Exam 3 Practice

1. Gangwer Corporation produces a single product and has the following cost structure:

   

The absorption costing unit product cost is: 

A. $119
B. $95
C. $61
D. $56

 
2. A manufacturing company that produces a single product has provided the following data concerning its most
recent month of operations:

   

What is the total period cost for the month under variable costing? 
A. $185,000
B. $117,600
C. $273,200
D. $302,600

 
3. A manufacturing company that produces a single product has provided the following data concerning its most
recent month of operations:

   

The total contribution margin for the month under variable costing is: 
A. $70,400
B. $169,200
C. $90,000
D. $183,600

4. Last year, Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory
decreased by 600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorption costing
net operating income last year? 
A. $64,200
B. $63,000
C. $63,600
D. $600

5. During April, Division D of Carney Company had a segment margin ratio of 15%, a variable expense ratio of
60% of sales, and traceable fixed expenses of $15,000. Division D's sales were closest to: 
A. $100,000
B. $60,000
C. $33,333
D. $22,500

 
6. Stephen Company has the following data for its three stores last year:

   

Given the above data, the total company sales were: 

A. $1,250,000
B. $1,375,000
C. $1,450,000
D. $800,000

7. Which of the following activities would be classified as a batch-level activity? 

A. Designing a new product.
B. Milling a part required for the final product.
C. Setting up equipment.
D. Training employees.

8. Property taxes are an example of a cost that would be considered to be: 

A. Organization-sustaining.
B. Unit-level.
C. Batch-level.
D. Product-level.

 
9. Higbie Corporation uses an activity-based costing system with three activity cost pools. The company has
provided the following data concerning its costs:

   

The distribution of resource consumption across the three activity cost pools is given below:

   

How much cost, in total, would be allocated in the first-stage allocation to the Fabricating activity cost pool? 
A. $76,000
B. $152,000
C. $204,000
D. $266,000

 
10. Zee Corporation has provided the following data concerning its overhead costs for the coming year:

   

The company has an activity-based costing system with the following three activity cost pools and estimated
activity for the coming year:

   

The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity
and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:

   

The activity rate for the Assembly activity cost pool is closest to: 
A. $4.05 per labor-hour
B. $2.70 per labor-hour
C. $4.25 per labor-hour
D. $8.10 per labor-hour
11. Wecker Corporation uses the following activity rates from its activity-based costing to assign overhead costs
to products:

   

Data concerning two products appear below:

   

How much overhead cost would be assigned to Product V09X using the activity-based costing system? 
A. $10,385.22
B. $5,485.50
C. $91,722.47
D. $157.87

 
 Kozloff Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company
has provided the following data concerning the activity rates in its activity-based costing system:

   

The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding
reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of
tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding
involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and
shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and
wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:

   

12. Assuming that the company charges $613.98 for the Manliguis wedding cake, what would be the overall
margin on the order? 
A. $168.40
B. $507.42
C. $106.56
D. $172.51

 
13. Matt Company uses activity-based costing. The company has two products: A and B. The annual production
and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with
total cost and total activity as follows:

   

The activity-based costing cost per unit of Product A is closest to: 

A. $6.60
B. $3.90
C. $10.59
D. $2.40

 
Exam 3 Practice - Key
 

1. Gangwer Corporation produces a single product and has the following cost structure:

   

The absorption costing unit product cost is: 

A. $119
B. $95
C. $61
D. $56

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #39
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
 
2. A manufacturing company that produces a single product has provided the following data concerning its most
recent month of operations:

   

What is the total period cost for the month under variable costing? 
A. $185,000
B. $117,600
C. $273,200
D. $302,600

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #43
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
 
3. A manufacturing company that produces a single product has provided the following data concerning its most
recent month of operations:

   

The total contribution margin for the month under variable costing is: 
A. $70,400
B. $169,200
C. $90,000
D. $183,600

Unit product cost under variable costing:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #52
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Easy
 
4. Last year, Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory
decreased by 600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorption costing
net operating income last year? 
A. $64,200
B. $63,000
C. $63,600
D. $600

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #53
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
 

5. During April, Division D of Carney Company had a segment margin ratio of 15%, a variable expense ratio of
60% of sales, and traceable fixed expenses of $15,000. Division D's sales were closest to: 
A. $100,000
B. $60,000
C. $33,333
D. $22,500

Segment margin = 0.15 ´ Segment sales

Segment variable expenses = 0.60 ´ Segment sales
Segment traceable fixed expenses = $15,000
Segment margin = Segment sales - Segment variable expenses - Segment traceable fixed expenses
0.15 ´ Segment sales = Segment sales - 0.60 ´ Segment sales - $15,000
0.25 ´ Segment sales = $15,000
Segment sales = $15,000 ¸ 0.25 = $60,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #64
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Hard
 
