CHAPTER 1: OVERVIEW OF MANAGEMENT ACCOUNTING

Question 1:
Information provided by management accountants:
A. Following a unified pattern among businesses
B. Includes both financial and non-financial information
C. Only reflects the measure of value, timeliness rather than accuracy, not mandatory
D. Mainly provided within the enterprise on an enterprise-wide scale

Question 2:
Which of the following combinations describe the purposes of management information?
A. Control, decision making and publication
B. Planning, negotiating and decision making
C. Decision making, negotiating and implementing
D. Planning, control and decision making

Question 3:
The information provided by management accountants has the following characteristics:
A. All answers are incorrect
B. Flexible, not mandatory, forward-looking
C. Only reflects the measure of value, timeliness rather than accuracy, not mandatory
D. Accurate, flexible, mandatory, forward-looking

Question 4:
Management accounting information provided for different levels of management will be
different, with the following statements:
(1) Information provided for strategic management is mainly short-term
(2) information provided for the strategic management must aim at long-term development goals
(3) Information provided for operational management is mainly estimated and qualitative data
(4) Information provided for operational management is mainly daily updated information
The correct statement is? (Maybe there’s more than one correct answer)

Question 5:
Management accounting mainly provides:
A.The information is consistent with accounting principles and standards
B. Information provided for authorities
C. Information provided for owners, creditors, and others outside the business
D. Information provided for managers within the organization

Question 6:
Business managers need management accounting providing:
A. Information for forecasting
B. Financial and non-financial information
C. Information for planning and control
D. All answers are correct
Question 7:
Management accounting provides information:
A. Entire business
B. Only be expressed in money
C. Every department in the business
D. Useful for financial management

Question 8:
Which of the following statements is correct?
A. Businesses have many choices when designing their management accounting systems
B. The information provided by management accounting does not include expenses incurred in the
operation department
C. The reporting period of management accounting is usually 1 year
D. The functions of management accounting are operation control, product costing, management
control, and external reporting

Question 9:
Which of the following accounting information is management accounting information:
A. Estimated product cost
B. All answers are correct
C. Opportunity costs incurred in the course of doing business
D. Actual product cost

Question 10:
Which of the following is not an attribute of managerial accounting?
A. Produced in the format required by management
B. Produced for internal use only
C. Based on historical data only
D. Used for planning, decision making and control
 CHAPTER 2: COST CLASSIFICATIONS
Question 1:
Which of the following is the best description of a direct cost?
A. A cost that is incurred by the factory
B. A cost which is directly shared by one or more cost centers
C. A cost that can be directly traced to a cost unit
D. A cost that is paid for in cash

Question 2:
A production worker is paid a salary of $650 per month, plus an extra 5 cents for each unit
produced during the month. This labor cost is best described as which of the following?
A. A step cost
B. A fixed cost
C. A semi-variable cost
D. A variable cost

Question 3:
Which of the following is most likely to be treated as an indirect cost by a car manufacturer?
A. Lubricant for machinery
B. Sheet metal for car body
C. Fabric for car seats
D. Wages of production line workers

Question 4:
Which of the following is most likely to be treated as an indirect cost by a computer manufacturer?
A. Microchips
B. Production line worker wages
C. Factory supervisor's wages
D. Plastic housing for computer bodies

Question 5:
Your boss would like you to estimate the fixed and variable components of a particular cost.
Assume you believe that machine-hours are an appropriate measure of activity for this overhead
cost. Actual data for this cost over four recent periods appear below:
Machine hours Cost
Period 1 1,200 $38,500
Period 2 1,100 $38,200
Period 3 1,250 $41,000
Period 4 1,350 $41,200
Using a high-low method, what is the variable cost per machine hour?
A. $2/machine hour
B. $15/machine hour
C. $18/machine hour
D. $12/machine hour
Question 6:
Your boss would like you to estimate the fixed and variable components of a particular cost.
Assume you believe that machine-hours are an appropriate measure of activity for this overhead
cost. Actual data for this cost over four recent periods appear below:
Machine hours Cost
Period 1 1,200 $38,500
Period 2 1,100 $38,200
Period 3 1,250 $41,000
Period 4 1,350 $41,200
Using the high-low method, if your boss expects to incur 1,290 machine hours next period, what
will the estimated total overhead cost be using the high-low method?
A. $45,000
B. $41,080
C. $38,770
D. $40,480
 QUIZ IN CLASS CHAPTER 1 AND CHAPTER 2
Question 1:
Which of the following is not an example of committed fixed cost?
A. Factory insurance expense
B. Advertising expenses for a specific product
C. Salaries of highly trained engineers
D. Real estate taxes

Question 2:
The management at Table Top have provided the following cost information in relation to its oak
hardwood table:
- 4 pieces of Oak
- Two metal brackets
- Nails and glue
- 10 labor hours of factory machine operators
- Other production overheads
- Selling and administrative overheads
Table Top has asked for clarification on which of the above costs are considered conversion costs?
A. Nails, glue, direct labor hours and other production overheads
B. All the above costs except selling and administrative overheads
C. Oak, metal brackets, nails, glue, direct labor hours
D. Other production overheads & direct labor hours

Question 3:
IKEA Corporation is a wholesaler that sells a single product. Management has provided the
following cost data for two levels of monthly sales volume. The company sells the product for
$240 per unit.
Sales volume (units) 9,000 12,000
Cost of goods sold $1,385,000 $1,625,000
Selling, general, and $490,000 $520,000
administrative costs
The best estimate of the total contribution margin when 10,000 units are sold is:
A. $1,400,000
B. $435,000
C. $1,065,000
D. All answers are incorrect

Question 4:
A manufacturing company prepays its insurance coverage for a three-year period. The premium
for the three years is $2,100 and is paid at the beginning of the first year. Sixty percent of the
premium applies to manufacturing operations and forty percent applies to selling and
administrative activities. What amounts should be considered product and period costs
respectively for the first year of coverage?
A. Product costs: $280; period costs: $420
B. Product costs: $0; period costs: $700
C. Product costs: $420; period costs: $280
D. Product costs: $700; period costs: $0
Question 5:
Dragons Inc is a tabletop role playing games company. Customers have a monthly subscription
and receive a new box of miniatures, maps, books and guides each month. Based on customer
feedback, Dragons Inc have decided to discontinue box 5 - Fire Breathing Dragons. It will be
discontinued from January next year. Dragon's Inc have asked their accountant to prepare some
sales and inventory forecasts, in order to minimize the amount of Box 5 inventory items that will
be in stock after it is discontinued. The work the accountant is carrying out can be best described
as:
A. Decision making
B. Financial Accounting
C. Control
D. Planning

