to Cost of Goods Sold.
D. charge goods produced with actual overhead amounts rather than applied overhead amounts.
E. eliminate the need for the Finished-Goods Inventory account.
Which of the following statements is false?

A. In job-order costing, costs are accumulated by job order.
B. In process costing, costs are accumulated by department.
C. In process costing, the cost per unit in a department is found by spreading the period's manufacturing
costs over the production activity.
D. In process costing, the total cost of each unit is found by dividing the total factory costs by the
number of units completed.
E. In job-order costing, the unit cost is found by dividing the job's total cost by the job's total units.
In a process-costing system,4 manufacturing costs are accumulated by:

A. batch.
B. batch and time period.
C. department.
D. department and time period.
E. department or process, and time period.
#9 look at doc
...
Morrison, Inc., which uses a process-cost accounting system, passes completed production from
Department A to Department B for further manufacturing. The journal entry to record completed
production in Department A requires:
A. a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.
B. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.
C. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A.
D. a debit to Work-in-Process Inventory: Department A and a credit to Work-in-Process Inventory:
Department B.
E. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory:
Department A.
Greene, Inc., which uses a process-costing system, transfers completed production from Department no.
debited to record this transfer?
A. Cost of Goods Transferred.
B. Finished-Goods Inventory: Department no. 1.
C. Finished-Goods Inventory: Department no. 2.
D. Work-in-Process Inventory: Department no. 1.
E. Work-in-Process Inventory: Department no. 2.
Barnes, Inc., which uses a process-costing system, transfers completed production from Department no.
credited to record this transfer?
A. Cost of Goods Transferred.
B. Finished-Goods Inventory: Department no. 1.
C. Finished-Goods Inventory: Department no. 2.
D. Work-in-Process Inventory: Department no. 1.
E. Work-in-Process Inventory: Department no. 2.
Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000
on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead
of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of
goods were still in production at year-end, Hamilton should make a journal entry on December 31 that
includes:
A. a debit to Cost of Goods Sold for $432,000.
B. a credit to Finished-Goods Inventory for $432,000.
C. a credit to Work-in-Process Inventory for $432,000.
E. a credit to Work-in-Process Inventory for $86,000.

A. in-process units.
B. completed units.
C. physical units.
E. a measure of activity other than those listed above.
D
April?
A. 11,600.
B. 17,700.
C. 20,500.
D. 30,700.
A. 8,600.
B. 9,800.
C. 11,000.
D. 12,200.
B. 2,100 completed units.
C. 900 in-process units.
D. 900 equivalent units of production.
E. 3,000 equivalent units of production.
method?
A. Work-to-date on ending work in process, units started during the period.
C. Work to complete beginning work in process, work-to-date on ending work in process.
D. Work to complete beginning work in process, units completed, work done on ending work in process.
E. Units completed, work to complete beginning work in process.
A. Materials, 40%; conversion cost, 40%.
B. Materials, 40%; conversion cost, 100%.
C. Materials, 100%; conversion cost, 40%.
D. Materials, 100%; conversion cost, 60%.
E. Materials, 100%; conversion cost, 100%.
Agora Company uses a process-cost system for its single product. Material A is added at the beginning of
the process; in contrast, material B is added when the units are 75% complete. The firm's ending work-
in-process inventory consists of 6,000 units that are 80% complete. Which of the following correctly
expresses the equivalent units of production with respect to materials A and B in the ending work-in-
process inventory?
A. A, 4,800; B, 0.
B. A, 4,800; B, 4,800.
C. A, 6,000; B, 0.
D. A, 6,000; B, 4,800.
E. A, 6,000; B, 6,000.
#21 look at doc
...
Hampton Textile Co., manufactures a variety of fabrics. All materials are introduced at the beginning of
production; conversion cost is incurred evenly through manufacturing. The Weaving Department had
2,000 units of work in process on April 1 that were 30% complete as to conversion costs. During April,
9,000 units were completed and on April 30, 4,000 units remained in production, 40% complete with
respect to conversion costs.
22. The equivalent units of direct materials for April total:

A. 9,000.
B. 13,000.
C. 13,600.
D. 14,400.
E. 15,000.
Hampton Textile Co., manufactures a variety of fabrics. All materials are introduced at the beginning of
production; conversion cost is incurred evenly through manufacturing. The Weaving Department had
2,000 units of work in process on April 1 that were 30% complete as to conversion costs. During April,
9,000 units were completed and on April 30, 4,000 units remained in production, 40% complete with
respect to conversion costs.
The equivalent units of conversion for April total:

