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# 1.

## The fixed cost per unit:

will increase as activity increases.

will increase as activity decreases and will decrease as activity increases.

will decrease as activity increases.

will remain constant.

will increase as activity decreases.

[The following information applies to the questions displayed below.]

Finished goods inventory, January 1, 2011 \$ 31,000
Finished goods inventory, December 31,
2011
\$ 25,800

2. If the cost of goods manufactured for the year was \$402,000, what was the
cost of goods sold for the year?

\$412,400.

None of these.

\$407,200.

\$417,600.

\$402,000.
3. If the cost of goods sold for the year was \$431,000, what was the cost of goods
manufactured for the year?

\$420,600.

\$431,000.

\$425,800.

\$403,900.

None of these.

[The following information applies to the questions displayed below.]

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 13,100 units and 22,800 units, respectively,
with the latter units being 2/3 complete at the end of the period. Universal started
35,600 units into production and completed 25,900 units. Manufacturing costs
follow.
Beginning work in process: Materials, \$67,800; conversion cost, \$158,000
Current costs: Materials, \$211,000; conversion cost, \$524,000

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

\$4.22.

\$7.72.

\$5.72.

None of these.

\$9.32.
5. Universal's equivalent-unit cost for conversion cost is:

\$19.59.

None of these.

\$12.30.

\$16.59.

\$23.79.

6. Which of the following is least likely to be classified as a batch-level activity in
an activity-based costing system?

Production setup.

Property taxes.

Shipping.

Quality assurance.

Receiving and inspection.
7. Aglow 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 50% complete. The firm's ending work-in-process inventory consists
of 4,000 units that are 75% 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, 4,000; B, 4,000.

A, 3,000; B, 3,000.

A, 4,000; B, 3,000.

A, 4,000; B, 0.

A, 3,000; B, 0.

8. A custom-home builder would likely utilize:

process costing.

mass customization.

process budgeting.

job-order costing.

joint costing.
9. Airstream builds recreational motor homes. All of the following activities add
value to the finished product except:

installation of carpet.

storage of the vehicle in the sales area.

assembly of the frame to the chassis.

final painting and polishing.
10. If a company sells goods that cost \$41,000 for \$54,800, the firm will:

reduce Finished-Goods Inventory by \$54,800.

reduce Cost of Goods Sold by \$41,000.

report sales revenue on the balance sheet of \$54,800.

follow more than one of the above procedures.

reduce Finished-Goods Inventory by \$41,000.
11. Which of the following statements about 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.

II and III.

I, II, and III.

I and III.

III only.

I only.
12. Job no. C12 was completed in November at a cost of \$50,900, subdivided as
follows: direct material, \$23,400; direct labor, \$11,000; and manufacturing
overhead, \$16,500. The journal entry to record the completion of the job is:
Cost of goods sold 50,900
Finished-goods
inventory
50,900

Finished-goods
inventory
50,900
Work-in-process
inventory
50,900

Work-in-process
inventory
50,900
Wages payable 11,000
Raw-material
inventory
23,400
Manufacturing
16,500

Finished-goods
inventory
50,900
Cost of goods
sold
50,900

Work-in-process
inventory
50,900
Finished-goods
inventory
50,900

13. Glass Industries reported the following data for the year just ended: sales
revenue, \$1,750,000; cost of goods sold, \$980,000; cost of goods manufactured,
\$560,000; and selling and administrative expenses, \$170,000. Glass' gross
margin would be:

\$940,000.

\$1,020,000.

\$380,000.

\$1,190,000.

\$770,000.

14. Product costs are:

expensed when incurred.

treated in the same manner as period costs.

treated in the same manner as advertising costs.

inventoried.

subtracted from cost of goods sold.
15. Equivalent-unit calculations are necessary to allocate manufacturing costs
between:

cost of goods manufactured and cost of goods sold.

units sold and ending work in process.

units completed and ending work in process.

beginning work in process and units completed.

cost of goods manufactured and beginning work in process.
16. 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:

was accounting for the usage of direct materials.

also recorded a credit to Manufacturing Supplies Inventory.

was accounting for the usage of indirect materials.

also recorded a credit to Raw-Material Inventory.

also recorded a credit to Raw-Material Inventory and was accounting for the usage of direct materials.
17. The following information relates to October:
Production supervisor's salary: \$3,700
Factory maintenance wages: 259 hours at \$ 10 per hour
The journal entry to record the preceding information is: Answer D

Wages payable 6,290

Work-in-process
inventory
6,290
Wages payable 6,290

Wages payable 6,290

Work-in-process inventory 3,700
Wages payable 6,290

Wages payable 6,290
Work-in-process inventory 6,290

18.

