ACG Practice Exam 2

Damon purchased a $140 ticket to a December game of the Jacksonville Jaguars in July. Parking for the game was expected to cost approximately $21, and Damon would probably spend another $11 for food. Is it now December, the Jaguars have had a miserable season, and the weather for the game looks terrible. Damon is thinking of skipping the game and going out to eat with friends. Damon expects the dinner to cost $100. The amount of sunk cost that should influence Damon's decision to hang out with friends is:

$0

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $189 per hour; the related hourly variable costs are $69, and the related fixed operating costs are $11. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest whole dollar.

$120

ABC Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses takes 45,000 direct labor hours and involves 1,700 parts and 115 inspections. The manufacturing of tinted glasses takes 115,000 direct labor hours and involves 1,400 parts and 450 inspections. The traditional method applies $560,000 of overhead on the basis of direct labor hours. What is the amount of overhead per direct labor hour applied to the clear glass products?

$157,500 The overhead rate = $560,000/(45,000 + 115,000) = $3.50 per direct labor hour. The labor applied to the clear product = $3.50 per direct labor hour × 45,000 direct labor hours.

Cost Pool - Packaging & Shipping Estimated Total Costs- $63,000 Cost Driver- Number of boxes shipped Estimated Annual Activity- 15,000 boxes During the period, 4,000 items were sold, reflecting 800 orders that were packed and shipped in 2,100 boxes. What amount is allocated to each box for packing and shipping?

$4.20 (Estimated Total Cost / Estimated Annual)

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $193 per hour; the related hourly variable costs are $73, and the related fixed operating costs are $15. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest whole dollar.

120

ABC Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using machine hours. Enter your response with two decimals (i.e., 2.46) and without a $ sign or comma.

20.00 OH/estimated cost driver

Direct material costs $4 per unit, direct labor costs $8 per unit, and overhead is applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred to the next department if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory? Enter your response rounded to the nearest whole number. Do not enter a comma or $ sign.

200,000 (2000+9000-1000) = 10,000 DM = 10000 * 4 DL = 10000 * 8 OH= 10000 * 8

A company calculated the predetermined overhead based on an estimated overhead of $70,000, and the activity for the cost driver was estimated as 2,500 hours. If product A utilized 1,202 hours and product B utilized 1,098 hours, what was the total amount of overhead assigned to the products? Enter your response rounded to the nearest whole number and without a comma or $ sign.

64400

ABC Co., currently makes 10,000 units of a product that has created a number of manufacturing problems. ABC's costs are as follows: Manufacturing Costs: Variable $540,000 Fixed 178,031 Allocated corporate administrative costs 60,000 If ABC were to discontinue production, fixed manufacturing costs would be reduced by 70%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest dollar.

664622 VC + (FC*0.7)

A company calculated the predetermined overhead based on an estimated overhead of $70,000, and the activity for the cost driver was estimated as 2,500 hours. If product A utilized 1,327 hours and product B utilized 1,086 hours, what was the total amount of overhead assigned to the products? Enter your response rounded to the nearest whole number and without a comma or $ sign.

67,564 OH/cost driver= 28 (1327 + 1086)

The initial processing department had a beginning inventory of 769 units and an ending inventory of 1,362 units, and it started 9,500 units into production. How many were transferred out to the next department? Enter your response rounded to the nearest whole number and without a comma or $ sign.

8907

Which of the following is not a qualitative decision that should be considered in an outsourcing decision? A) relevant costs B) product quality C) company reputation D) employee morale

A

Which of the following types of companies would most likely use process costing? A) custom-machining firms B) textile manufacturers C) aircraft manufacturers D) textbook publishers

B

Fill in the missing items for the following inventories: Product A Beginning balance - $14,200 Ending Balance - ? Transferred In - $44,000 Transferred Out - $45,800 Product B Beginning balance - ? Ending Balance - $28,000 Transferred In - $79,500 Transferred Out - $85,000 Product C Beginning balance - $17,000 Ending Balance - $16,000 Transferred In - ? Transferred Out - $19,000 Enter your responses without a $ sign or decimal, i.e., 14000

Beg bal + Trans in - End bal = Trans out A: 12,400 B: 33,500 C: 18,000

A cost not relevant to deciding whether to purchase a new machine is: A) Additional training required for operating the new machine B) Lower maintenance costs for the new machine C) The cost of the old machine D) The cost of the new machine

C

Which of the following cost drivers would best be associated with the activity of a physician time in a medical clinic? A) Number of continuing patient visits B) Number of new patient visits C) Physician minutes with a patient D) Number of items on the clinic's bill

C

Which of the following product situations is better suited to job order costing than to process costing? A) Costs are accumulated by department. B) The value of work in process is based on assigning standard costs. C) The costs are easily traced to a specific product. D) Each product batch is exactly the same as the prior batch.

