1. The way of doing business whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is:
A. Total quality management.
B. Managerial accounting.
C. Customer orientation.
D. Continuous improvement.
E. Lean business model.
2. The following costs are included in a recent summary of data for a company: advertising expense, $85,000; depreciation expense – factory building, $133,000; direct labor, $250,000; direct material used, $300,000; factory utilities, $105,000; and sales salaries expense, $150,000. Determine the dollar amount of prime costs.
3. Which of the following costs would not be classified as factory overhead?
A. Property taxes on maintenance machinery.
B. Expired insurance on factory equipment.
C. Wages of the factory janitor.
D. Metal doorknobs used on wood cabinets produced.
E. Small tools used in production.
4. Product costs:
A. Are expenditures necessary and integral to finished products.
B. Are expenditures identified more with a time period rather than with finished products.
C. Include selling and administrative expenses.
D. Are only costs that vary with the volume of activity.
E. Are only costs that do not vary with the volume of activity.
5. Products that have been completed and are ready to be sold by the manufacturer are called:
A. Finished goods inventory.
B. Goods in process inventory.
C. Raw materials inventory.
D. Cost of goods sold.
E. Factory supplies.
6. Which one of the following items is normally not a manufacturing cost?
A. Direct materials.
B. Factory overhead.
C. General and administrative expenses.
D. Direct labor.
E. Conversion cost.
7. The beginning and ending finished goods inventories of the Prize Ring manufacturing company were $75,000 and $73,000 respectively. If cost of goods sold equaled $66,000, what is the amount of cost of goods manufactured for this period?
8. Use the following information from Hardy Co. for the current year:
Hardy Co.’s cost of goods manufactured for the current year is:
9. Use the following information for Acme, Inc., as of December 31
What is the total amount of manufacturing costs added to Goods In Process?
10. Job order costing systems normally use:
A. Periodic inventory systems.
B. Perpetual inventory systems.
C. Real inventory systems.
D. General inventory systems.
E. All of the above.
11. A document in a job order cost accounting system that is used to record the costs of producing a job is a(n):
A. Job cost sheet.
B. Job lot.
C. Finished goods summary.
D. Process cost system.
E. Units-of-production sheet.
12. A perpetual record of a raw materials item that records data on the quantity and cost of units purchased, units issued for use in production, and units that remain in the raw materials inventory is called a(n):
A. Materials ledger card.
B. Materials requisition.
C. Purchase order.
D. Materials voucher.
E. Purchase ledger.
13. During last period, a company’s overhead rate was 150% of direct labor cost. This caused factory overhead to be $10,000 overapplied. Use the following incomplete accounts to determine the cost of goods manufactured:
14. Penn Company uses a job order cost accounting system. In the last month, the system accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect labor. These costs were accumulated in Factory Payroll as they were paid. Which entry should Penn make to assign the Factory Payroll?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
15. BVD Company uses a job order cost accounting system and last period incurred $80,000 of overhead and $100,000 of direct labor. BVD estimates that its overhead next period will be $75,000. It also expects to incur $100,000 of direct labor. If BVD bases applied overhead on direct labor cost, their overhead application rate for the next period should be:
16. Austin Company uses a job order cost accounting system. The company’s executives estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that factory overhead would be $1,500,000 for the current period. At the end of the period, the records show that there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate?
A. $6.00 per direct labor hour.
B. $7.50 per direct labor hour.
C. $6.67 per direct labor hour.
D. $8.33 per direct labor hour.
E. $7.08 per direct labor hour.
17. The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how much direct materials cost was incurred in producing these units?
18. An expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period is called:
A. Manufacturing overhead.
B. Units in process.
C. A job cost sheet.
D. Equivalent units of production.
E. Process cost summary.
19. A system of accounting in which the costs of each process are accumulated separately and then assigned to the units of product that passed through the process is a:
A. General cost accounting system.
B. Process cost accounting system.
C. Job order cost accounting system.
D. Manufacturing cost accounting system.
E. Goods in process accounting system.
20. Direct material costs are recorded:
A. Indirectly to Goods in Process account.
B. Indirectly to a Finished Goods account.
C. Directly to a Goods in Process account.
D. Directly to a Finished Goods account.
E. Directly to a Cost of Goods Sold account.
21. The purchase of raw materials on account in a process costing system is recorded with a:
A. Debit to Purchases and credit to Cash.
B. Debit to Purchases and a credit to Accounts Payable.
C. Debit to Raw Materials Inventory and a credit to Accounts Payable.
D. Debit to Accounts Payable and a credit to Raw Materials Inventory.
E. Debit to Goods in Process Inventory and a credit to Accounts Payable.
22. Houston Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Houston had $125,000 of direct labor cost, and in the Finishing Department, Houston had $35,000 of direct labor cost. The entry to apply overhead to these production departments is:
23. The following data are available for a company’s manufacturing activities:
Assume the company uses the weighted-average inventory method. If materials are added when the production process begins and direct labor is applied uniformly throughout the process, what are the equivalent units for direct materials and for direct labor, respectively?
A. 21,000; 23,000
B. 26,000; 19,250
C. 21,000; 19,250
D. 26,000; 23,000
24. The Filtering Department started the current month with beginning goods in process inventory of $55,000. During the month, it was assigned the following costs: direct materials, $77,000; direct labor, $44,000; and factory overhead, 20% of direct material cost. Also, inventory with a cost of $66,000 was transferred out of the department to the next phase in the process. The ending balance of the Goods in Process Inventory account for the Filtering Department is:
25. The following is an account for a production department, showing its costs for one month:
Assume that materials are added at the beginning of the production process and that direct labor and overhead are applied uniformly. If the units in ending goods in process inventory cost $4,590, and the started and completed units cost $41,850, what was the cost of completing the units in the beginning goods in process inventory?
26. A method of assigning overhead costs to a product using a single overhead rate is:
A. Plantwide overhead rate method.
B. Cost pool overhead rate method.
C. Departmental overhead rate method.
D. Activity-based costing.
E. Overhead cost allocation method.
27. Overhead costs:
A. Are directly related to production.
B. Can be traced to units of product in the same way that direct materials can.
C. Cannot be traced to units of product in the same way that direct labor can.
D. Are period costs.
E. Include only fixed costs.
28. From an ABC perspective, what causes costs to be incurred?
A. Financial transactions.
B. The volume of units produced.
C. Debits and credits.
D. Management decisions.
29. Which of the following is true?
A. Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.
B. The departmental overhead rate is not usually based on measures closely related to production volume.
C. The departmental overhead rate is most accurate in assigning overhead costs that are not driven by production volume.
D. Allocated overhead costs will be the same no matter which allocation method is used.
E. When cost analysts are able to logically trace cost objects to costs, costing accuracy is improved.
30. A cost that remains constant over a limited range of volume but increases by a lump sum when volume increases beyond a maximum amount is a(n):
A. Step-wise cost.
B. Fixed cost.
C. Curvilinear cost.
D. Incremental cost.
E. Opportunity cost.
31. A term describing a firm’s normal range of operating activities is:
A. Relevant range of operations.
B. Break-even level of operations.
C. Margin of safety of operations.
D. Relevant operating analysis.
E. High-low level of operations.
32. Mueller Corp. manufactures compact discs that sell for $5. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller’s break-even point in units?
A. 4,444 unit increase.
B. 9,850 unit decrease.
C. 5,714 unit increase.
D. 4,444 unit decrease.
E. No effect on the break-even point in units.
33. A company wishes to earn a pretax income equal to 35% of total fixed costs. Its product sells for $50.75 per unit. Total fixed costs equal $156,800 and variable costs per unit are $32.50. How many units must this company sell to meet its goal? (Round answer to complete units.)
34. A statistical method for deriving an estimated line of cost behavior is the:
A. Scatter diagram method.
B. High-low method.
C. Composite method.
D. CVP charting method.
E. Least-squares regression method.
35. Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months:
Using the high-low method and the Willco data, calculate the variable maintenance cost per machine hour (round to three decimal places).
36. A company’s product sells at $12 per unit and has a $5 per unit variable cost. The company’s total fixed costs are $98,000. The break-even point in units is:
37. A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company’s break-even point in dollar sales?
38. Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:
39. A CVP graph presents data on:
A. Profit and loss on a unit basis.
B. Profit, loss, and break-even on a total basis.
C. Profit, loss, and break-even on a unit basis.
D. Only profit and loss on a total basis.
E. Profit and loss on a budget and actual basis.
40. A cost-volume-profit chart is also known as a(n)
A. Operating profit chart.
B. Operating leverage chart.
C. Break-even chart.
D. Margin of safety chart.
E. Sales chart.