18. Which of the following activity cost pools and activity measures likely has the
lowest degree of correlation?

A
B
C
D
E

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

in-process units.

equivalent units.

completed units.

physical units.
20. Which of the following inventories would a discount retailer such as Wal-Mart
report as an asset?

Finished goods.

All of the other answers are correct.

Work in process.

Merchandise inventory.

Raw materials.
21. 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 machine hours: 20,000
Actual machine hours: 16,000

\$ 600,000.

\$ 550,000.

\$ 384,000.

some other amount.

\$ 352,000.
22. Aladin's customer service department follows up on customer complaints by
telephone inquiry. During a recent period, the department initiated 16,000 calls
and incurred costs of \$400,000. If 3,430 of these calls were for the company's
wholesale operation (the remainder were for the retail division), costs allocated to
the wholesale operation under activity-based costing system should amount to:

\$85,750.

\$0.

\$25.

\$400,000.

\$314,250.
23. The estimates used to calculate the predetermined overhead rate will virtually
always:

result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

prove to be correct.

result in a year-end balance of zero in the Manufacturing Overhead account.

result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
24. The accounting records of Reynolds Corporation revealed the following
selected costs: Sales commissions, \$66,000; plant supervision, \$280,000; and
administrative expenses, \$197,000. Reynolds's period costs total:

\$477,000.

\$263,000.

\$197,000.

\$543,000.

\$346,000.
25. The accounting records of Bronco Company revealed the following
information:

Bronco's cost of goods manufactured is:

\$522,000.

\$519,000.

\$571,000.

None of the other answers are correct.

\$568,000.
26. Activity-based costing systems have a tendency to distort product costs.

27. 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?

None of these, because service providers do not apply overhead to jobs.

(Budgeted compensation budgeted overhead) budgeted compensation cost on the job.

(Budgeted overhead budgeted compensation) budgeted compensation cost on the job.

(Budgeted compensation budgeted overhead) actual compensation cost on the job.

(Budgeted overhead budgeted compensation) actual compensation cost on the job.
28. The following tasks are associated with an activity-based costing system:

1 Assignment of cost to products
2 Calculation of pool rates
3 Identification of cost drivers
4 Identification of cost pools

True

False
Which of the following choices correctly expresses the proper order of the

4, 3, 2, 1.

2, 4, 1, 3.

4, 2, 1, 3.

3, 4, 2, 1.

1, 2, 3, 4.
29. Michaella, Inc. uses a process-costing system. A newly-hired accountant
identified the following procedures that must be performed by the close of

1Calculation of equivalent units
2Analysis of physical flows of units
3Assignment of costs to completed units and units still in process
4Calculation of unit costs

Which of the following choices correctly expresses the proper order of the

1, 4, 3, 2.

1, 2, 3, 4.

2, 1, 3, 4.

1, 2, 4, 3.

2, 1, 4, 3.

30. Serina Manufacturing recently sold goods that cost \$35,000 for \$45,000 cash.
The journal entries to record this transaction would include:

a debit to Finished-Goods Inventory for \$35,000.

a credit to Profit on Sale for \$10,000.

a credit to Work-in-Process Inventory for \$35,000.

a debit to Sales Revenue for \$45,000.

a credit to Sales Revenue for \$45,000.

31. 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 11,100 units during the period
and these units were 50% of the way through manufacturing, it would be correct
to say that the company has:

5,550 completed units.

5,550 in-process units.

11,100 equivalent units of production.

5,550 equivalent units of production.

11,100 physical units in production.
32. The accounting records of Diego Company revealed the following costs,
among others:

Costs that would be considered in the calculation of manufacturing

\$442,000.

\$186,000.

\$171,000.

\$149,000.

None of the other answers are correct.
33. Othello Manufacturing incurred \$113,000 of direct labor and \$13,400 of
indirect labor. The proper journal entry to record these events would include a
debit to Work-in-Process for:

\$13,400.

\$113,000.

\$126,400.

\$0 because Work-in-Process should be credited.

\$0 because Work-in-Process is not affected.

34. Cosby 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.

The cost of goods completed is:

\$520,000.

\$634,000.

None of the answers is correct.

\$312,000.

\$414,000.
35. [The following information applies to the questions displayed below.]

St. James, Inc., currently uses traditional costing procedures, applying
\$1,162,400 of overhead to products Beta and Zeta on the basis of direct labor
hours. The company is considering a shift to activity-based costing and the
creation of individual cost pools that will use direct labor hours (DLH), production
setups (SU), and number of parts components (PC) as cost drivers. Data on the
cost pools and respective driver volumes follow.