C

The Shoe Department at the Knights Department Store is being considered for closure. The following information related to shoe department activity: Sales revenue $350,000 Variable costs: Cost of goods sold 280,000 Sales commissions 30,000 Fixed operating costs 90,000 If 70% of the fixed operating costs are avoidable, should the shoe department be closed? A) Yes, Knights would be better off by $50,000 B) No, Knights would be worse off by $40,000 C) Yes, Knights would be better off by $23,000 D) No, Knights would be worse off by $13,000

C (350K - 310K=-40K + 63K = 23K) SP - VC = CM (this will be a negative number added to the avoidable costs)

In activity-based costing system, direct materials used would typically be classified as a: A) matric level cost B) batch-level cost C) facility-level cost D) unit-level cost E) product-sustaining cost

D

Factors in a decision problem that cannot be expressed in numerical terms are:

Qualitative in nature

ABC Co., currently makes 10,000 units of a product that has created a number of manufacturing problems. ABC's costs are as follows: Manufacturing Costs: Variable $540,000 Fixed $170,101 Allocated corporate administrative costs $60,000 If ABC were to discontinue production, fixed manufacturing costs would be reduced by 70%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest dollar.

VC + avoidable cost = 659,071 *allocated = irrelevant

A job order costing system is most likely used by which of the following? an accounting firm specializing in tax returns a paper mnufacturing company a pet food manufacturer a toy manufacturing company

an accounting firm specializing in tax returns

The following costs are relevant to the decision situation cited except: a) the commission that could be earned by a salesperon in a decision that involves salesperson compensation methods (such as commissions or flat salaries) b) the cost of hiring a full-time staff attorney in a decision to establish an in-house legal department c) the remodeling cost of an existing office space in a decision to remain in its current location or move to a new location d) the cost to enhance an airlines beverage service in a decision to expand existing service to either Salt Lake City or Phoenix

d) the cost to enhance an airlines beverage service in a decision to expand existing service to either Salt Lake City or Phoenix

The cost of inventory owned by a company is considered a: decision cost sunk cost opportunity cost relevant cost economic cost

sunk cost

The controller for Knights Co. estimates that the company's fixed overhead is $160,000 per year. They have also determined that the variable overhead is approximately $0.25 per unit. Since the company has s single product, overhead is applied on the basis of output units. What is the predetermined overhead per unit if the estimated output is 80,000 units?

$2.25 [160K + (0.25*80,000)] / 80,000

ABC Co. makes batches of custom novelty items or other companies to give away at career fairs. Job A11 consists of 2,000 pens that light up inside the pen base when used. In addition, a specialized logo is printed on the pens. Direct materials for these pens amount to $1,400; direct labor is $2,200; and manufacturing overhead is $1,800. Based on this information, what is the cost per pen for Job A11?

$2.70 (DM+DL+MOH)/Units = $2.70

A company anticipates the cost to heat the building will be $28,800. Product A takes up 450 square feet of space, while Product B takes up 350 square feet. The activity rate per product using activity-based costing would be which of the following?

$36 per square ft =28800 / (450 + 350)

ABC Co. makes batches of custom novelty items or other companies to give away at career fairs. Job A11 consists of 2,000 pens that light up inside the pen base when used. In addition, a specialized logo is printed on the pens. Direct materials for these pens amount to $1,500; direct labor is $2,800; and manufacturing overhead is $1,600. Based on this information, what is the cost per pen for Job A11?

(1500+1600+2800)/2000 = $2.95

ABC Corp., which has excess capacity, received a special order for 4,901 units at a price of $16 per unit. Currently, production and sales are anticipated to be 12,000 units without considering the special order. The budget information related to the current year is as follows: Sales $252,000 Less: Cost of goods sold 180,000 Gross margin $72,000 The cost of goods sold includes $36,000 of fixed manufacturing costs. If the special order is accepted, the company's income will increase by: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest dollar.