6. Stephen Company has the following data for its three stores last year:

   

Given the above data, the total company sales were: 

A. $1,250,000
B. $1,375,000
C. $1,450,000
D. $800,000
Segment A Variable expense ratio = Segment A Variable expenses ¸ Segment A Sales
0.60 = $240,000 ¸ Segment A Sales
Segment A Sales = $240,000 ¸ 0.60 = $400,000

Segment B CM ratio = Segment B Contribution margin ¸ Segment B Sales

0.20 = $120,000 ¸ Segment B Sales
Segment B Sales = $120,000 ¸ 0.20 = $600,000

Segment C CM ratio = 1 - Segment C Variable expense ratio

Segment C Variable expense ratio = 1 - Segment C CM ratio = 1 - 0.40 = 0.60
Segment C Variable expense ratio = Segment C Variable expenses ¸ Segment C Sales
Segment C Sales = Segment C Variable expenses ¸ Segment C Variable expense ratio
= $150,000 ¸ 0.60 = $250,000

Total sales = $400,000 + $600,000 + $250,000 = $1,250,000

 
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #68
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Hard
 

7. Which of the following activities would be classified as a batch-level activity? 

A. Designing a new product.
B. Milling a part required for the final product.
C. Setting up equipment.
D. Training employees.

Batch-level activities are performed each time a batch of goods is handled or processed, regardless of how many
units are in the batch. The amount of resource consumed depends on the number of batches run rather than on
the number of units in the batch.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 07 #16
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Medium
 

8. Property taxes are an example of a cost that would be considered to be: 

A. Organization-sustaining.
B. Unit-level.
C. Batch-level.
D. Product-level.

Organization-sustaining activities are carried out regardless of which customers are served, which products are
produced, how many batches are run, or how many units are made.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 07 #23
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Medium
 
9. Higbie Corporation uses an activity-based costing system with three activity cost pools. The company has
provided the following data concerning its costs:

   

The distribution of resource consumption across the three activity cost pools is given below:

   

How much cost, in total, would be allocated in the first-stage allocation to the Fabricating activity cost pool? 
A. $76,000
B. $152,000
C. $204,000
D. $266,000

Allocations to the Fabricating activity cost pool:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #31
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Level: Medium
 
10. Zee Corporation has provided the following data concerning its overhead costs for the coming year:

   

The company has an activity-based costing system with the following three activity cost pools and estimated
activity for the coming year:

   

The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity
and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:

   

The activity rate for the Assembly activity cost pool is closest to: 
A. $4.05 per labor-hour
B. $2.70 per labor-hour
C. $4.25 per labor-hour
D. $8.10 per labor-hour

Allocations to the Assembly activity cost pool:

Assembly: $85,000 ¸ 20,000 labor-hours = $4.25 per labor-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #26
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium
 
11. Wecker Corporation uses the following activity rates from its activity-based costing to assign overhead costs
to products:

   

Data concerning two products appear below:

   

How much overhead cost would be assigned to Product V09X using the activity-based costing system? 
A. $10,385.22
B. $5,485.50
C. $91,722.47
D. $157.87

The overhead cost charged to Product V09X is:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #43
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Level: Easy
 
 Kozloff Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company
has provided the following data concerning the activity rates in its activity-based costing system:

   

The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding
reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of
tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding
involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and
shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and
wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:

   

Garrison - Chapter 07
 

12. Assuming that the company charges $613.98 for the Manliguis wedding cake, what would be the overall
margin on the order? 
A. $168.40
B. $507.42
C. $106.56
D. $172.51

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #66
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Level: Medium
 
13. Matt Company uses activity-based costing. The company has two products: A and B. The annual production
and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with
total cost and total activity as follows:

   

The activity-based costing cost per unit of Product A is closest to: 

A. $6.60
B. $3.90
C. $10.59
D. $2.40

The activity rates for each activity cost pool are computed as follows:

The overhead cost charged to Product A is:

Cost per unit = $52,800 ¸ 8,000 units = per unit

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #39
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Level: Medium
 
Exam 3 Practice - Spring 2013 Summary

Category #  of  Questi

ons
AACSB: Analytic 11
AACSB: Reflective Thinking 2
AICPA BB: Critical Thinking 13
AICPA FN: Measurement 13
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Application 1
Blooms: Comprehension 1
Blooms: Comprehension 1
Garrison - Chapter 06 6
Garrison - Chapter 07 8
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each  2
method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing 1
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amoun 1
ts differ
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs  2
and use it to make decisions
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system. 2
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation. 2
Learning Objective: 07-03 Compute activity rates for cost pools. 2
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation. 3
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins. 1
Level: Easy 4
Level: Hard 2
Level: Medium 7