A. 9,000.
B. 10,600.
C. 11,200.
D. 12,000.
E. 12,600.
year total:
A. materials, 50,000; conversion, 50,000.
B. materials, 50,000; conversion, 4,500.
C. materials, 54,500; conversion, 54,500.
E. materials, 65,000; conversion, 65,000.
#25 look at doc
...
A. There is no ending work-in-process inventory.
B. The ending work-in-process inventory totaled 3,000 physical units.
C. The ending work-in-process inventory of 10,000 physical units was 30% complete.
D. The ending work-in-process inventory of 20,000 physical units was 85% complete.
E. More than one of the above could be true.
Total equivalent units of materials: 5,000

Total equivalent units of conversion: 4,400
Units started and completed during the period: 3,500
On the basis of this information, the ending work-in-process inventory's stage of completion is:
A. 40%.
B. 60%.
C. 70%.
D. 80%.
E. some other percentage not listed above.
Corruption, Inc., overstated the percentage of work completed with respect to conversion cost on the
ending work-in-process inventory. What is the effect of this overstatement on conversion-cost
equivalent units and physical units manufactured, respectively?
A. Overstated, overstated.
B. Overstated, understated.
C. Overstated, none.
D. None, overstated.
E. None, none.
Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following

A. 1, 2, 3, 4.
B. 1, 2, 4, 3.
C. 1, 4, 3, 2.
D. 2, 1, 4, 3.
E. 2, 1, 3, 4.
on:
A. only the current period's manufacturing costs.
B. only costs in the period's beginning work-in-process inventory.
period.
D. only costs incurred in previous accounting periods.
E. a summation of the costs in the beginning work-in-process inventory plus costs to be incurred in the
upcoming period.
When computing the conversion cost per equivalent unit under the weighted-average method of
process costing, all of the following information would be needed except:
A. the number of units completed during the current accounting period.
B. the conversion work performed during the current period on the ending work-in-process inventory.
C. the conversion work performed during the current period on the beginning work-in-process
inventory.
D. the conversion cost in the beginning work-in-process inventory.
E. the conversion cost incurred during the current accounting period.
#32 look at doc
...
A. $15.75.
B. $16.43.
C. $18.00.
D. $18.90.

34. Universal's equivalent-unit cost for materials is:

A. $4.50.
B. $6.00.
C. $8.00.
D. $9.60.
Universal's equivalent-unit cost for conversion cost is:

A. $13.71.
B. $18.00.
C. $21.00.
D. $25.20.
#36 doc
...
#37 doc
...
#38 doc
...

B. beginning work in process and units completed.
C. units sold and ending work in process.
D. cost of goods manufactured and beginning work in process.
E. cost of goods manufactured and cost of goods sold.
#40 doc
...
#41 doc
...
Using the weighted-average method of process costing, the cost per unit of direct materials is:
A. $1.17.
B. $1.18.
C. $1.20.
D. $1.28.
B
Using the weighted-average method of process costing, the cost per unit of conversion activity is:
A. $2.50.
B. $2.53.
C. $2.70.
D. $2.76.
Using the weighted-average method of process costing, the cost of goods completed and transferred
during May is:
A. $249,560.
B. $250,240.
C. $258,400.
D. $263,840.
Using the weighted-average method of process costing, the total costs remaining in work in process on
May 31 are:
A. $0.
B. $12,040.
C. $17,480.
D. $25,640.
46 doc
...
47 doc
...
48 doc
...
49 doc
...

B. Master schedule.
C. Production budget.
D. Sequential product report.
E. Materials requirement report.
A
Which of the following statements about operation costing is (are) true?
Conversion costs are accumulated by department.