(SP - VC) Special Order Units *COGS - FC = VC

ABC Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using direct labor dollars. Enter your response with two decimals (i.e., 2.46) and without a $ sign or comma.

0.10

ABC Manufacturing uses activity-based costing. Each product consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information is as follows: Acitivity - Materials handling Allocation Base - Number of parts Cost Allocation Rate -$0.05 Acitivity - Machine operations Allocation Base - Number of hours Cost Allocation Rate - $5.22 Acitivity - Assembling Allocation Base - Number of parts Cost Allocation Rate - $0.35 What is the cost of materials handling per product? Enter your response with two decimals but without a comma or $ sign.

1

A company estimated 100,000 direct labor hours and $800,000 in overhead. The actual overhead was $805,100, and there were 99,900 direct labor hours. 1. What is the predetermined overhead rate? 2. How much was applied during the year? Enter your response with two decimals. Do not include a comma or a $ sign.

1. 8.00 (POMHR = est OH/estimated cost driver) 2. 799,200.00 (Overhead applied = POMHR x Actual Cost Driver

Match the concept to its correct description. job order costing- predetermined overhead rate- process costing- underapplied overhead- overapplied overhead-

1. the cost accounting system used by law firms 2. computes the overhead applied to each job 3. the cost accounting system used by pet food manufacturers 4. when the actual overhead is more than the amount assigned to each specific job 5. the result when the actual overhead is less than the amount assigned to each specific job

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $182 per hour; the related hourly variable costs are $73, and the related fixed operating costs are $11. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest whole dollar.

109

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $194 per hour; the related hourly variable costs are $65, and the related fixed operating costs are $15. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest whole dollar.

129; SP - VC

ABC Enterprises has been approached about providing a new service to its clients. The company will bill clients $200 per hour; the related hourly variable costs are $68, and the related fixed operating costs are $11. If all employees are currently working at full capacity on other client matters, the per-hour opportunity cost of being unable to provide this new service is: Enter your responses without a $ sign or decimal, i.e., 14000. Round to the nearest whole dollar.

132 SP-VC= (200-68)

ABC Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses takes 45,000 direct labor hours and involves 1,700 parts and 115 inspections. The manufacturing of tinted glasses takes 115,000 direct labor hours and involves 1,400 parts and 450 inspections. The traditional method applies $560,000 of overhead on the basis of direct labor hours. What is the amount of overhead per direct labor hour applied to the clear glass products?

157,500 The overhead rate = $560,000/(45,000 + 115,000) = $3.50 per direct labor hour. The labor applied to the clear product = $3.50 per direct labor hour × 45,000 direct labor hours.

ABC Manufacturing uses activity-based costing. Each product consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information is as follows: Acitivity - Materials handling Allocation Base - Number of parts Cost Allocation Rate -$0.1 Acitivity - Machine operations Allocation Base - Number of hours Cost Allocation Rate - $5.22 Acitivity - Assembling Allocation Base - Number of parts Cost Allocation Rate - $0.35 What is the cost of materials handling per product? Enter your response with two decimals but without a comma or $ sign.

2.00

ABC manufactures small and large blankets. It estimates $350,000 in overhead during the manufacturing of 75,000 small blankets and 25,000 large blankets. What is the predetermined overhead rate if a small blanket takes 1 machine hour and a large blanket takes 2 machine hours? Enter your response to 2 decimals. Do not include a comma or a $ sign.

2.80 350000/(75000+(2*25000) = 2.80

ABC Company makes backpacking tents. It has the capacity to produce 10,000 tents per year and is currently producing and selling 7,000 tents. The normal selling price for a tent is $470. Unit-level costs are $100 for direct materials, $200 for direct labor, and $25 for other manufacturing costs. Facility-level costs of $80 are allocated to each tent. ABC Company has received a special order for 1,467 tents at $340 each. How much income will ABC Company make on the special order? Enter your response without a comma or $ sign. Round to the nearest whole number.

22,005

Seashore Furniture has selected direct labor hours as its allocation base. The budgeted manufacturing overhead costs are $328,039 for products that are expected to use a total of 5,995 direct labor hours. What is the predetermined overhead rate? When entering your answer, round to the nearest dollar. Do not include commas or a $ sign (i.e., 24).

55

The initial processing department had a beginning inventory of 755 units and an ending inventory of 1,316 units, and it started 9,500 units into production. How many were transferred out to the next department? Enter your response rounded to the nearest whole number and without a comma or $ sign.