Question 6:
Management accounting is primarily concerned with:
A. Providing investors with useful information for valuing securities
B. All answers are correct
C. Providing creditors information on the status of their loans
D. Providing managers with relevant information to help achieve organizational goals

Question 7:
Which of the following statements about variable costing is correct?
A. Variable costing is more compatible with cost-volume-profit analysis than is absorption costing
B. Product costs consist of direct materials, direct labor, variable manufacturing overhead and
variable selling and administration expenses
C. It is possible to defer a portion of the fixed manufacturing overhead costs of the current period
to future periods through the inventory account
D. All answers are correct

Question 8:
Rose Corporation produces a single product. The company had net operating income of $50,000
using variable costing. Beginning and ending inventories were 13,000 units and 18,000 units,
respectively. If the predetermined fixed manufacturing overhead rate was $2.00 per unit applied
to for both beginning and ending inventory, what would have been the net operating income using
absorption costing?
A. $50,000
B. $62,000
C. $60,000
D. $40,000

Question 9:
Z Ltd. prepares to flexible budget for production costs as follows:
Capacity 80% 90%
Direct material costs $2,400,000 $2,700,000
Direct labor costs $2,120,000 $2,160,000
Manufacturing overhead $4,060,000 $4,080,000
costs
Determine total production costs at the level of 83% of maximum capacity:
A. $6,266,000
B. $6,888,000
C. $8,586,000
D. $8,688,000

Question 10:
Joel is the manager of Kay Ltd, a factory producing t-shirts. The factory has the capacity to produce
7,000 t-shirts every week. The factory currently produces 4,000 t-shirts every week.
Which of the following can be categorized as a direct cost for Kay Ltd?
A. Depreciation of lorries used for deliveries to customers
B. Wages of factory workers engaged in machine maintenance
C. Cost of indirect production materials
D. Cost of transporting raw materials from the supplier's stores

Question 11 :
Which one of the following statements about ethical behavior is true?
A. Ethical behavior is best described as doing actions that are permitted by law
B. Ethical behavior always involves choosing between actions that are clearly right or wrong
C. Ethical behavior is best guided by a policy of placing corporate performance above individual
ends
D. Ethical behavior is not guided by well-defined rules and is often subjective

Question 12:
Which of the following production costs, if expressed on a per unit basis, would be most likely to
change significantly as the production level varies?
A. Variable costs
B. Fixed manufacturing overhead
C. Direct labor
D. Direct materials

Question 13:
Alan - an executive of Handmade Jam Company which makes three different jams all in the same
small factory - is doing its 2021 strategic plan. Which of the following statements describes an
ethical dilemma associated with costing the different varieties of jam?
A. Treating some of the fixed costs as variable costs in a document prepared for new investors
B. Preparing the accounting information to be included with the application for bank loan
C. Determining the product mix between the three different jams (strawberry, raspberry, and
blueberry)
D. Selecting the supplier of the glass jars used to pack the jam
 CHAPTER 3: C-V-P ANALYSIS
Question 1:
Astair, Inc. reported sales of $8,000,000 for the month and incurred variable expenses totaling
$5,600,000 and fixed expenses totaling $1,440,000. The company has no beginning or ending
inventories. A total of 80,000 units were produced and sold last month. What is the company's
degree of operating leverage?
A. 0.4
B. 2.5
C. 3.3
D. 0.12

Question 2:
Astair, Inc. reported sales of $8,000,000 for the month and incurred variable expenses totaling
$5,600,000 and fixed expenses totaling $1,440,000. The company has no beginning or ending
inventories. A total of 80,000 units were produced and sold last month. What is the company's
margin of safety in dollars?
A. $3,200,000
B. $2,400,000
C. $3,520,000
D. $480,000

Question 3:
Astair, Inc. reported sales of $8,000,000 for the month and incurred variable expenses totaling
$5,600,000 and fixed expenses totaling $1,440,000. The company has no beginning or ending
inventories. A total of 80,000 units were produced and sold last month. What is the company's
break-even in units?
A. 80,000 units
B. 72,000 units
C. 48,000 units
D. 0 units

Question 4:
Astair, Inc. reported sales of $8,000,000 for the month and incurred variable expenses totaling
$5,600,000 and fixed expenses totaling $1,440,000. The company has no beginning or ending
inventories. A total of 80,000 units were produced and sold last month. How many units would
the company have to sell to achieve a desired profit of $1,200,000?
A. 150,000 units
B. 106,668 units
C. 100,000 units
D. 88,000 units

Question 5:
Astair, Inc. reported sales of $8,000,000 for the month and incurred variable expenses totaling
$5,600,000 and fixed expenses totaling $1,440,000. The company has no beginning or ending
inventories. A total of 80,000 units were produced and sold last month. If sales increase by 200
units, how much should net income increase?
A. $1,600
B. $6,000
C. $19,200
D. $10,000

Question 6:
Gardner Manufacturing Company produces a product that sells for $120 per unit. A selling
commission of 10% of each unit sold. Variable manufacturing costs are $60 per unit. Fixed
manufacturing costs are $20 per unit based on the current level of activity, and fixed selling and
administrative costs are $16 per unit. The contribution margin per unit is:
A. $48
B. $72
C. $60
D. $104

Question 7:
Grant Company sells a single product. The product has a selling price of $50 per unit and variable
expenses of 80% of sales. If the company's fixed expenses total $150,000 per year, then it will
have a break-even point in sales dollars:
A. $187,500
B. $750,000
C. $3,750
D. $15,000

Question 8:
Redford, Inc. has provided the following data:
Sales price $200 per unit
Units sold 6,000 units
Total fixed costs $300,000
Variable costs $100 per unit
If the dollar contribution margin per unit is increased by 10%, total fixed costs is decreased by
20%, and all other factors remain the same, net income will:
A. Decrease by $60,000
B. Increase by $120,000
C. Increase by $420,000
D. Increase by $60,000

