QUESTION 1:

Wages paid to a timekeeper in a factory are a:

O Prime Cost YES.....Conversion Cost NO
O Prime Cost YES.....Conversion Cost YES
O Prime Cost NO....Conversion Cost NO
O Prime Cost NO.....Conversion Cost YES


QUESTION 2:
cost incurred in the past that is not relevant to any current decision is classified as a(n):

O period cost.
O opportunity cost.
O sunk cost.
O differential cost.


QUESTION 3:
nventoriable costs are also known as:
O variable costs
O conversion costs
O product costs
O fixed costs


QUESTION 4:
When the activity level is expected to decline within the relevant range, what effects would be anticipated
with respect to each of the following?

O Fixed Costs per Unit ncrease and Variable Costs per Unit ncrease
O Fixed Costs per Unit ncrease and Variable Costs per Unit do not change
O Fixed Costs per Unit do not change and Variable Costs per Unit do not change
O Fixed Costs per Unit do not change and Variable Costs per Unit ncrease


QUESTION 5:
When manufacturing overhead is applied to production, it is added to:

O the Cost of Goods Sold account
O the Raw Materials account
O the Work in Process account
O the Finished Goods inventory account


QUESTION 6:
Which of the following statements about process costing system is incorrect?

O n a process costing system, each processing department has a work in process account
O n a process costing system, equivalent units are separately computed for materials and for
conversion costs
O n a process costing system, overhead can be under- or overapplied just as in job-order costing
O n a process costing system, materials costs are traced to units of products



QUESTION 7:
The weighted-average method of process costing differs from the FFO method of process costing in that
the weighted-average method:

O can be used under any cost flow assumption
O does not require the use of predetermined overhead rates
O keeps costs in the beginning inventory separate from current period costs
O does not consider the degree of completion of units in the beginning work in process inventory
when computing equivalent units of production


QUESTION 8:
The contribution margin ratio always increases when the:

O break-even point increases
O break-even point decreases
O variable expenses as a percentage of net sales decreases
O variable expenses as a percentage of net sales increases


QUESTION 9:
Which of the following would not affect the break-even point?

O total variable expenses
O selling price per unit
O variable expenses per unit
O total fixed expenses


QUESTION 10:
Under variable costing:

O net operating income will tend to move up and down in response to changes in levels of
production
O inventory costs will be lower than under absorption costing
O net operating income will tend to vary inversely with production changes
O net operating income will always be higher than under absorption costing


QUESTION 11:
The following data (in thousands of dollars) have been taken from the accounting records of [COMPNY]
for the just completed year.

Sales $820
Purchases of raw materials $180
Direct labor $130
Manufacturing overhead $200
dministrative expenses $180
Selling expenses $140
Raw materials inventory, beginning $60
Raw materials inventory, ending $20
Work in process inventory, beginning $50
Work in process inventory, ending $20
Finished goods inventory, beginning $110
Finished goods inventory, ending $150

Required: Prepare a Schedule of Cost of Goods Manufactured statement.

3807:
Direct materials:
eginning raw materials inventory $60
dd: Purchases of raw materials $180
$240
Deduct: Ending raw materials inventory $20
Raw material used in production $220
Direct labor $130
Manufacturing overhead:
Manufacturing overhead $200

Total Overhead cost $200
Total manufacturing cost $550
dd: eginning work in process inventory $50
$550
Deduct: Ending work in process inventory, $20
Cost of goods manufactured $530




QUESTION 12:
The [COMPNY] manufactures a product that goes through three processing departments. nformation
relating to activity in the first department during June is given below:

Percent completed
Units Materials Conversion
Work in process, June 1 40,000 65% 45%
Work in process, Jun 30 35,000 75% 65%

The department started 175,000 units into production during the month and transferred 180,000
completed units to the next department.

REQURED: Compute the equivalent units of production for the first department for June, assuming that
the company uses the weighted-average method of accounting for units and costs.



QUESTION 13:
tile manufacturer has supplied the following data:

oxes of tile produced and sold 580,000
Sales revenue $2,842,000
Variable manufacturing expense $1,653,000
Fixed manufacturing expense $784,000
Variable selling and admin expense $145,000
Fixed selling and admin expense $128,000
Net operating income $132,000

Required:
a. Calculate the company's unit contribution margin
b. Calculate the company's unit contribution ratio
c. f the company increases its unit sales volume by 5% without increasing its fixed expenses, what would
the company's net operating income be?
Calculate unit contribution margin, contribution ratio, unit sales increase of 5%

3807:
Your contribution margin is determined by creating a contribution income statement which is a normal
income statement that subtracts variable costs from sales to get your contribution margin. The format is
as follows:

Sales Revenue
-Variable Costs
= Contribution Margin
-Fixed Costs
= Net Operating ncome

oxes of tile produced and sold 580,000
Sales revenue $2,842,000
-Variable manufacturing expense $1,653,000
-Variable selling and admin expense $145,000
= Contribution Margin
-Fixed manufacturing expense $784,000
-Fixed selling and admin expense $128,000
Net operating income $132,000

The formula to calculate unit contribution margins is contribution margin / units produced & sold

f the company increases its unit sales volume by 5% without increasing its fixed expenses, what would
the company's net operating income be?
Calculate unit contribution margin, contribution ratio, unit sales increase of 5%

To determine how a change in sales will change net operating income, you can use the contribution
margin ration you just calculated in the previous step. The CM ratio just tells you how much of each
dollar of sales "contributes to covering your fixed costs.

So you'd use the formula...Profit = CM ratio x Sales fixed costs

your example says that fixed costs don't change so you can simplify the formula to
Profit = CM ratio x Sales



QUESTION 14:
The [COMPNY] produces and sells a single product. The following data refer to the year just
completed:

Selling Price $350
Units in beginning nventory 0
Units Produced 20000
Units sold 19000
Variable Costs per unit:
Direct materials $190
Direct labor $40
Variable manufacturing overhead $25
Variable selling and admin $10
Fixed Costs:
Fixed manufacturing overhead $250,000
Fixed selling and admin $225,000

ssume that direct labor is a variable cost.

Required:
a. Compute the cost of a single unit of product under both the absorption costing and variable costing
approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
Compute the cost of a single unit of product under both the absorption costing and variable costing
approaches. Prepare income statement using absorption and variable costing.

bsorption Costing ncome Statement

Sales
-Cost of Goods Sold
= Gross Margin
-Selling, General, & dmin Costs
= Net ncome/Loss

Variable Costing ncome Statement
Sales
-Variable Cost of Goods Sold
-Variable Selling/dmin Costs
= Contribution Margin
-Fixed Manufacturing Overhead
-Fixed Selling/dmin Costs
=Net ncome/Loss