8939 BB-Trans In+EB= Trans out

Which of the following is a reason a company would implement activity-based costing? A) They want to improve the data on which decisions are made. B) The additional data obtained through traditional allocation are not worth the cost. C) A company only has one cost driver D) The cost of record keeping is high.

A

ABC Production manufactures products X and Y and has been applying overhead on the basis of direct labor hours. Product X is a high-volume product and relatively simplistic in nature. Product Y is a low-volume product that requires a variety of complex manufacturing procedures. What would an activity-based costing system likely disclose about products X and Y? A) Product X was overcosted and product Y was undercosted B) Products X and Y were both undercosted C) Product X was undercosted and product Y was overrcosted D) Products X and Y were both overcosted E) Products X and Y were both costed correctly

A) Product X was overcosted and product Y was undercosted

Which of the following would activity-based costing most likely lead to? A) Raising the sale price of low-volume products B) Cutting back on high-volume products that appear to be unprofitable C) Expanding low-volume products that appear to be profitable D) Raising the sale price of high-volume products.

A) Raising the sale price of low-volume products

ABC Co.,is analyzing whether to expand operations by adding a new product line. Which of the following choices correctly identifies the costs that should be considered in this decision? A) Opportunity and sunk costs B) Opportunity cost only C) No costs noted D) Sunk cost only

B

Activity-based costing systems: A) limit the number of cost pools B) frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C) use a single predetermined overhead rate based on machine hours instead of on direct labor D) always result in an increase of at least one product's selling price

B

Consider the following statements regarding traditional costing systems. Which of the statements is the most accurate? A) All manufacturing costs are easily traceable to the goods produced B) Overhead costs are applied to products on the basis of volume-related measures and traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements C) Overhead costs are applied to products on the basis of volume-related measures D) Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements E) All manufacturing costs are easily traceable to the goods produced and traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements

B

Manufacturing overhead: A) includes direct materials, indirect materials, indirect labor, and factory depreciation B) is a pool of indirect production costs that must somehow be attached to each unit manufactured C) includes selling costs D) is easily traced to jobs E) should not be assigned to individual jobs because it bears no obvious relationship to them

B

Which statement is correct? A) Activity-based cost systems provide the same data as traditional cost systems. B) Activity-based cost systems are easier to implement than traditional cost systems. C) Activity-based cost systems are less costly than traditional cost systems. D) Activity-based cost systems are more accurate than traditional cost systems.

D

ABC Company is trying to decide whether to replace an old machine with a new one. The following data were analyzed. Cost savings per year on new machine $100,000 New machine cost $150,000 Revenue from sale of old machine $10,000 Book value of old machine $25,000 The purchase of a new machine would have what effect on net income?

Net decrease of 40,000

Which of the following is most likely to be a cost driver for a packaging and shipping activity? Hours of testing Estimted product costs Number of orders Number of components Number of setups

Number of orders

A cost not relevant to deciding whether to purchase a new machine is: Lower maintenance costs for the new machine The cost of the new machine The cost of the old machine Additional training required for operating the new machine

The cost of the old machine

The Shoe Department at the Knights Department Store is being considered for closure. The following information related to shoe department activity: Sales revenue $352,000 Variable costs: Cost of goods sold 282,000 Sales commissions 32,000 Fixed operating costs 92,000 If 80% of the fixed operating costs are avoidable, should the shoe department be closed?

Yes, Knights would be better off by $35,600 -(SP-COGS-SC) + Avoidable Cost

Activity-based costing systems: A) typically have fewer cost drivers than more traditional costing systems B) use a single volume-based cost driver C) assign overhead to products based on the products' relative usage of labor hours D) often reveal products that were under- or over-costed by traditional costing systems E) have a tendency to distort product costs

often reveal products that were under- or over-costed by traditional costing systems

Which if the following costs are relevant to a decision making situation? A) the cost of special electrical wiring in an equipment acquisition decision B) the cost of existing inventory in a keep vs dispose decision C) the salary of a supervisor who will be trasnferred elsewhere in the organization in a department closure decision D) the cost of special electrical wiring in an equipment acquisition decision and the salary of a supervisor who will be transferred elsewhere in the organization in a department closure decision

the cost of special electrical wiring in an equipment acquisition decision