1) What is the best way to handle manufacturing overhead costsin order to get the most timely job cost information?
A. The company should add actual manufacturing overhead costs tojobs as soon as the overhead costs are incurred.
B. The company should determine an allocation rate as soon as theactual costs are known, and then apply manufacturing overhead tojobs.
C. The company should apply overhead using an estimated ratethroughout the year. D. The company should account for only thedirect production costs.
2) At the end of the year, manufacturing overhead has beenoverapplied. What occurred to create this situation?
A. The company incurred more manufacturing overhead costs than themanufacturing overhead assigned to jobs
B. The actual manufacturing overhead costs were less than themanufacturing overhead assigned to jobs
C. The company incurred more total job costs than the amountbudgeted for the job
D. Estimated manufacturing overhead was less than actualmanufacturing overhead costs
3) Luca Company overapplied manufacturing overhead during 2006.Which one of the following is part of the year end entry to disposeof the overapplied amount assuming the amount is material
A. A decrease to work in process inventory
B. A decrease to applied overhead
C. An increase to finished goods
D. An increase to cost of goods sold
4) Which of the following would be accounted for using a job ordercost system?
A. The production of textbooks
B. The production of town homes
C. The pasteurization of milk
D. The production of cans of spinach
5) Which one of the following is NEVER part of recording theissuance of raw materials in a job order cost system?
A. Debit Manufacturing Overhead
B. Debit Finished Goods Inventory
C. Debit Work in Process Inventory
D. Credit Raw Materials Inventory
Finished Goods Inventory is debited when goods are transferred fromwork in process to finished goods, not when raw materials areissued for a job.
6. What is unique about the flow of costs in a job order costsystem?
A. It involves accumulating material, labor, and manufacturingoverhead costs as they are incurred in order to determine the jobcost
B. Each job is costed separately in a Work in Process subsidiaryledger
C. Job costs cannot be measured until all overhead costs aredetermined
D. There are no costs remaining in Work in Process at year end
7) Which one of the following costs would be included inmanufacturing overhead of a lawn mower manufacturer?
A. The cost of the fuel lines that run from the motor to the gastank
B. The cost of the wheels
C. Depreciation on the testing equipment
D. The wages earned by motor assemblers
Depreciation on testing equipment would be included inmanufacturing overhead because it is indirectly associated with thefinished product.
8) What broad functions do the management of an organizationperform?
A. Planning, directing, and controlling
B. Directing, manufacturing, and controlling
C. Planning, directing, and selling
D. Planning, manufacturing, and controlling
9) Which of the following represents the correct order in whichinventories are reported on a manufacturer’s balance sheet?
A. Work in process, finished goods raw materials
B. Raw materials, work in process, finished goods
C. Finished goods, work in process, raw materials
D. Work in process, raw materials, finished goods
10) In traditional costing systems, overhead is generally appliedbased on
A. machine hours
B. direct labor
C. direct material dollars
D. units of production
11) An activity that has a direct cause-effect relationship withthe resources consumed is a(n)
A. overhead rate
B. product activity
C. cost driver
D. cost pool
12) A well-designed activity-based costing system starts with
A. computing the activity-based overhead rate
B. analyzing the activities performed to manufacture a product
C. identifying the activity-cost pools
D. assigning manufacturing overhead costs for each activity costpool to products
13) Which of the following factors would suggest a switch toactivity-based costing?
A. Overhead costs constitute a significant portion of totalcosts
B. Production managers use data provided by the existingsystem.
C. Product lines similar in volume and manufacturing complexity
D. The manufacturing process has been stable
14) All of the following statements are correct EXCEPT that
A. the objective of installing ABC in service firms is differentthan it is in a manufacturing firm
B. the general approach to identifying activities and activity costpools is the same in a service company as in a manufacturingcompany
C. activity-based costing has been widely adopted in serviceindustries
D. a larger proportion of overhead costs are company-wide costs inservice industries
15) What sometimes makes implementation of activity-based costingdifficult in service industries is
A. identifying activities, activity cost plus, and cost drivers
B. attempting to reduce or eliminate nonvalue-added activities
C. the labeling of activities as value-added
D. that a larger proportion of overhead costs are company-widecosts
16) One of Astro Company’s activity cost pools is machine setups,with estimated overhead of $150,000. Astro produces sparklers (400setups) and lighters (600 setups). How much of the machine setupcost pool should be assigned to sparklers?
