I got 4 wrong

1
Luca Company overapplied manufacturing overhead during 2006. Which one of the following is part of
the year end entry to dispose of the overapplied amount assuming the amount is material?

An increase to finished goods

A decrease to applied overhead

An increase to cost of goods sold

A decrease to work in process inventory

2
An activity that has a direct cause-effect relationship with the resources consumed is a(n)

overhead rate

cost driver

product activity

cost pool
3
Max Company uses 10,000 units of Part A in producing its products. A supplier offers to make Part A for
$7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the
opportunity cost of buying Part A from the supplier is

$80,000

$10,000

$70,000

$0
4
The difference between a budget and a standard is that

a budget expresses a total amount while a standard expresses a unit amount

standards are excluded from the cost accounting system, whereas budgets are generally
incorporated into the cost accounting system

a budget expresses what costs were, while a standard expresses what costs should be

a budget expresses management's plans, while a standard reflects what actually happened
5
Which of the following is NOT typical of traditional costing systems?

Use of direct labor hours or direct labor cost to assign overhead

Use of multiple cost drivers to allocate overhead

Use of a single predetermined overhead rate

Assumption of correlation between direct labor and incurrence of overhead cost

6
Which of the following would be accounted for using a job order cost system?

The production of town homes

The pasteurization of milk

The production of cans of spinach

The production of textbooks

7
A company developed the following per-unit standards for its product: 2 pounds of direct materials at $6
per pound. Last month, 2,000 pounds of direct materials were purchased for $11,400. The direct
materials price variance for last month was

$11,400 favorable

$300 favorable

$600 unfavorable

$600 favorable
8
Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of
setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the
two products is:

Mini A
Direct labor hours
Machine setups
Machine hours
Inspections

Maxi B
15,000
600
24,000
800

Overhead applied to Mini A using traditional costing using direct labor hours is

$1,670,000

$1,536,000

$1,200,000

$1,920,000

25,000
400
26,000
700

9
A company must price its product to cover its costs and earn a reasonable profit in

the long run

all cases

its early years

the short run

10
Manufacturing overhead costs are applied to work in process on the basis of

ratio of actual variable to fixed costs

actual overhead costs incurred

standard hours allowed

actual hours worked

11
Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April. Each mug requires
2 pounds of resin and a half hour of direct labor. Resin costs $1 per pound and employees of the
company are paid $12.50 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor
costs. Gottberg has 2,000 pounds of resin in beginning inventory and wants to have 2,400 pounds in
ending inventory. How much is the total amount of budgeted direct labor for April?

$12,500

$25,000

$13,750

$27,500
12
Which of the following represents the two basic types of cost accounting systems?

Job order and process cost systems

Job order and job accumulation systems

Job order and batch systems

Process cost and batch systems

13
Which one of the following is NEVER part of recording the issuance of raw materials in a job order
cost system?

Debit Finished Goods Inventory

Credit Raw Materials Inventory

Debit Manufacturing Overhead

Debit Work in Process Inventory

14
Which of the following statements is FALSE ?

A standard is a unit amount.

The standard cost of a product is equivalent to the budgeted cost per unit of product.

A standard cost is more accurate than a budgeted cost.

In concept, standards and budgets are essentially the same.

15
Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs of $74,400 and
sales for the current year of $100,000. How much is Hesss break-even point?

2,133 units

4,600 units

$25,600

6,200 units
16
H55 Company sells two products, beer and wine. Beer has a 10 percent profit margin and wine has a 12
percent profit margin. Beer has a 27 percent contribution margin and wine has a 25 percent contribution
margin. If other factors are equal, which product should H55 push to customers?

It should sell an equal quantity of both.

Wine

Beer

Selling either results in the same additional income for the company
17
One of Astro Company's activity cost pools is machine setups, with estimated overhead of $150,000.
Astro produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost
pool should be assigned to sparklers?

$90,000

$75,000

$150,000

$60,000
18
The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to $11 per unit. In
2006, Supplier Company has offered to supply Part A for $9 per unit. For the make-or-buy decision,

incremental costs are $1 per unit

net relevant costs are $1 per unit

incremental revenues are $2 per unit

differential costs are $2 per unit

19
What is the best way to handle manufacturing overhead costs in order to get the most timely job cost
information?

The company should apply overhead using an estimated rate throughout the year.

The company should account for only the direct production costs.

The company should add actual manufacturing overhead costs to jobs as soon as the overhead
costs are incurred.