Direct material costs are accumulated by batch.
Operation costing is a hybrid product-costing system.
A. I only.
B. I and II.
C. I and III.
D. II and III.
E. I, II, and III.
Operation costing:
A. tends to parallel job-order costing with respect to the treatment of conversion cost.
B. tends to parallel process costing with respect to the treatment of conversion cost.
C. tends to parallel process costing with respect to the treatment of direct materials.
D. would likely be used by a manufacturing plant that produces one model of a single product.
E. is commonly known as a joint-costing system.
53 doc
...
When determining the cost of a manufactured good under an operation-costing system, a company
would:
A. trace direct-material cost and actual conversion cost to each product produced.
B. trace direct-material cost to each product produced and use a predetermined application rate for
conversion cost.
C. trace actual conversion cost to each product produced and use a predetermined application rate for
direct material.
D. use a predetermined application rate for both direct-material cost and conversion cost.
E. often switch to a job-costing system to simplify recordkeeping procedures.
C. Conversion and transferred-in costs.
D
C. Transferred-in costs only.
Department no. 2 receives goods from Department no. 1, adds material, completes the units, and
transfers the units to Department no. 3 for final processing. The cost of goods completed by Department
no. 2 would include charges for:
A. direct materials.
B. conversion cost.
C. direct materials and conversion cost.
D. transferred-in costs.
E. transferred-in costs, direct materials, and conversion cost.
Consider the following statements regarding traditional costing systems:
I. Overhead costs are applied to products on the basis of volume-related measures.

II. All manufacturing costs are easily traceable to the goods produced.
III. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made
that have widely varying production requirements.

A. I only.
B. II only.
C. III only.
D. I and III.
E. II and III.
Many traditional costing systems:

A. trace manufacturing overhead to individual activities and require the development of numerous
activity-costing rates.
B. write off manufacturing overhead as an expense of the current period.
C. combine widely varying elements of overhead into a single cost pool.
D. use a host of different cost drivers (e.g., number of production setups, inspection hours, orders
processed) to improve the accuracy of product costing.
E. produce results far superior to those achieved with activity-based costing.
C
The following tasks are associated with an activity-based costing system:
1—Calculation of cost application rates

2—Identification of cost drivers
3—Assignment of cost to products
4—Identification of cost pools
A. 1, 2, 3, 4.
B. 2, 4, 1, 3.
C. 3, 4, 2, 1.
D. 4, 2, 1, 3.
E. 4, 2, 3, 1.
Which of the following is the proper sequence of events in an activity-based costing system?
A. Identification of cost drivers, identification of cost pools, calculation of cost application rates,
assignment of cost to products.
B. Identification of cost pools, identification of cost drivers, calculation of cost application rates,
C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation
of cost application rates.
D. Calculation of cost application rates, identification of cost drivers, identification of cost pools,
E. Some other sequence of the four activities listed above.
Which of the following tasks is not normally associated with an activity-based costing system?
A. Calculation of cost application rates.
B. Identification of cost pools.
C. Preparation of allocation matrices.
D. Identification of cost drivers.
E. Assignment of cost to products.
Which of the following is not a broad, cost classification category typically used in activity-based costing?
A. Unit-level.
B. Batch-level.
C. Product-sustaining level.
D. Facility-level.
E
In an activity-based costing system, direct materials used would typically be classified as a:
A. unit-level cost.
B. batch-level cost.
C. product-sustaining cost.
D. facility-level cost.
E. matrix-level cost.
Which of the following is least likely to be classified as a batch-level activity in an activity-based costing
system?
A. Shipping.
B. Receiving and inspection.
D. Property taxes.
E. Quality assurance.
n an activity-based costing system, materials receiving would typically be classified as a:

E. period-level activity.
Foster, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser
technology. The research and testing costs associated with the new ovens is said to arise from a:
E. competitive-level activity.
Consider the following statements regarding product-sustaining activities:
They must be done for each batch of product that is made.

They must be done for each unit of product that is made.
They are needed to support an entire product line.

A. I only.
B. II only.
C. III only.
D. I and II.
E. II and III.
Which of the following is least likely to be classified as a facility-level activity in an activity-based costing
system?
B. Property taxes.
D. Plant depreciation.
E. Plant management salaries.
The salaries of a manufacturing plant's management are said to arise from:

A. unit-level activities.
B. batch-level activities.
C. product-sustaining activities.
D. facility-level activities.
E. direct-cost activities.
14 doc
...
The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories
is commonly known as a cost:
A. object.
B. application method.
C. hierarchy.
D. estimation method.
E. classification scheme that is useful in traditional, volume-based systems.
Alamo's customer service department follows up on customer complaints by telephone inquiry. During a
recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls
were for the company's wholesale operation (the remainder were for the retail division), costs allocated
to the retail division should amount to:
A. $0.
B. $29.
C. $85,260.
D. $117,740.
E. $203,000.
D
17 doc
...
18 doc
...
19 doc
...
20 doc
...
21 doc
...
What is HiTech's cost application rate for the packaging activity?

A. $4.86 per machine hour.
B. $5.00 per labor hour.
C. $10.00 per unit.
D. $100.00 per order shipped.
E. A rate other than those listed above.
Under an activity-based costing system, what is the per-unit cost of Economy?