A. $60,000
B. $90,000
C. $150,000
D. $75,000
17) 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 thetwo products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using activity-based costing is
A. $1,536,000
B. $1,664,000
C. $1,920,000
D. $1,200,000
18) 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 thetwo products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Maxi B using activity-based costingis
A. $1,536,000
B. $1,664,000
C. $2,000,000
D. $1,280,000
19) Seran Company has contacted Truckel Inc. with an offer to sellit 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 thewickets?
A. Buy; savings = $10,000
B. Make; savings = $20,000
C. Make; savings = $10,000
D. Buy; savings = $25,000
20) Rosen, Inc. has 10,000 obsolete calculators, which are carriedin inventory at a cost of $20,000. If the calculators are scrapped,they can be sold for $1.10 each (for parts). If they arerepackaged, at a cost of $15,000, they could be sold to toy storesfor $2.50 per unit. What alternative should be chosen, and why?
A. Repackage; revenue is $5,000 greater than cost
B. Scrap; incremental loss is $9,000
C. Repackage; receive profit of $10,000
D. Scrap; profit is $1,000 greater
21) The cost to produce Part A was $10 per unit in 2005. During2006, it has increased to $11 per unit. In 2006, Supplier Companyhas offered to supply Part A for $9 per unit. For the make-or-buydecision
A. incremental costs are $1 per unit
B. net relevant costs are $1 per unit
C. differential costs are $2 per unit
D. incremental revenues are $2 per unit
22) Hartley, Inc. has one product with a selling price per unit of$200, the unit variable cost is $75, and the total monthly fixedcosts are $300,000. How much is Hartley’s contribution marginratio?
A. 37.5%
B. 150%
C. 266.6%
D. 62.5%.
23. Which statement describes a fixed cost?
A. The amount per unit varies depending on the activity level
B. It varies in total at every level of activity
C. It remains the same per unit regardless of activity level
D. Its total varies proportionally to the level of activity
24) Disney’s variable costs are 30% of sales. The company iscontemplating an advertising campaign that will cost $22,000. Ifsales are expected to increase $40,000, by how much will thecompany’s net income increase?
A. $28,000
B. $18,000
C. $6,000
D. $12,000
25) Variable costing
A. is required under GAAP
B. is used for external reporting purposes
C. is also known as full costing
D. treats fixed manufacturing overhead as a period cost
26) Which cost is NOT charged to the product under variablecosting?
A. Direct labor
B. Direct materials
C. Fixed manufacturing overhead
D. Variable manufacturing overhead
27) Orbach Company sells its product for $40 per unit. During 2005,it produced 60,000 units and sold 50,000 units (there was nobeginning inventory). Costs per unit are: direct materials $10,direct labor $6, and variable overhead $2. Fixed costs are:$480,000 manufacturing overhead, and $60,000 selling andadministrative expenses. The per unit manufacturing cost underabsorption costing is
A. $18
B. $16
C. $27
D. $26
28) Which of the following is NOT considered an advantage of usingstandard costs?
A. Standard costs can be useful in setting prices for finishedgoods
B. Standard costs can reduce clerical costs
C. Standard costs can make employees “cost-conscious.”
D. Standard costs can be used as a means of finding fault withperformance
29) The difference between a budget and a standard is that
A. a budget expresses management’s plans, while a standard reflectswhat actually happened
B. standards are excluded from the cost accounting system, whereasbudgets are generally incorporated into the cost accountingsystem
C. a budget expresses a total amount while a standard expresses aunit amount
D. a budget expresses what costs were, while a standard expresseswhat costs should be
30) If a company is concerned with the potential negative effectsof establishing standards, they should
A. offer wage incentives to those meeting standards
B. set tight standards in order to motivate people
C. not employ any standards
D. set loose standards that are easy to fulfill
31) The per-unit standards for direct materials are 2 gallons at $4per gallon. Last month, 11,200 gallons of direct materials thatactually cost $42,400 were used to produce 6,000 units of product.The direct materials quantity variance for last month was
A. $2,400 favorable
B. $5,600 unfavorable
C. $3,200 unfavorable
D. $3,200 favorable
32) The standard number of hours that should have been worked forthe output attained is 8,000 direct labor hours and the actualnumber of direct labor hours worked was 8,400. If the direct laborprice variance was $8,400 unfavorable, and the standard rate of paywas $18 per direct labor hour, what was the actual rate of pay fordirect labor?
A. $15 per direct labor hour
B. $18 per direct labor hour
C. $19 per direct labor hour
D. $17 per direct labor hour
33) The total variance is $10,000. The total materials variance is$4,000. The total labor variance is twice the total overheadvariance. What is the total overhead variance?
A. $2,000
B. $4,000
C. $3,000
D. $1,000…
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