Question 9:
Lange Company sells three products: X, Y and Z. Product X's unit contribution margin is higher
than Product Y's and Product Y's is higher than Product Z's. Which one of the following events is
most likely to increase the company's overall break-even point?
A. A Change in the relative market demand for the products, with the increase favoring Product Z
relative to Product Y and Product X
B. A decrease in Product Z's selling price
C. The installation of new automated equipment and subsequent lay-off of factory workers
D. An increase in the overall market demand for Product Y
Question 10:
Newman Corporation produced and sold 80,000 units and reported sales of $4,000,000 during the
past year. Management determined that variable expenses totaled $2,800,000 and fixed expenses
totaled $720,000. What is the company's contribution margin ratio?
A. 30%
B. 250%
C. 150%
D. 70%
 QUIZ IN CLASS CHAPTER 3
Question 1:
Crystal Ltd. produces two types of products F and P with the following information:
Product F Product P
Selling price/unit $100 $120
Variable cost/unit $35 $30
Total fixed costs for a year $1,192,800
Crystal Ltd. sells two dollars of the F product for every three dollars of the P product earned.
What is the annual breakeven point in unit sales for the P product at the current sales mix?
A. 8,946 units
B. 5,964 units
C. 6,720 units
D. 8,400 units

Question 2:
The cost structures of the company A and the company B as follows:
Company A Company B
Variable costs $320,000 $580,000
Fixed costs $640,000 $380,000
Which of the conclusions related to the A and B company is correct?
A. Company A's margin of safety and break-even points are all higher than those of Company B
B. Company A is higher risky in business than Company B
C. Company A's profits are less sensitive than company B's profits to percentage changes in sales
D. Company A is more profitable and then more attractive to investors than Company B

Question 3:
N Company produces the new toy with an estimated selling price of $3 per unit and the capacity
of 16,000 units of the toy each month. Variable expenses to manufacture and sell one unit would
be $1.25, and fixed expenses associated with the toy would total $35,000 per month. Additional
manufacturing space can be rented from another company at a fixed expense of $1,000 per month
when the demand for the new toy will exceed the 16,000 units that the company is able to produce.
Variable expenses would total $1.4 per unit, due to somewhat less efficient operations than in the
main plant once renting the manufacturing space.
How many units must be sold each month to make a monthly profit of $12,000?
A. 30,000 units
B. 27,500 units
C. 28,125 units
D. 28,500 units

Question 4:
For the coming year, variable costs are budgeted to be 60% of sales dollars and fixed costs are
budgeted to be 10% of sales dollars. If sales price increases by 10%, but if total fixed costs, unit
variable costs, and sales volume remain the same, the effect on marginal contribution would be:
A. An increase of 25% B. An increase of 5%
C. An increase of 15% D. Remain unchanged
Question 5:
Hoang Ha Company has variable costs of $5 per unit and a selling price of $10 per unit. Fixed
costs are $200,000. Planned unit sales for 2015 are 45,000 units. Actual unit sales for 2014 were
42,000. What is the margin of safety in units for 2015?
A. 2,000 units
B. 7,000 units
C. 5,000 units
D. 3,000 units

Question 6:
Assume the following information for Thanh Minh Company:
Selling price per unit $150
Variable costs per unit $100
Total fixed costs $190,000
If fixed costs increased by 20% and management wanted to maintain the original break-even point
in units, then the selling price per unit would have to be increased to:
A. $160
B. $165
C. $170
D. All answers are incorrect
 CHAPTER 4: PRICING PRODUCT AND SERVICE
Question 1:
A company operating in the service sector has the following data:
Direct labor cost $15/labor hour
Total annual direct labor hour 12,000 labor hour
Annual production overhead:
Preservation and storage of materials $24,000
Other manufacturing overheads $126,000
Annual cost of direct materials (invoice price) $240,000
Desired profit per one labor hour $8/labor hour
Desired profit on the direct material costs 15%
What is the markup percentage added to the bill of materials price charged to the customer?
A. 125%
B. 16%
C. 15%
D. 25%

Question 2:
In the formula for calculating the markup percentage when determining the cost-based selling
price, in order to achieve the desired ROl, what is the numerator of the formula?
A. Profit needed to achieve desired ROl + Total annual fixed cost
B. Profit required to achieve desired ROI + Total annual cost excluded cost base
C. Profit needed to achieve desired ROl + Unit variable cost
D. Profit needed to achieve desired ROl + Total annual cost

Question 3:
Company K manufactures and sells 10,000 products per year. The data regarding this product is
as follows:
Variable production cost $45/unit
Variable selling and administrative expenses $10/unit
Fixed manufacturing overhead $600,000
Fixed selling and administrative expenses $300,000
Investment capital in this product is $1,000,000 with ROl of 20%. If the company uses the
contribution margin approach (direct method) to price the product on a cost basis, what percentage
of the markup will be?
A. 100%
B. 20%
C. 50%
D. 200%

Question 4:
A company have the following data:
Variable cost/unit $400
Total fixed cost/year $150,000
 Number of units produced and consumed 500 units
annually
Average investment capital $400,000
Desired ROI 20%
Rounding to one decimal, what is the markup percentage in order to attain the desired ROI?
A. 115.0%
B. 22.9%
C. 153.3%
D. 65.7%

Question 5:
Company G, which manufactures hair dryers, wants to introduce a small hair dryer to its customers.
In order to improve its competition, the selling price of this product cannot be greater than
$13.25/unit. The company requires that the ROI on new products be 7.5%. To produce and sell
80,000 small hair dryers per year, the company needs to invest $800,000. The desired cost per unit
of output is closest to:
A. $12.50/unit
B. $1.5/unit
C. $15.50/unit
D. $14/unit

Question 6:
A company have the following data:
Variable cost/unit $400
Total fixed cost/year $150,000
Number of units produced and consumed 500 units
annually
Average investment capital $400,000
Desired ROI 20%
What is the selling price calculated by marginal costing approach?
A. $460/unit
B. $860/unit
C. $805/unit
D. $700/unit