A. $141.
B. $164.
C. $225.
D. $228.
E. An amount other than those listed above.
Under an activity-based costing system, what is the per-unit cost of Standard?

A. $164.
B. $228.
C. $272.
D. $282.
Under an activity-based costing system, what is the per-unit cost of Deluxe?

A. $272.
B. $282.
C. $320.
D. $440.
Assume that HiTech is using a volume-based costing system, and the preceding manufacturing costs are
applied to all products based on direct labor hours. How much of the preceding cost would be assigned
to Deluxe?
A. $456,471.
B. $646,471.
C. $961,176.
D. $1,141,176.
Assume that HiTech is using a volume-based costing system, and the preceding manufacturing costs are
applied to all products based on direct labor hours. How much of the preceding cost would be assigned
to Standard?
A. $456,471.
B. $646,471.
C. $961,176.
D. $1,141,176.
28 doc
...
29 doc
...
The overhead cost allocated to product X by using activity-based costing procedures would be:
A. $120,000.
B. $184,500.
C. $215,500.
D. $280,000.
The overhead cost allocated to product Y by using activity-based costing procedures would be:
A. $120,000.
B. $184,500.
C. $215,500.
D. $280,000.
C
32 doc
...
If Kelly and Logan switched from its current accounting method to an activity-based costing system, the
amount of administrative cost chargeable to consulting services would:
A. decrease by $23,500.
B. increase by $23,500.
C. decrease by $32,500.
D. change by an amount other than those listed above.
E. change, but the amount cannot be determined based on the information presented.
Activity-based costing systems:

A. use a single, volume-based cost driver.
B. assign overhead to products based on the products' relative usage of direct labor.
C. often reveal products that were under- or overcosted by traditional costing systems.
D. typically use fewer cost drivers than more traditional costing systems.
E. have a tendency to distort product costs.
Dreyfus Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A
recent study of product no. 519 revealed a traditionally-derived total cost of $1,019, a selling price of
$1,850 based on that figure, and a newly computed activity-based total cost of $1,215. Which of the
following statements is true?
A. All other things being equal, the company should consider a drop in its sales price.
B. The company may have been extremely competitive in the marketplace from a price perspective.
C. Product no. 519 could be labeled as being overcosted by the firm's traditional costing procedures.
D. If product no. 519 is undercosted by traditional accounting procedures, then all of the company's
other products must be undercosted as well.
E. Generally speaking, the activity-based cost figure is "less accurate" than the traditionally-derived cost
figure.
Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to
products by using machine hours. Activity-based costing would likely show that with Vanguard's current
procedures,
A. all of the company's products are undercosted.
B. the company's high-volume products are undercosted.
C. all of the company's products are overcosted.
D. the company's high-volume products are overcosted.
E. the company's low-volume products are overcosted.
D
37 doc
...
38 doc
...
onsider the following statements:
Product diversity creates costing problems because diverse products tend to utilize manufacturing
activities in different ways.
Overhead costs that are not incurred at the unit level create costing problems because such costs do not
vary with traditional application bases such as direct labor hours or machine hours.
Product diversity typically exists when a single product (e.g., a ballpoint pen) is made in different colors.

A. I only.
B. II only.
C. I and II.
D. I and III.
Consumption ratios are useful in determining:

A. the existence of product-line diversity.
B. overhead that is incurred at the unit level.
C. if overhead-producing activities are being utilized effectively.
D. if overhead costs are being applied to products.
E. if overhead-producing activities are being utilized efficiently.
Widely varying consumption ratios:

A. are reflective of product-line diversity.
B. indicate an out-of-control production environment.
C. dictate a need for traditional costing systems.
D. work against the implementation of activity-based costing.
E. create an unsolvable product-costing problem.
Moon Bay Manufacturing uses machine hours to apply manufacturing overhead to products. This
method of costing would likely be acceptable if the company has:
A. a large proportion of unit-level activities.
B. a large proportion of unit-level activities and fairly identical consumption ratios among product lines.
C. a large proportion of unit-level activities and widely varying consumption ratios among product lines.
D. a large proportion of nonunit-level activities.
E. a large proportion of nonunit-level activities and fairly identical consumption ratios among product
lines.
In comparison with a system that uses a single, volume-based cost driver, an activity-based costing
system is preferred when a company has:
A. a large proportion of nonunit-level activities.
B. product-line diversity or a large proportion of nonunit-level activities.
C. minimal product-line diversity and a small proportion of nonunit-level activities.
D. existing variances from budgeted amounts.
E. a situation other than those noted above.
onsider the following factors:
The degree of correlation between consumption of an activity and consumption of a particular cost
driver.
The likelihood that a particular cost driver will induce a desired behavioral effect.
The likelihood that a particular cost driver will cause an increase in the cost of measurement.
Which of these factors should be considered in the selection of a cost driver?