Product
Pool No.1
(Driver: DLH)
Pool No.2
(Driver: SU)
Pool No.3
(Driver: PC)
Beta 1,700 35 2,750
Zeta 3,500 65 810
Pool Cost \$364,000 \$300,000 \$498,400

would be closest to:

\$584,015.

some other amount.

\$380,015.

\$782,385.

\$496,015.

36. Dixie Company, which applies overhead at the rate of 190% of direct material
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:

\$79,800.

\$28,500.

\$70,500.

\$51,300.

\$0.
37. Strong Company applies overhead based on machine hours. At the beginning
of 20x1, the company estimated that manufacturing overhead would be \$559,000
and machine hours would total 21,500. By 20x1 year-end, actual overhead
totaled \$587,900, and actual machine hours were 28,900. On the basis of this
information, the 20x1 predetermined overhead rate was:

\$26 per machine hour.

\$1.04 per machine hour.

\$1.05 per machine hour.

\$21 per machine hour.

\$22 per machine hour.
38. In an activity-based costing system, direct materials used would typically be
classified as a unit-level cost.

True

False
39. [The following information applies to the questions displayed below.]

Haskins 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 40% complete as to conversion costs. During April,
11,500 units were completed and on April 30, 3,000 units remained in production,
50% complete with respect to conversion costs.

The equivalent units of direct materials for April total:

15,300.

16,500.

11,500.

14,500.

15,700.
40. The equivalent units of conversion for April total:

11,500.

13,000.

15,600.

14,800.

13,800.
41. Which of the following statements about material requisitions is false?

Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse.

Material requisitions are often computerized.

Material requisitions contain information that is useful to the cost accounting department.

Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.

Material requisitions are a common example of source documents.

42. [The following information applies to the questions displayed below.]

Work-in-process inventory, January 1, 2011 \$ 50,000
Work-in-process inventory, December 31, 2011 \$ 55,500
Conversion costs during the year \$ 422,000

If direct materials used during the year were \$142,000, what was cost of goods
manufactured?

\$553,000.

\$147,500.

\$558,500.

None of these.

\$416,500.

43. If the cost of goods manufactured for the year was \$574,000, what was the
amount of direct materials used during the year?

None of these.

\$105,500.

\$152,000.

\$157,500.

\$166,500.
44. Baxter Company, which pays a 11% commission to its salespeople, reported
sales revenues of \$300,000 for the period just ended. If fixed and variable sales
expenses totaled \$65,000, what would these expenses total at sales of
\$240,000?

\$32,000.

None of these.

\$52,000.

\$26,400.

\$58,400.
45. Gilberto adds materials at the beginning of production and incurs conversion
cost uniformly throughout manufacturing. Consider the data that follow.
Units
Beginning work in process 24,400
Started in August 69,200
Production completed 59,600
Ending work in process, 40% completed 34,000
Conversion cost in the beginning work-in-process inventory totaled \$203,000,
and August conversion cost totaled \$306,000. 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. 59,600 \$5.86
B. 73,200 \$ 5.83
C. 73,200 \$ 6.95
D. 93,600 \$ 5.83
E. 93,600 \$ 6.95

B
D
C
E
A
46. 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.

Which of the above statements is (are) true?

I and III.

III only.

II only.

II and III.

I only.
47. [The following information applies to the questions displayed below.]

Riverside Florists uses an activity-based costing system to compute the cost of
making floral bouquets and delivering the bouquets to its commercial customers.
Company personnel who earn \$240,000 typically perform both tasks; other firm-
wide overhead is expected to total \$70,000. These costs are allocated as follows:

Bouquet
Production Delivery Other
Wages and salaries 70% 20% 10%

Riverside anticipates making 23,500 bouquets and 3,000 deliveries in the
upcoming year.

The cost of wages and salaries and other overhead that would be charged to
each bouquet made is closest to:

some other amount.

\$10.24.

\$8.64.

\$13.19.

\$14.44.

48. The cost of wages and salaries and other overhead that would be charged to
each delivery is closest to:

some other amount.

\$23.00.

\$30.12.

\$23.68.

\$44.00.
49. Which of the following is true concerning cost drivers for the predetermined
overhead rate in a process-costing system?

Predetermined overhead rates are not used in a process-costing system.

If direct labor hours is the cost driver, direct labor and manufacturing overhead may be combined into the single element of conversion cost.

If direct material cost is the cost driver, direct labor and direct materials may be combined into the single element of prime cost.

Cost drivers are irrelevant in process-costing systems.

If direct labor cost is the cost driver, direct labor and manufacturing overhead may be combined into the single element of conversion cost.