Question 7:
Company B manufactures a product with the following cost information:
Direct materials $27/unit
Direct labor $2.9/unit
Variable manufacturing overhead $4.1/unit
Variable selling and administrative expenses $3.6/unit
Fixed production cost/year $1,264,000
Fixed selling and administrative expenses $1,540,000
The company uses an absorption costing approach to pricing. The number of units sold is 79,000
units. Expected ROl is 15% of the investment capital of $420,000 to produce and sell this product.
The unit selling price will be:
A. $47.29/unit
B. $73.9/unit
C. $108.04/unit
D. $73.1/unit

Question 8:
Company M uses an absorption costing approach to determine its selling price on a cost basis. The
selling price is determined to be $96/unit. The costs per unit with the production and sale of 25,000
units during the year are as follows:
Direct materials cost $20/unit
Direct labor cost $12/unit
Variable manufacturing overhead $10/unit
Variable selling and administrative expenses $6/unit
Fixed manufacturing overhead $18/unit
Fixed selling and administrative expenses $16/unit
The markup percentage is:
A. 37.5%
B. 40%
C. 100%
D. 60%

Quesion 9:
A company estimates that net profit of $255,000 would be earned when it produces and sells
10,000 units of product S each month. At this level of activity, the company consumes 9,000
machine hours and 5,000 direct manufacturing labor hours at the rate of $32 per labor hour. The
following information is available on product S:
Direct materials per unit $32
Variable manufacturing overhead costs per $7
unit
Fixed manufacturing overhead costs $200,000
Selling and administrative expenses costs $420,000
If the company uses the absorption costing approach to cost-plus pricing, the required markup for
product S would be closest to:
A. All answers are incorrect
B. 74.17%
C. 85%
D. 90%

Question 10:
A company operating in the service sector has the following data:
Direct labor costs $15/labor hour
Total annual direct labor hour 12,000 labor hour
Annual production overhead:
Preservation and storage of materials $24,000
Other manufacturing overheads $126,000
Annual cost of direct materials (invoice price) $240,000
 Desired profit per one labor hour $8/labor hour
Desired profit on the direct material costs 15%
How much will the customer be charged for each service hour?
A. $7/labor hour
B. $23/labor hour
C. $33.5/labor hour
D. $17.42/labor hour
 CHAPTER 5: RELEVANT INFORMATION FOR DECISION
MAKING
Question 1:
The managers of a company are considering accepting or rejecting a special order for one of the
company's products. The irrelevant costs of this decision are:
A. Fixed manufacturing overhead cannot be avoided if the order is not accepted
B. Fixed manufacturing overhead can be avoided if the order is not accepted
C. Variable manufacturing overhead
D. Direct material costs

Question 2:
Company's produces three types of products from a common manufacturing process. The common
cost for all three types of products, up to the split-off point, is a total of $50,000 per year. The
company allocates this cost to each product category based on the revenue at the split-off point.
Revenue at the split-off point of each type of product is as follows: product X: $25,000; product
Y: $45,000; and product Z: $30,000. Each type of product can be sold at the split-off point or
further processed. Additional processing costs and revenue after further processing of each product
(calculated for each year) are as follows:
Product X Product Y Product Z
Additional processing $10,000 $32,000 $6,000
cost
Revenue (after $40,000 $75,000 $37,000
further processing)
Which product/(s) should be processed further?
A. Product X and Z
B. Product Y
C. Product X
D. Product X and Y

Question 3:
Company E manufactures small plates, bowls, and big plates. Demand for these products exceeds
its capacity. Information regarding these products is as follows:
Small plates Bowls Big plates
Selling price per unit $36/unit $84/unit $120/unit
Variable cost per unit $9/unit $21/unit $30/unit
Numer of labor hours 1 hour/unit 3 hours/unit 4 hours/unit
per unit
Factory workers can work overtime. Assuming this overtime is used to produce bowls, in order
for the factory to remain open after normal working hours, how much is the company willing to
pay more for each hour of overtime?
A. $26/hour
B. $21/hour
C. $7/hour
D. $72/hour
Question 4:
Company E manufactures small plates, bowls, and big plates. Demand for these products exceeds
its capacity. Information regarding these products is as follows:
Small plates Bowls Big plates
Selling price per unit $36/unit $84/unit $120/unit
Variable cost per unit $9/unit $21/unit $30/unit
Numer of labor hours 1 hour/unit 3 hours/unit 4 hours/unit
per unit
Demand 400 units 200 units 600 units
The company has a maximum capacity of 3,010 labor hours. How many units of each product
should the company sell to maximize its profit?
A. 10 small plates, 200 bowls and 600 big plates
B. 400 small plates, 70 bowls and 600 big plates
C. 400 small plates, 200 bowls and 502 big plates
D. 360 small plates, 150 bowls and 550 big plates

Question 5:
Company K is considering discontinuing one of its products. Contribution margin generated by
this product annually is $300,000. The fixed cost allocated for this product is $390,000 per year.
If this product is discontinued, $240,000 annual fixed cost will be eliminated. If this product is
discontinued, the company's net operating profit will:
A. Decrease by $60,000/year
B. Increase by $150,000/year
C. Decrease by $150,000/year
D. Increase by $60,000/year

Question 6:
Company H has 8,000 obsolete products in inventory with a total production cost of $160,000. If
these products are reworked at a cost of $40,000, they will be sold at $72,000. Another solution is
to sell these products as scrap for $28,000. Which solution should the company choose and what
is the relevant cost for that solution?
A. Selling scrap; $132,000
B. Selling scrap; $160,000
C. Rework; $40,000
D. Rework; $200,000

Question 7:
The costs to produce and sell one product at an operating level of 30,000 units per month at a
company are as follows:
Direct materials $6/unit
Direct labor $12/unit
Variable manufacturing overhead $2/unit
Fixed manufacturing overhead $4/unit
Variable selling and administration expenses $8/unit
Fixed selling and administration expenses $10/unit
Suppose a company has 300 products from the previous year that have minor defects so it can sell
them and has to reduce the price to sell them as scrap. This does not affect other revenue of the
company. Variable selling and administration expenses will be incurred when selling these
defective products. What is the relevant cost to determine their minimum selling price?
A. $36/unit
B. $8/unit
C. $18/unit
D. $32/unit

Question 8:
The data relating to the two types of products (A and B) produced and consumed by Company X
are as follows:
Product A Product B
Contribution margin per unit $480/unit $320/unit
Number of machine setups 32 setups/unit 40 setups/unit
per unit
Only 260,000 setups can be performed each year. The market demand for each type of product is
unlimited. What is the maximum total contribution that can be attained each year?
A. 7,280,000
B. 3,640,000
C. 3,900,000
D. 3,380,000

Question 9:
Company M sells a single product for $126/unit. The unit cost of product is calculated at the level
of 300,000 products per year as follows:
Direct materials $24/unit
Direct labor $30/unit
Manufacturing overhead $36/unit
Product cost $90/unit
A customer from abroad orders 120,000 units. The selling cost related to this order only has a
shipping cost of $18/unit. The company has enough excess capacity to manufacture additional
products. 2/3 of manufacturing overhead is fixed and is not affected by this order. What is the
minimum acceptable selling price for this order?
A. $84/unit B. $108/unit C. $96/unit D. $90/unit

Question 10:
Company F produces 4,000 parts per year to assemble one of its product lines. The unit cost of
this part is as follows:
Variable cost per unit $32
Fixed cost per unit $18
Product cost per unit $50
This spare part can be purchased from outside for $40/unit. If this part is purchased from an outside
supplier, two thirds of the fixed production cost can be eliminated. The effect on the company's
annual net operating profit when this part is purchased from an external supplier, will be:
A. An increase of $16,000
B. A decrease of $16,000
C. An increase of $8,000
D. A decrease of $8,000
 QUIZ IN CLASS CHAPTER 4 AND CHAPTER 5
Question 1:
From the options below, select the one which is NOT an advantage of marginal (variable) cost
plus pricing?
A. Good for short-term decision-making
B. Ensures fixed overheads are recovered in the long-term
C. Marginal cost-plus pricing creates an easy way for the company to enter a new market
D. Better understanding of cost

Question 2:
Assume the following information for Thanh Minh Company:
Selling price per unit $150
Variable costs per unit $100
Total fixed costs $190,000
If fixed costs increased by 20% and management wanted to maintain the original break-even point
in units, then the selling price per unit would have to be increased to:
A. $165
B. All answers are incorrect
C. $160
D. $170

Question 3:
Perth Corporation estimates that an investment of $5,000,000 would be needed to produce and sell
50,000 units of Product B each year. At this level of activity, the cost information as follows:
Cost of goods sold per unit under variable $200
costing approach
Variable costs per unit $215
Total fixed manufacturing overhead costs $2,000,000
each year
Total fixed selling and administrative $1,850,000
expenses each year
The company uses the absorption costing approach to cost-plus pricing. If a 20% rate of return on
investment is desired, then the required markup for Product B would be closest to:
A. 45.12%
B. 28.50%
C. 23.75%
D. 30.00%

Question 4:
Wendy Corporation has two divisions for two types of products - including bike and motorbike.
The operating results of each division for 20×9 follow:
Bike Motobike
Sales revenue 2,000,000 500,000
Variable costs 1,000,000 300,000
Contribution margin 1,000,000 200,000
Segment fixed costs 200,000 220,000
 Segment margin 800,000 (20,000)
Common fixed costs 400,000 100,000
Operating income 400,000 (120,000)
Common fixed costs are allocated to the divisions based on relative sales. Assume that 60% of a
segment's fixed costs could be avoided by dropping a division. Because the Motorbike division is
operating at a loss, Wendy Corporation's president is considering eliminating it. What is the effect
on the corporation's profit if it drops the Motorbike division?
A. Profit will decrease by $120,000
B. Profit will increase by $120,000
C. Profit will increase by $20,000
D. Profit will decrease by $68,000

Question 5:
A company producing two product – L and M has done the following analysis:
L M
($ per unit) ($ per unit)
Selling price 70 100
Direct labor ($7 per labor 28 14
hour)
Direct materials ($5 per kg) 10 40
Variable manufacturing ? ?
overhead ($5 per machine
hour)
Variable selling and 2 6
administration cost
Fixed manufacturing 10 20
overhead ($10 per machine
hour)
Fixed selling and 3 2
administration expenses
Demand for the product L and M is 1,000 units and 600 units respectively. Material is in short
supply and there is only 6,000 kilograms available. Manufacturing overhead was applied to
product costs based on machine hours. What is the optimum contribution that can be earned?
A. $33,000
B. $40,000
C. $35,000
D. All answers are incorrect

Question 6:
Nataly Company is considering the introduction of a new product. Management has gathered the
following information:
Number of units to be produced and sold each 50,000 units
year
Variable production cost per unit $20/unit
Annual fixed production cost $2,000,000
 Variable selling and administrative cost per $3/unit
unit
Annual fixed selling and administrative cost $120,000
Investment required by the company $1,000,000
Desired return on investment (ROI) $18%
The mark-up percentage of pricing under the absorption costing approach is:
A. 15%
B. All answers are incorrect
C. 20%
D. 60%

Question 7:
Nataly Company is considering the introduction of a new product. Management has gathered the
following information:
Number of units to be produced and sold each 50,000 units
year
Variable production cost per unit $20/unit
Annual fixed production cost $2,000,000
Variable selling and administrative cost per $3/unit
unit
Annual fixed selling and administrative cost $120,000
Investment required by the company $1,000,000
Desired return on investment (ROI) $18%
The mark-up percentage of pricing under the marginal costing approach is:
A. 200%
B. 150%
C. 100%
D. All answers are incorrect

Question 8:
A company has 10,000 hours of capacity and manufactures two products. Product 1 takes 2 hours
per unit. Product 2 takes 3 hours per unit. The contribution margin per unit for Product 1 is $5.
The contribution margin per unit for Product 2 is $6. Neither product has enough demand to use
all of the plant capacity, but the demand for both products exceeds the plant capacity. Which
product or products should be manufactured?
A. 0 units of Product 1 and 3,333 units of Product 2
B. 5,000 units of Product 1 and 0 units of Product 2
C. Make Product 1 first until meet customer demand, then make Product 2
D. Make Product 2 first until meet customer demand, then make Product 1

Question 9:
Bella Products manufactures 6,000 units of part X each year for use on its production line. At this
level of activity, the cost per unit for part X is as follows:
Direct materials $18/unit
Direct labor $50/unit
Variable manufacturing overhead $12/unit
 Fixed manufacturing overhead $45/unit
Total cost per part $125/unit
An outside supplier has offered to sell 6,000 units of part X each year to Bella Products for $105
per part. If Bella Products accepts this offer, the facilities now being used to manufacture part X
could be rented to another company at an annual rental of $90,000. However, Bella Products has
determined that two-thirds of the fixed manufacturing overhead being applied to part X would
continue even if part X were purchased from the outside supplier. How much profits will increase
or decrease if the outside supplier's offer is accepted?
A. Profits would decrease by $60,000
B. Profits would increase by $60,000
C. Profits would decrease by $120,000
D. Profits would increase by $30,000

Question 10:
In a short-decision making context, which one of the following would be a relevant cost?
A. Specific development costs already incurred
B. The original cost of raw material currently in stock that will be used on the project
C. The cost of special material which will be purchased
D. Depreciation on existing equipment

Question 11:
Operations of Del Rio Oil Drilling Services are separated into two geographical divisions: United
States and Mexico. The operating results of each division for 20x8 follow:
United States Mexico Total
Sales revenue 7,200,000 3,600,000 10,800,000
Variable costs 4,740,000 2,088,000 6,828,000
Contribution margin 2,460,000 1,512,000 3,972,000
Traceable fixed costs 900,000 480,000 1,380,000
Segment margin 1,560,000 1,032,000 2,592,000
General fixed costs 1,800,000 900,000 2,700,000
Operating income (240,000) 132,000 108,000
General fixed costs are allocated to the divisions based on relative sales. Assume that 40% of a
division's traceable fixed costs could be avoided by eliminating that division. Because the United
States division is operating at a loss, Del Rio's president is considering eliminating it. What is the
effect on the company's profit if it drops the United States division?
A. Profit will increase by $1,560,000
B. Profit will decrease by $2,100,000
C. Profit will increase by $2,100,000
D. Profit will decrease by $1,560,000
 CHAPTER 6: JOB-ORDER COSTING
Question 1:
Dearborn Company's predetermined overhead rate is based on direct labor hours (DLHs). At the
beginning of the current year, the company estimated that its manufacturing overhead would total
$220,000 during the year. During the year, the company incurred $200,000 in actual manufacturing
overhead costs. The Manufacturing Overhead account showed that overhead was underapplied by
$8,000 during the year. If the predetermined overhead rate was $40.00 per DLHs. How many
DLHs were worked during the year?
A. 5,500 hours
B. 4,800 hours
C. 5,000 hours
D. 5,200 hours

Question 2:
Hiaasen Company's predetermined overhead rate is based on direct labor costs. The company's
Work in Process inventory account has a balance of $2,400, which relates to the one job that was
in process at the end of an accounting period. The related job cost sheet includes total charges of
$400 for direct materials and $1,000 for direct labor. The company's predetermined overhead rate,
as a percentage of direct labor costs, must be:
A. 100%
B. 40%
C. 50%
D. 17%

Question 3:
Hutchins Company uses a predetermined overhead rate based on direct labor hours (DLHs) to
apply manufacturing overhead to jobs. At the beginning of the year, the company estimated
manufacturing overhead would be $200,000 and DLHs would be 20,000. The actual figures for
the year were $215,000 for manufacturing overhead and 21,000 DLHs. The cost records for the
year will show:
A. Underapplied overhead of $5,000
B. Overapplied overhead of $5,000
C. Underapplied overhead of $10,000
D. Overapplied overhead of $10,000

Question 4:
In a job order cost system, the use of direct materials would be recorded as a debit to:
A. Manufacturing Overhead
B. Work In Process
C. Finished Goods
D. Raw Materials

Question 5:
In a job-order cost system, indirect materials costs would be recorded as a debit to:
A. Work In Process B. Manufacturing Overhead
C. Finished Goods D. Raw Materials
Question 6:
Tribute Company has the following estimated costs for next year:
Sales commissions $150,000
Direct labor $110,000
Salary of production supervisor $70,000
Rent on factory equipment $32,000
Direct materials $30,000
Advertising expenses $22,000
Indirect materials $10,000
The company estimates that 16,000 direct labor and 106,000 machine hours will be worked during
the year. If overhead is applied on the basis of direct labor hours, the predetermined overhead rate
per direct labor hour will be:
A. $15.26
B. $7.00
C. $17.12
D. $13.88

Question 7:
Mukundan Company uses a job order costing system. Manufacturing overhead is applied to Work
in Process inventory using a predetermined overhead rate. During the current month, the
company's transactions included the following:
Direct materials issued to production $360,000
Indirect materials issued to production $32,000
Direct labor costs incurred $428,000
Manufacturing overhead costs applied $452,000
Manufacturing overhead costs incurred $500,000
The company had no beginning or ending inventories in the current month. What was the cost of
goods manufactured?
A. $1,288,000
B. $1,320,000
C. $1,240,000
D. $1,208,000

Question 8:
Vahedi Company manufactures a specialty line of silk-screened ties. The company uses a job-
order costing system. During the month, the following costs were incurred on Job 104: direct
materials $54,800 and direct labor $19,200. In addition, selling and shipping costs of $28,000 were
incurred on the job. Manufacturing overhead was applied at the rate of $25 per machine hour (MH)
and Job 1041 required 320 MHs. If Job 1041 consisted of 5,000 ties, the cost of goods sold per tie
was:
A. $16.40
B. $50.00
C. $14.80
D. $22.00
Question 9:
Harrington Company uses predetermined overhead rates to apply manufacturing overhead to jobs.
The predetermined overhead rate is based on machine hours in the Machining Department and
direct labor cost in the Assembly Department. At the beginning of the year, the company made the
following estimates:
Machining Assembly
Direct labor hours 16,000 DLHs 12,000 DLHs
Direct labor costs $20,000 $15,000
Machine hours 5,000 hours 1,000 hours
Manufacturing overhead $25,000 $30,000
What predetermined overhead rates would be used in the Machining and Assembly Departments,
respectively?
A. $8.00 and 50%
B. $5.00 and 200%
C. $5.00 and 50%
D. 110% and $15

Question 10:
Which of the following statements is true?
A. Companies that produce many different products or services would use job-order costing
systems
B. Job-order costing systems cannot be used by service firms
C. Costs are traced to departments and then allocated to units of product when job-order costing is
used
D. All answers are correct
 CHAPTER 7: PROCESS COSTING
Question 1:
Erie Company uses the weighted-average method in its process costing system. The company has
only a single processing department. The company's ending work in process inventory consisted
of 36,000 units. The units in the ending work in process inventory were 50% complete with respect
to materials and 30% complete with respect to labor and overhead. If the costs per equivalent unit
for the current period were $5.50 for materials and $8.50 for labor and overhead, the total cost
assigned to the ending work in process inventory was:
A. $190,800
B. $151,200
C. $160,200
D. $252,000

Question 2:
In a process costing system, the journal entry used to record the transfer of units from Department
A, a processing department, to Department B, the next processing department, includes a debit to:
A. Finished Goods and a credit to Work in Process - Department B
B. Work in Process - Department B and a credit to Work in Process - Department A
C. Work in Process - Department A and a credit to Work in Process - Department B
D. Work in Process - Department B and a credit to Materials

Question 3:
Addingly Company uses the weighted-average method in its process costing system. The
following information pertains to one of its processing departments for the current month:
Number of units Cost of materials
Beginning work in process 60,000 $20,000
Started during the month 160,000 $54,000
Units completed 170,000
Ending work in process 50,000
All materials are added at the beginning of the process. The cost per equivalent unit for materials
is closest to:
A. $1.48
B. $0.25
C. $0.34
D. $0.44

Question 4:
Ontario Company uses the weighted-average method in its process costing system. The Baking
Department is the third department in its production process. The data below summarize the
department's operations during the current month:
Beginning work in process inventory 14,200 units
(35% complete as to conversion)
Transferred in from the prior department 122,000 units
during the current month
Ending work in process inventory 9,200 units
(30% complete as to conversion)
The Baking Department's production report indicates that the cost per equivalent unit for
conversion cost for the current month was $8.24. How much conversion cost was assigned to the
units transferred out of the Baking Department during the current month?
A. $1,005,280
B. $1,046,480
C. $964,574.40
D. $1,122,288

Question 5:
The beginning work in process inventory in the Milling Department consisted of 10,000 units,
50% complete with respect to materials cost and 60% complete with respect to conversion costs.
The total cost of the beginning inventory was $60,000. During the month, 50,000 units were
transferred out of this department. The equivalent unit cost was computed to be $4.00 for materials
and $7.40 for conversion costs under the weighted-average method. Given this information, the
total cost of the units completed and transferred out of this department during the month was:
A. $510,000
B. $480,000
C. $540,000
D. $570,000

Question 6:
Barnes Company uses the weighted-average method in its process costing system. The company
sold 250,000 units during the current month. The following data were taken from the company's
accounting records:
Beginning inventories:
Work in process – Packing Department None
Finished goods 75,000 units
Ending inventories:
Work in process – Packing Department 16,000 units
(75% complete as to conversion costs)
Finished goods 60,000 units
What were the equivalent units of production for conversion costs in the Packing Department for
the current month?
A. 153,000 units
B. 251,000 units
C. 247,000 units
D. 235,000 units

Question 7:
Goethe Company uses the weighted-average method in its process costing system. The following
information was available about one of the company's processing departments:
- There were 108,000 equivalent units of production with respect to conversion costs during
the current month
- There were 15,000 units in the department's beginning work in process inventory, which
were two-thirds complete with respect to conversion costs
- During the current month, 105,000 units were started and 100,000 were completed and
transferred out of the department
The ending work in process inventory in the department:
A. Consisted of 5,000 units
B. Was 40% complete with respect to conversion costs
C. Consisted of 10,000 units
D. Was 65% complete with respect to conversion costs

Question 8:
Zook Company uses the weighted-average method in its process costing system. The following
data for the Mixing Department were taken from the company's accounting records:
Beginning work in process inventory 60,000 units
100% complete as to materials
80% complete as to conversion
Started in process during the period 180,000 units
Ending work in process inventory 40,000 units
100% complete as to materials
60% complete as to conversion
The equivalent units of production for conversion costs were:
A. 222,000 units
B. 204,000 units
C. 200,000 units
D. 224,000 units

Question 9:
Golden Company uses the weighted-average method in its process costing system. The following
information was available for one of its processing departments:
- The beginning work in process inventory consisted of 16,000 units, which were 75%
complete with respect to conversion costs
- The department converted the equivalent of 59,000 units of production during the current
month
- A total of 50,000 units were completed and transferred out of that department during the
current month.
- The ending work in process inventory consisted of 12,000 units, which were 50%
complete with respect to conversion costs
The number of units started during the month in that department was:
A. 29,000 units
B. 54,000 units
C. 42,000 units
D. 46,000 units

Question 10:
Which of the following statements is true?
A. A manufacturer of paper would ordinarily use process costing rather than job-order costing
B. If a company uses a process costing system it accumulates costs by processing department rather
than by job
C. The output of a processing department must be homogeneous in order to use process costing
D. All answers are correct
 QUIZ IN CLASS CHAPTER 6 AND CHAPTER 7
Question 1:
HMF Co. has two service departments serving two production departments. Overhead costs
allocated and apportioned to each department are as follows:
Production department Service centres
Mixing Stirring Administration Janitorial
Department $2,320,000 $950,000 $150,000 $40,000
costs before
allocations
Employee-hours 3,100 740 320 160
Space occupied- 4,000 1,000 250 100
square feet
The company uses the step-down method for apportioning the cost of administration service centre
first on the basis of employee-hours. After the apportionment of the service departments to the
production departments, what will the total overhead cost be for the mixing department?
A. $2,473,050
B. All answers are incorrect
C. $153,050
D. $2,468,250

Question 2:
The A Company has two departments, X and Y. Overhead is applied based on direct labor costs
in Department X and machine hours in Department Y. The following additional information is
available:
(1) Budgeted data for Job A35 is as follows:
Department X Department Y
Direct labor costs $180,000 $165,000
Factory overhead $225,000 $200,000
Machine hours 51,000 hours 40,000 hours
(2) Actual data for Job A35 is as follows:
Department X Department Y
Direct materials costs $15,000 $18,000
Direct labor costs $11,000 $14,000
Machine hours 5,000 hours 3,000 hours
Given that Job A35 consists of 50 units of product, what is the profit per unit if the selling price is
$2,000 per unit?
A. Profitable $540
B. Profitable $265
C. Profitable $98.8
D. Loss $10

Question 3:
Andy Company uses the FIFO method and normal costing approach in its process costing system.
According to the company's records, the direct labor costs in beginning work in process inventory
was $276,240,000 at the beginning of June. Additional direct labor costs of $27,624,000,000 were
incurred during the month. Andy Company started June with 500 units in its beginning work in
process inventory that were 40% complete with respect to direct labor costs. 18,000 finished goods
were completed in June. There were 880 units in the ending work in process inventory that were
70% complete with respect to direct labor costs. What was the cost per equivalent unit for direct
labor costs for the month?
A. $1,529,229 (rounded)
B. $1,508,190 (rounded)
C. $1,500,000
D. $1,515,000

Question 4:
Marlowe, Inc. uses the weighted average method in its process costing system. The following data
relate to operations for a recent month:
Beginning units in process 300 units
Completion with respect to conversion 80%
Conversion cost in beginning units $3,164
Units started during the month 26,000 units
Costs added to production during the month:
Conversion cost $887,000
Ending units in process 800 units
Completion with respect to conversion 40%
What was the cost per equivalent unit for conversion costs?
A. $34.50 per unit
B. $35.13 per unit
C. $34.70 per unit
D. All answers are incorrect

Question 5:
Anny company operates a normal costing system and absorbs (applies) production overhead to the
product costs based on machine hours. The budgeted fixed production overheads for the company
for the latest year were $405,000 at the units of 135,000 units and the standard machine hours for
every unit were 2 machine hours. At the end of the company's financial year, the total of the fixed
production overhead debited to the Fixed Production Overhead Control Account was $325,000.
The actual output achieved was 130,000 units and each unit required 2.2 machine hours. The under
or over absorption of overheads was:
A. $104,000 under absorbed
B. $104,000 over absorbed
C. $130,000 under absorbed
D. $130,000 over absorbed

Question 6:
Benny Corporation started to produce and sell a new product using a job order costing system
under normal costing approach. The transactions occurred during the month of July as follows:
(1) Requisitioned raw materials totaling $101,600 for the use in production. Of the total, $38,100
was for job A1, $35,400 for job B2 and the remainder for job C3
(2) Incurred direct labor for the month $38,000 with an average wage of $10 per labor hour. Job
A1 used 1,000 labor hours, job B2 used 2,000 labor hours and job C3 used 800 labor hours
(3) Incurred and paid actual manufacturing overhead of $40,000
(4) Charged manufacturing overhead to each job at the rate of $8 per direct labor hour
(5) Completed and transferred Job A1 and B2 to finished goods
(6) Job C3 was still incomplete
What is the double entry for Disposition of under or overapplied overhead? The company believes
that the under or overapplied manufacturing overhead should be considered material
A. DR Finished goods control account 7,200
DR Work in process control account 2,400
CR Manufacturing overhead control account 9,600
B. DR Manufacturing overhead control account 9,600
CR Finished goods control account 7,100
CR Work in process control account 2,500
C. DR Manufacturing overhead control account 9,600
CR Finished goods control account 7,200
CR Work in process control account 2,400
D. DR Finished goods control account 7,100
DR Work in process control account 2,500
CR Manufacturing overhead control account 9,600

Question 7:
Hall Company uses the weighted-average method in its process costing system. The production
department started the month with $20,000,000 of direct material costs in this beginning work in
process inventory. A total of $160,000,000 in direct material costs were incurred in the production
department during the month. All direct materials are added at the beginning of the process. As at
month-end, there were 60 units completed in the production department, 20 units in the ending
work in process inventory that were 50% completion, 10 units treated as normal losses as they are
substandard. The direct material cost of ending work in process inventory in the production
department according to the company's cost system is closest to:
A. $40,000,000
B. $22,500,000
C. $25,714,286
D. $45,000,000

Question 8:
The company applies a job-order costing system. During the period, the order 1012 consumed
$45,000,000 of direct material costs, $30,000,000 of direct labor costs based on the wage rate of
$7,500,000 each direct labor hour. The production overhead rate to allocate production overhead
costs was $12,500,000 per direct labor hour. The non-production costs were allocated at the rate
of 60% of the prime costs. The full cost of the order 1012 was calculated:
A. $240,000,000
B. $170,000,000
C. $195,000,000
D. $200,000,000

Question 9:
Mango, Inc. uses the FIFO method in its process costing system. All direct materials are added at
the beginning of the process. The following data relate to operations for a recent month:
Beginning units in process 80 units
 Direct material costs in beginning units $7,040
Units started during the month 2,000 units
Costs added to production during the month:
Direct material costs $160,000
Ending units in process 50 units
What was the cost per equivalent unit for direct material costs?
A. $80.20 per unit
B. All answers are incorrect
C. $80.31 per unit
D. $80.00 per unit

Question 10:
W Company uses a job-order costing system to account for product costs. The following
information pertains for a period:
Materials placed into production $140,000
Indirect labor $40,000
Direct labor (10,000 hours) $160,000
Depreciation of factory building $60,000
Other factory overheads $100,000
Increase in work-in-process inventory $30,000
Factory overhead rate $18 per direct labor hour
What is the total amount debited to Finished Goods Inventory for the period?
A. $450,000
B. $490,000
C. $550,000
D. $510,000

Question 11:
A company owns 800 units of work-in-process at the beginning of the period, 10,000 units started
in process and 400 units of work-in-process at the end of the period, with a completion rate of 60%
for labor costs. The equivalent units of production for labor under the FIFO approach is 10,080
units. What is the completion percentage of beginning work-in-process for the labor item?
A. 30%
B. 50%
C. 40%
D. 70%