A. I only.
B. I and II.
C. I and III.
D. II and III.
E. I, II, and III.
45 doc
...
Grossman Enterprises is converting to an activity-based costing system and needs to depict the various
activities in its manufacturing process along with the activities' relationships. Which of the following is a
possible tool that the company can use to accomplish this task?
A. Storyboards.
B. Activity relationship charts (ARCs).
C. Decision trees.
D. Simulation games.
E. Process organizers.
Successful adoptions of activity-based costing typically occur when companies rely heavily on:
A. finance personnel.
B. accounting personnel.
C. manufacturing personnel.
D. office personnel.
E. multidisciplinary project teams.
Under a traditional costing system, which of the following costs would likely be classified as indirect with
respect to the various products manufactured?
B. Factory supplies.
C. Utilities.
D. Machinery depreciation.
E. All of the above would be considered indirect costs.
Williams Corporation is changing from a traditional costing system to an activity-based system. As a

result of this action, which of the following costs would likely change from indirect to direct?
A. Direct materials.
B. Factory supplies.
D. Production setup and finished-goods inspection.
E. Production setup, finished-goods inspection, and product shipping.
Which of the following generally fails to signal the need for a new product-costing system?
A. Line managers do not believe reported product costs.
B. Complex products have high reported profitability despite the lack of premium prices.
C. Overhead rates are high and increasing over time.
D. Line managers suggest that seemingly profitable products be dropped.
E. Product-line profit margins are easy to explain.
Of the following organizations, activity-based costing cannot be used by:

A. manufacturers.
B. financial-services firms.
C. book publishers.
D. hotels.
E. none of the above, as all are able to use this costing system.
Which of the following statements about activity-based costing (ABC) is false?

A. ABC cannot be used by service businesses.
B. In comparison with traditional costing systems, ABC tends to use more cost pools and more cost
drivers.
C. In comparison with traditional-costing systems, ABC results in less cost "averaging" of various
diversified activities.
D. In comparison with traditional-costing systems, ABC results in more costs being classified as direct
costs.
E. ABC tends to reduce cost distortion among product lines.
A hospital administrator is in the process of implementing an activity-based-costing system. Which of

the following tasks would not be part of this process?
A. Identification of cost pools.
B. Calculation of cost application rates.
C. Assignment of cost to services provided.
D. Identification of cost drivers.
E. None of the above, as all these tasks would be part of the process.
The relationship between cost and activity is termed:

A. cost estimation.
B. cost prediction.
C. cost behavior.
D. cost analysis.
E. cost approximation.
Which of the following costs changes in direct proportion to a change in the activity level?
A. Variable cost.
B. Fixed cost.
C. Semivariable cost.
D. Step-variable cost.
E. Step-fixed cost.
#3 on bank
...
#4 on bank
...
Plaza Corporation observed that when 25,000 units were sold, a particular cost amounted to $70,000, or
$2.80 per unit. When volume increased by 15%, the cost totaled $80,500 (i.e., $2.80 per unit). The cost
that Plaza is studying can best be described as a:
A. variable cost.
B. fixed cost.
C. semivariable cost.
D. discretionary fixed cost.
E. step-fixed cost.
A company observed a decrease in the cost per unit. All other things being equal, which of the following
is probably true?
A. The company is studying a variable cost, and total volume has increased.
B. The company is studying a variable cost, and total volume has decreased.
C. The company is studying a fixed cost, and total volume has increased.
D. The company is studying a fixed cost, and total volume has decreased.
E. The company is studying a fixed cost, and total volume has remained constant.
Webster has the following budgeted costs at its anticipated production level (expressed in hours):
variable overhead, $150,000; fixed overhead, $240,000. If Webster now revises its anticipated
production slightly downward, it would expect:
A. total fixed overhead of $240,000 and a lower hourly rate for variable overhead.
B. total fixed overhead of $240,000 and the same hourly rate for variable overhead.
C. total fixed overhead of $240,000 and a higher hourly rate for variable overhead.
D. total variable overhead of less than $150,000 and a lower hourly rate for variable overhead.
E. total variable overhead of less than $150,000 and a higher hourly rate for variable overhead.
#8 on bank
...
When graphed, a typical variable cost appears as:

A. a horizontal line.
B. a vertical line.
C. a u-shaped line.
D. a diagonal line that slopes downward to the right.
E. a diagonal line that slopes upward to the right.
Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the
vertical axis representing per-unit cost and the horizontal axis representing units sold, how would a line
that depicts sales commissions be drawn?
A. As a straight diagonal line, sloping upward to the right.
B. As a straight diagonal line, sloping downward to the right.
C. As a horizontal line.
D. As a vertical line.
E. As a curvilinear line.
C
When graphed, a typical fixed cost appears as:
A. a horizontal line.
B. a vertical line.
C. a u-shaped line.
D. a diagonal line that slopes downward to the right.
E. a diagonal line that slopes upward to the right.
Costs that remain the same over a wide range of activity, but jump to a different amount outside that
range, are termed:
A. step-fixed costs.
B. step-variable costs.
C. semivariable costs.
D. curvilinear costs.
E. mixed costs.
Straight-line depreciation is a typical example of a:

A. variable cost.
B. step-variable cost.
C. fixed cost.
D. mixed cost.
E. curvilinear cost.
#14 on bank
...
Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity
amounted to $50,000; variable costs were $100,000. How much cost would the company anticipate if
during the next period it produced and sold 102,000 units?
A. $150,000.
B. $151,000.
C. $152,000.
D. $153,000.
E. Some other amount not listed above.
Extron, Inc., has only variable costs and fixed costs. A review of the company's records disclosed that
when 100,000 units were produced, fixed manufacturing costs amounted to $200,000 and the cost per
unit manufactured totaled $5. On the basis of this information, how much cost would the firm anticipate
at an activity level of 97,000 units?
A. $485,000.
B. $491,000.
C. $494,000.
D. $500,000.
A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable
and fixed cost per unit amounted to $8 and $4, respectively. On the basis of this information, what
amount of total cost would Parry anticipate at a volume of 85,000 units?
A. $1,020,000.
B. $1,040,000.
C. $1,060,000.
D. $1,080,000.
Each of Davidson's production managers (annual salary cost, $45,000) can oversee 60,000 machine
hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one
manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are
needed; and so forth. Davidson's salary cost can best be described as a:
A. variable cost.
B. semivariable cost.
C. step-variable cost.
D. fixed cost.
E. step-fixed cost.
A cost that has both a fixed and variable component is termed a:

A. step-fixed cost.
B. step-variable cost.
C. semivariable cost.
D. curvilinear cost.
E. discretionary cost.
A mixed cost is often known as a:

A. semivariable cost.
B. step-fixed cost.
C. variable cost.
D. curvilinear cost.
E. discretionary cost.
Richard Hamilton has a fast-food franchise and must pay a franchise fee of $35,000 plus 3% of gross
sales. In terms of cost behavior, the fee is a:
A. variable cost.
B. fixed cost.
C. step-fixed cost.
D. semivariable cost.
E. curvilinear cost.
Which of the following are examples of a mixed cost?
A building that is used for both manufacturing and sales activities.

An employee's compensation, which consists of a flat salary plus a commission.
Depreciation that relates to five different machines.
Maintenance cost that must be split between sales and administrative offices.
A. I only.
B. II only.
C. I and III.
D. I, III, and IV.
E. I, II, III, and IV.
Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range
of activity?
A. Semivariable cost.
B. Curvilinear cost.
C. Step-fixed cost.
D. Step-variable cost.
E. Fixed cost.
The relevant range is that range of activity:

A. where a company achieves its maximum efficiency.
B. where units produced equal units sold.
C. where management expects the firm to operate.
D. where the firm will earn a profit.
E. where expected results are abnormally high.
Within the relevant range of activity, costs:

A. can be estimated with reasonable accuracy.
B. can be expected to change radically.
C. exhibit decreasing marginal cost patterns.
D. exhibit increasing marginal cost patterns.
E. cannot be estimated satisfactorily.
A
Within the relevant range, a curvilinear cost function can sometimes be graphed as a:
A. straight line.
B. jagged line.
C. vertical line.
D. curved line.
E. horizontal line.
#27 on bank
...
A variable cost that has a definitive physical relationship to the activity measure is called a(n):
A. discretionary cost.
B. engineered cost.
C. managed cost.
D. programmed cost.
E. committed cost.
Costs that result from an organization's ownership or use of facilities and its basic organizational
structure are termed:
A. discretionary fixed costs.
B. committed fixed costs.
C. discretionary variable costs.
D. committed variable costs.
E. engineered costs.
Property taxes are an example of a(n):

A. committed fixed cost.
B. committed variable cost.
C. discretionary fixed cost.
D. discretionary variable cost.
E. engineered cost.
Which of the following is not an example of a committed fixed cost?