The company should determine an allocation rate as soon as the actual costs are known, and
then apply manufacturing overhead to jobs.
20
Managerial accounting

places emphasis on special-purpose information

is governed by generally accepted accounting principles

pertains to the entity as a whole and is highly aggregated

is concerned with costing products

21
The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 2,400
units, the actual direct labor cost was $51,200 for 4,000 direct labor hours worked, the total direct labor
variance is

$6,400 favorable

$6,400 unfavorable

$4,000 unfavorable

$1,920 unfavorable
22
Disneys variable costs are 30% of sales. The company is contemplating an advertising campaign that
will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income
increase?

$12,000

$6,000

$28,000

$18,000
23
All of the following statements are correct EXCEPT that

the general approach to identifying activities and activity cost pools is the same in a service
company as in a manufacturing company

the objective of installing ABC in service firms is different than it is in a manufacturing firm

a larger proportion of overhead costs are company-wide costs in service industries

activity-based costing has been widely adopted in service industries

24
In most cases, prices are set by the

competitive market

customers

largest competitor

selling company
25
Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for $18 each. If
Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12 per unit; however, $5 per
unit is avoidable. Should Truckel make or buy the wickets?

Make; savings = $10,000

Make; savings = $20,000

Buy; savings = $10,000

Buy; savings = $25,000

26
What broad functions does the management of an organization perform?

Directing, manufacturing, and controlling

Planning, directing, and controlling

Planning, manufacturing, and controlling

Planning, directing, and selling

27
A standard cost is

a cost which is paid for a group of similar products

a predetermined cost

the historical cost of producing a product last year

the average cost in an industry

28
Which of the following factors would suggest a switch to activity-based costing?

Product lines similar in volume and manufacturing complexity.

Production managers use data provided by the existing system.

The manufacturing process has been stable.

Overhead costs constitute a significant portion of total costs.

29
Which cost is NOT charged to the product under absorption costing?

Direct materials

Variable manufacturing overhead

Direct labor

Fixed administrative expenses

30
The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month, 11,200 gallons of
direct materials that actually cost $42,400 were used to produce 6,000 units of product. The direct
materials quantity variance for last month was

$3,200 unfavorable

$2,400 favorable

$3,200 favorable

$5,600 unfavorable
31
At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates it will sell
35,000 units during the first quarter of 2004 with a 10% increase in sales each quarter. Barrys policy is
to maintain an ending inventory equal to 25% of the next quarters sales. Each widget costs $1 and is
sold for $1.50. How much is budgeted sales revenue for the third quarter of 2004?

$63,525

$63,000

$42,350

$57,525
32
Which cost is charged to the product under variable costing?

Variable administrative expenses

Variable manufacturing overhead

Fixed administrative expenses

Fixed manufacturing overhead

33
At the end of the year, manufacturing overhead has been overapplied. What occurred to create this
situation?

The company incurred more manufacturing overhead costs than the manufacturing overhead
assigned to jobs.

The actual manufacturing overhead costs were less than the manufacturing overhead assigned
to jobs.

Estimated manufacturing overhead was less than actual manufacturing overhead costs.

The company incurred more total job costs than the amount budgeted for the job.
34
If the standard hours allowed are less than the standard hours at normal capacity,

variable overhead costs will be overapplied

variable overhead costs will be underapplied

the overhead controllable variance will be favorable

the overhead volume variance will be unfavorable

35
Wacos Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during July.
Waco keeps 10% of the next months sales as ending inventory. How many units should Waco produce
during June?

19,100

19,000

21,000

18,900
36
Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of
setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the
two products is:

Mini A
Direct labor hours
Machine setups
Machine hours
Inspections

Maxi B
15,000
600
24,000
800

Overhead applied to Maxi B using traditional costing using direct labor hours is

$1,536,000

25,000
400
26,000
700

$1,280,000

$1,670,000

$2,000,000
37
Prices are set by the competitive market when

a product is not easily distinguished from competing products

the product is specially made for a customer

there are no other producers capable of manufacturing a similar item

a company can effectively differentiate its product from others

38
Which cost is NOT charged to the product under variable costing?

Direct labor

Variable manufacturing overhead

Direct materials

Fixed manufacturing overhead

39
Which one of the following is indirect labor considered?

Period cost

Raw material cost

Product cost

Nonmanufacturing cost
40
Which of the following statements is FALSE ?

The costs that cause the overhead volume variance are usually controllable costs.

The overhead volume variance is favorable if standard hours allowed for output is greater than
the standard hours at normal capacity.

The overhead volume variance relates solely to fixed costs.

The overhead volume variance indicates whether plant facilities were used efficiently during
the period.
41
What sometimes makes implementation of activity-based costing difficult in service industries is

identifying activities, activity cost plus, and cost drivers

that a larger proportion of overhead costs are company-wide costs

attempting to reduce or eliminate nonvalue-added activities

the labeling of activities as value-added

42
In traditional costing systems, overhead is generally applied based on

direct material dollars

units of production

machine hours

direct labor