A. Property taxes.
B. Depreciation on buildings.
C. Salaries of management personnel.
D. Outlays for advertising programs.
E. Equipment rental costs.
D
Committed fixed costs would include:

A. advertising.
B. research and development.
C. depreciation on buildings and equipment.
D. contributions to charitable organizations.
E. expenditures for direct labor.
Amounts spent for charitable contributions are an example of a(n):

A. committed fixed cost.
B. committed variable cost.
C. discretionary fixed cost.
D. discretionary variable cost.
E. engineered cost.
Which of the following would not typically be classified as a discretionary fixed cost?
A. Equipment depreciation.
B. Employee development (education) programs.
C. Advertising.
D. Outlays for research and development.
E. Charitable contributions.
#35 on bank
...
#36 on bank
...
High-tech automation combined with a downsizing of a company's hourly labor force often results in:
A. increased fixed costs and increased variable costs.
B. increased fixed costs and reduced variable costs.
C. reduced fixed costs and increased variable costs.
D. reduced fixed costs and reduced variable costs.
E. increased discretionary fixed costs and reduced committed fixed costs.
Which of the following techniques is not used to analyze cost behavior?

A. Least-squares regression.
B. High-low method.
C. Visual-fit method.
D. Linear programming.
E. Multiple regression.
The high-low method and least-squares regression are used by accountants to:
A. evaluate divisional managers for purposes of raises and promotions.
B. choose among alternative courses of action.
C. maximize output.
D. estimate costs.
E. control operations.
Which of the following statements about the visual-fit method is (are) true?
The method results in the creation of a scatter diagram.

The method is not totally objective because of the manner in which the cost line is determined.
The method is especially helpful in the determination of outliers.
A. I only.
B. II only.
C. I and II.
D. I and III.
E. I, II, and III.
The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the:
A. least-squares regression method.
B. high-low method.
C. visual-fit method.
D. account analysis method.
E. multiple regression method.
Which of the following methods of cost estimation relies on only two data points?
B. The high-low method.
C. The visual-fit method.
D. Account analysis.
E. Multiple regression
43. Swanson's variable cost per copy is:

A. $0.040.
B. $0.051.
C. $0.053.
D. $0.056.
E. an amount other than those given above.
Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee
each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in
March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze
costs.
Swanson's monthly fixed fee is:
A. $80.
B. $102.
C. $106.
D. $112.
E. an amount other than those given above.
#45 on bank
...
#46 on bank
...
#47 on bank
...
Hitchcock, Inc., uses the high-low method to analyze cost behavior. The company observed that at
12,000 machine hours of activity, total maintenance costs averaged $7.00 per hour. When activity
jumped to 15,000 machine hours, which was still within the relevant range, the average cost per
machine hour totaled $6.40. On the basis of this information, the variable cost per machine hour was:
A. $4.00.
B. $6.40.
C. $6.70.
D. $7.00.
E. an amount other than those listed above.
Northridge, Inc., uses the high-low method to analyze cost behavior. The company observed that at
20,000 machine hours of activity, total maintenance costs averaged $10.50 per hour. When activity
jumped to 24,000 machine hours, which was still within the relevant range, the average cost per
machine hour totaled $9.75. On the basis of this information, the company's fixed maintenance costs
were:
A. $24,000.
B. $90,000.
C. $210,00.
D. $234,000.
E. an amount other than those listed above.
#50 on bank
...
51 on bank
...
52 on bank
...
53 on bank
...
In regression analysis, the variable that is being predicted is known as the:

A. independent variable.
B. dependent variable.
C. explanatory variable.
D. interdependent variable.
E. functional variable.
55 on bank
...
Checkers Corporation, which uses least-squares regression analysis, has derived the following regression
equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following
statements is true if the primary cost driver is machine hours?
A. Total manufacturing overhead is represented by the variable "X."
B. The company anticipates $495,000 of fixed manufacturing overhead.
C. "X" is commonly known as the dependent variable.
D. "X" represents the number of machine hours.
E. Both "B" and "D" are true.
Boulder, Inc., recently conducted a least-squares regression analysis to predict selling expenses. The
company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following
statements is false if the primary cost driver is number of units sold?
A. The company anticipates $329,000 of fixed selling expenses.
B. "Y" represents total selling expenses.
C. The company expects both variable and fixed selling expenses.
D. For each unit sold, total selling expenses will increase by $7.80.
E. "X" represents the number of hours worked during the period.
58 on bank
...
Waller Enterprises has determined that three variables play a key role in determining company
revenues. To arrive at an objective forecast of revenues for the next accounting period, Waller should
use:
A. simple regression.
B. multiple regression.
C. a scatter diagram.
D. complex regression.
E. the high-low method.
Which of the following tools is not associated with cost estimation?

B. Multiple regression.
C. Inversion equations.
D. Time and motion (engineering) studies.
E. Learning curves.
A staff assistant at Washington Corporation recently determined that the first four units completed in a
new manufacturing process took 800 hours to complete, or an average of 200 hours per unit. The
assistant also found that when the cumulative output produced doubles, the average labor time
declines by 20%. On the basis of this information, how many total hours would Washington use if it
produces 16 units?
A. 128.
B. 160.
C. 1,280.
D. 2,048.
Which of the following is not an issue in the collection of data for cost estimation?
A. Outliers.
B. Missing data.
C. Mismatched time periods.
D. Inflation.
E. All of the above are issues in data collection.
E
A high R2 measure in regression analysis is preferred because:

A. it indicates a good fit of the regression line through the data points.
B. it shows that a great deal of the change in the dependent variable is explained by change in the
independent variable.
C. it means that the independent variable is a good predictor of the dependent variable.
D. it means that the cost analyst can be relatively confident in his or her cost predictions.
E. all of the preceding statements are true.

Cost Accounting Test Bank

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cost Accounting Test Bank

Uploaded by

Copyright:

Available Formats

Which of the following statements is true?

Product costs are:

Which of the following is a product cost?

Which of the following would not be classified as a product cost?

Which of the following is a period cost?

Which of the following is not a period cost?

Companies that engage in mass customization:

Which of the following employees would not be classified as indirect labor?

Depreciation of factory equipment would be classified as:

Which of the following costs is not a component of manufacturing overhead?

The accounting records of Westcott Company revealed the following costs:

Costs that would be considered in the calculation of manufacturing overhead total:

Which of the following statements is (are) correct?

Conversion costs are:

Prime costs are comprised of:

Which of the following statements is true?

Work-in-process inventory is composed of:

The accounting records of Bronco Company revealed the following information:

Bronco's cost of goods manufactured is:

he accounting records of Dolphin Company revealed the following information:

Dolphin's cost of goods sold is:

Variable costs are those costs that:

As activity decreases, unit variable cost:

Which of the following is not an example of a variable cost?

Fixed costs are those costs that:

The fixed cost per unit:

Which of the following is an example of a fixed cost?

Which of the following would not be characterized as a cost object?

Costs that can be easily traced to a specific department are called:

A=Acceptable NA=Not Acceptable

Look at doc for rest

Consider the following cost items:

1. Sales commissions earned by a company's sales force.

A. Commissions paid to salespeople

1. Direct materials used in production

Process costing is used to account for:

D. A builder of customized yachts.

Process costing would be used in all of the following industries except:

Companies that use a process-cost accounting system would:

In a process-costing system, manufacturing costs are accumulated by:

E. department or process, and time period. not by batch

Unit costs in a process-costing system are derived by using:

A. 3,000 physical units in production.

B. Units completed during the period, work-to-date on ending work in process.

C. Materials, 100%; conversion cost, 40%

D. materials, 65,000; conversion, 54,500.

Upgrade to remove adverts

Total equivalent units of materials: 5,000

1—Calculation of equivalent units

Equivalent-unit calculations are necessary to allocate manufacturing costs between:

A. units completed and ending work in process.

Which of the following is a key document in a typical process-costing system?

A. Departmental production report.

D. Direct material and conversion costs

E. Direct material, conversion, and transferred-in costs.

Consider the following statements regarding traditional costing systems:

1. Overhead costs are applied to products on the basis of volume-related measures.

Which of the above statements is (are) true?

Upgrade to remove adverts

The following tasks are associated with an activity-based costing system:

1—Calculation of cost application rates

In an activity-based costing system, direct materials used would typically be classified as a:

In an activity-based costing system, materials receiving would typically be classified as a: