COST CHAPTER 1

normal costing system

A costing system that uses actual costs for direct materials and labor and predetermined overhead rates to apply overhead is called a(n) a. standard costing system. b. actual costing system. c. activity-based costing system. d. normal costing system.

machine hours

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases? a. machine hours b. direct labor cost c. direct labor hours d. units of direct material used

normal job-order costing system

A job-order costing system that uses actual costs for direct materials and direct labor and estimated costs for overhead is called a(n) _____. a. actual job-order costing system b. normal job-order costing system c. hybrid job-order costing system d. average job-order costing system

step cost

A nursing home requires one nurse for each six patients. This is an example of a a. mixed cost. b. step cost. c. fixed cost. d. variable cost.

Budgeted annual overhead / budgeted annual driver level

A predetermined overhead rate is calculated using which of the following formulas? a. Actual annual overhead / actual annual driver level b. Actual annual overhead / budgeted annual driver level c. Budgeted annual overhead / actual annual driver level d. Budgeted annual overhead / budgeted annual driver level

has high fixed costs

A very high degree of operating leverage indicates a firm a. has high variable costs. b. has high fixed costs. c. is operating close to its break-even point. d. has a high net income.

activity

A(n) _____ is a basic unit of work performed within an organization. a. object b. activity c. allocation d. driver

the weighted average method

When computing equivalent units of production, the method that combines partially completed units in beginning inventory with current period production is a. the specific identification method. b. the weighted average method. c. the FIFO method. d. the LIFO method.

transferred-in costs

When products and their costs are moved from one process to the next process, these costs are referred to as a. WIP inventory costs. b. transferred-in costs. c. equivalent unit costs. d. unit costs.

the depreciation on factory building

Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product? a. the windshields for buses b. the tires for buses c. the wages paid to assembly-line production workers d. the depreciation on factory building

activities and then tracing costs to cost objects

Activity-based costing assigns cost to cost objects by first tracing costs to a. customers and then tracing costs to products. b. activities and then tracing costs to cost objects. c. products and then tracing costs to cost objects. d. departments and then tracing costs to products.

number of direct labor hours

All of the following are non-unit-based activity drivers EXCEPT a. number of material moves. b. number of setups. c. number of inspections. d. number of direct labor hours.

number of setups

All of the following are unit-based activity drivers EXCEPT a. machine hours. b. number of units. c. number of setups. d. direct labor hours.

direct labor

All of the following costs are included in factory overhead EXCEPT a. plant foreman's salary. b. indirect labor. c. direct labor. d. factory supplies.

mixed cost

An equipment lease that specifies a payment of $8,000 per month plus $7 per machine hour used is an example of a a. mixed cost. b. fixed cost. c. step cost. d. variable cost.

work in process

As production occurs, materials, direct labor, and applied manufacturing overhead are recorded in a. cost of goods sold. b. materials. c. work in process. d. finished goods.

remains the same

As the volume of activity increases within the relevant range, the variable cost per unit a. decreases. b. decreases at first, then increases. c. remains the same. d. increases.

decreased

Assuming all other things are equal, if there was a decrease in the break-even point, fixed costs must have: a. increased first, then decreased b. increased c. decreased d. remained the same

increased

Assuming all other things are the same, if there was a decrease in the break-even point, selling price per unit must have: a. remained the same b. increased first, then decreased c. decreased d. increased

$125,000

The Cumberland Company provides the following information: Sales (250,000 units) $625,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the break-even point in sales dollars for Cumberland? a. $100,000 b. $300,000 c. $125,000 d. $37,500

50,000 units

The Cumberland Company provides the following information: Sales (250,000 units) $625,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the break-even point in units for Cumberland? a. 125,000 units b. 41,668 units c. 250,000 units d. 50,000 units

0.50

The Cumberland Company provides the following information: Sales (250,000 units) $625,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the contribution margin ratio for Cumberland? a. 0.50 b. 0.16 c. 0.76 d. 0.34

2,500

The Mildmanner Corporation has the following data for 2018: Selling price per unit $15 Variable cost per unit $9 Fixed costs $45,000 Units sold 10,000 units The margin of safety in units will be (round to the nearest whole unit) a. 7,500. b. 2,500. c. 667. d. 4,000.

$37,500

The Mildmanner Corporation has the following data for the current year: Selling price per unit $15 Variable cost per unit $9 Fixed costs $45,000 Units sold 10,000 units The margin of safety expressed in sales revenue will be a. $112,500 b. $75,000. c. $45,000. d. $37,500.

process costing

The appropriate cost accounting system to use when inventory items are produced on an assembly line is a. job-order costing. b. perpetual method. c. process costing. d. weighted average.

rent on an office building

Which of the following costs is NOT a product cost? a. repairs on manufacturing equipment b. indirect labor c. steel used in inventory items produced d. rent on an office building

actual factory overhead costs

Which of the following costs is NOT included on a job-order cost sheet? a. direct labor costs b. actual factory overhead costs c. applied factory overhead costs d. direct material costs

controller's salary

Which of the following costs is a period cost for a manufacturing company? a. insurance on factory equipment b. controller's salary c. wages of machine operators d. fringe benefits for factory employees

property taxes on factory building

Which of the following costs is a product cost? a. depreciation on office equipment b. lease payments on cars used by salespersons c. president's salary d. property taxes on factory building

direct materials

Which of the following costs is an example of product costs? a. selling commissions b. advertising expense c. nonfactory office salaries d. direct materials

paper used in the production of books

Which of the following costs would be considered a direct material? a. paper used in the production of books b. depreciation on the corporation's office building c. glue in the production of automobiles d. labor used to finish product

depreciation of plant equipment

Which of the following costs would be included as part of factory overhead? a. depreciation on the corporation's office building b. direct labor c. depreciation of plant equipment d. paper used in the production of books

dental and medical services

Which of the following firms would make extensive use of a job-order costing? a. canned foods b. petroleum c. dental and medical services d. discount brokers

cost

The cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit to the organization is/are called: a. Cost b. A loss c. Expenses d. An activity

work-in-process file

The collection of all job cost sheets defines a a. finished goods file. b. materials file. c. cost of goods file. d. work-in-process file.

equals total fixed costs

The contribution margin at the break-even point a. is greater than variable costs. b. is zero. c. equals total fixed costs. d. plus total fixed costs equals total revenues.

both "current costs" and "beginning work in process"

The costs included in the cost per equivalent unit using the weighted average method are a. current costs. b. beginning work in process. c. ending work in process. d. both "current costs" and "beginning work in process".

total variable costs from total revenues

Total contribution margin is calculated by subtracting a. cost of goods sold from total revenues. b. total manufacturing costs from total revenues. c. total variable costs from total revenues. d. fixed costs from total revenues.

materials added at the beginning of the process

Transferred-in costs are accounted for in the same manner as a. labor costs. b. conversion costs. c. materials added at the end of the process. d. materials added at the beginning of the process.

the prior-period output found in beginning work in process

Under the weighted average method, once weighted average equivalent units are calculated then the first-in, first-out equivalent units can be obtained by subtracting out: a. units in ending work in process. b. units completed and transferred out. c. the prior-period output found in beginning work in process. d. equivalent units in ending work in process.

the write-off of an obsolete product

Which of the following is an example of a loss? a. the cost of the purchase of equipment b. the cost of a delivered advertising campaign c. the cost of a product delivered to a customer d. the write-off of an obsolete product

the cost of a product delivered to a customer

Which of the following is an example of an expense? a. the cost of the purchase of equipment b. the write-off of an obsolete product c. the cost of a product delivered to a customer d. the cost of a proposed advertising campaign

different products consume resources differently

Unit-level cost drivers create distortions when a. products use resources similarly. b. different products consume resources differently. c. products are produced using resources homogeneously. d. All of these choices are correct.

all of these choices are correct

Value-chain product costs include which of the following? a. research and development b. marketing costs c. customer service costs d. All of these choices are correct.

job-order costing

What system would a manufacturer of unique special orders or batch processes most likely use to accumulate costs? a. contract costing b. variable costing c. job-order costing d. process costing

unit-based activity drivers

he overhead rates of the traditional functional-based product costing use a. job order costing. b. unit-based activity drivers. c. non-unit-based activity drivers. d. process costing.

3.000

ulius Corporation had the following income statement for 2018: Sales $80,000 Variable expenses 56,000 Contribution margin $24,000 Fixed expenses 16,000 Operating income $8,000 What is the degree of operating leverage for Julius Corporation for 2018? a. 0.333 b. 3.000 c. 2.000 d. 2.333

loss

A cost that expires without producing any revenue benefit is known as a(n) _____. a. profit b. expense c. surplus d. loss

expense

A cost used up in the production of revenues is a(n) a. loss. b. expense. c. asset. d. unexpired cost.

$7,500

Direct material cost is $15,000 when 3,000 units are produced. What is the direct material cost when 1,500 units produced? a. $7,500 b. $6,000 c. $3,000 d. $3,500

$937,500

Summersville Production Company had the following projected information for the current year: Selling price per unit $150 Variable cost per unit $90 Total fixed costs $300,000 What level of sales dollars is needed to obtain a target before-tax profit of $75,000? a. $375,000 b. $937,500 c. $625,000 d. $750,000

both "actual cost systems cannot provide accurate unit cost information on a timely basis" and "actual cost systems produce unit costs that fluctuate from period to period"

Disadvantages of actual costing include a. actual cost systems cannot provide accurate unit cost information on a timely basis. b. actual cost systems produce unit costs that fluctuate from period to period. c. estimates must be used when calculating the actual overhead rate. d. both "actual cost systems cannot provide accurate unit cost information on a timely basis" and "actual cost systems produce unit costs that fluctuate from period to period".

fully completed units

Equivalent units expresses all activity of the period in terms of a. direct labor hours. b. partially completed units. c. units of input. d. fully completed units.

drivers

Factors that cause changes in resource usage, activity usage, costs and revenues are called a. cost objects. b. indirect costs. c. assignments. d. drivers.

$175,000

Fixed cost per unit is $7 when 25,000 units are produced and $5 when 35,000 units are produced. What is the total fixed cost when nothing is produced? a. $12 b. $200,000 c. $130,000 d. $175,000

direct labor hours

For a labor-intensive manufacturing operation, which of the following would be the most appropriate activity driver? a. number of employees b. direct labor hours c. units of output d. machine hours

II

Given the following graphs, which graph represents fixed costs? a. II b. III c. I d. None of these choices are correct.

90

Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning. What is the cumulative average time per batch using the incremental unit-time learning curve for 2,000 units? a. 100 b. 90 c. 180 d. 80

160 hours

Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning. What is the cumulative total time (labor hours) to produce 2,000 units based on the cumulative average-time learning curve? a. 20 hours b. 160 hours c. 80 hours d. 100 hours

180

Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning. What is the cumulative total time using the incremental unit-time learning curve to produce 2,000 units? a. 180 b. 100 c. 80 d. 90

7,750 units

Hologram Printing Company projected the following information for next year: Selling price per unit $75.00 Contribution margin per unit $30.00 Total fixed costs $120,000 Tax rate 40% How many units must be sold to obtain an after-tax profit of $67,500? a. 5,625 units b. 3,750 units c. 7,750 units d. 5,167 units

total variable costs will increase by 25 percent

If production volume increases from 16,000 to 20,000 units, a. total costs will increase by 20 percent. b. total costs will increase by 25 percent. c. total variable costs will increase by 25 percent. d. mixed and variable costs will increase by 25 percent.

delivered muffins

In a company that supplies muffins to bakeries, which of the following would NOT be considered an input? a. oil b. flour c. delivered muffins d. egg

flour

In a company that supplies muffins to bakeries, which of the following would be considered an input? a. delivered muffins b. flour c. baking d. None of these choices are correct.

intercept

In the formula Y = F + VX, F refers to the a. independent variable. b. intercept. c. slope. d. dependent variable.

slope

In the formula Y = F + VX, V refers to the a. intercept. b. total variable costs. c. slope. d. dependent variable.

independent variable

In the formula Y = F + VX, X refers to the a. intercept. b. dependent variable. c. slope. d. independent variable.

dependent variable

In the formula Y = F + VX, Y refers to the a. independent variable. b. intercept. c. slope. d. dependent variable.

VX

In the formula Y = F + VX, total variable cost is represented by: a. V. b. VX. c. Y. d. F.

$63,000

Mannitou Company made the following predictions for 2018: Factory overhead costs $300,000 Direct labor hours 50,000 hours Machine hours 100,000 hours Job A2 (which was started and completed in June) used 3,000 direct labor hours, 2,000 machine hours, and $57,000 of prime costs. If factory overhead is applied based on machine hours, the cost of Job A2 for the Mannitou Company is a. $66,000. b. $63,000. c. $75,000. d. $69,000.

step-fixed cost

Salaries paid to shift supervisors are an example of a a. step-variable cost. b. step-fixed cost. c. variable cost. d. mixed cost.

Y = $20,000 + $2 MHR

Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units. Develop a cost equation for the total machine maintenance cost. a. Y = $20,000 + $2 MHR b. Y= $275,000 c. Y = $20,000 d. Y = $2 MHR

$60

Summersville Production Company had the following projected information for the current year: Selling price per unit $150 Variable cost per unit $90 Total fixed costs $300,000 What is the profit when one unit more than the break-even point is sold? a. $1,500,150 b. $600,060 c. $60 d. $150

activity-based pool rates

More accurate product costing information is produced by assigning costs using a. activity-based pool rates. b. a volume-based, plantwide rate. c. volume-based, departmental rates. d. All of these choices are correct.

$1,000 overapplied

Motorsports, Inc. had a predetermined overhead rate of $2 per direct labor hour. The direct labor hours were estimated to be 25,000. The actual manufacturing overhead incurred was $47,000 and 24,000 actual direct labor hours were worked. How much was overhead over/under applied last year? a. $3,000 overapplied b. $1,000 underapplied c. $1,000 overapplied d. $2,000 underapplied

applied overhead

Normal costing uses which cost in work in process? a. actual overhead b. applied overhead c. applied direct materials d. budgeted overhead

an electronics producer

Process costing would be most applicable for a. CPA audits. b. high rise building construction. c. custom machining. d. an electronics producer.

All of these choices are correct

Products might consume overhead in different proportions due to differences in a. product size. b. setup times. c. product complexity. d. All of these choices are correct.

fixed cost

Rent of $10,000 paid per month for renting a building is an example of a(n): a. opportunity cost. b. marginal cost. c. variable cost. d. fixed cost.

Overhead = 1,000 + 25(Setup hours) + 100(# of parts)

The following computer printout estimated overhead costs using multiple regression: t for H(0) Std. error Parameter Estimate Parameter = 0 Pr > t of parameter Intercept 1000 1.96 0.0250 510.204 Setup hours 25 81.96 0.0001 0.305 # of parts 100 9.50 0.0001 10.527 R Square (R2) 0.94 Standard Error (Se) 75.00 Observations 160 During the year the company used 1,000 setup hours and 500 parts. The model being measured is a. Overhead = 1,000 + 25(Setup hours) b. Overhead = 510 + 0.305(Setup hours) + 10.527(# of parts) c. Overhead = 0.98 + 40.98(Setup hours) + 4.865(# of parts) d. Overhead = 1,000 + 25(Setup hours) + 100(# of parts)

$76,000

The following computer printout estimated overhead costs using multiple regression: t for H(0) Std. error Parameter Estimate Parameter = 0 Pr > t of parameter Intercept 1000 1.96 0.0250 510.204 Setup hours 25 81.96 0.0001 0.305 # of parts 100 9.50 0.0001 10.527 R Square (R2) 0.94 Standard Error (Se) 75.00 Observations 160 During the year the company used 1,000 setup hours and 500 parts. What is the predicted overhead cost? a. $75,000 b. $2,500 c. $76,000 d. None of these choices are correct.

$675,000

The following information is provided by Zinger Corporation for the year: Actual direct labor hours worked 75,000 Budgeted overhead $450,000 Budgeted direct labor hours 50,000 Actual overhead costs incurred $550,000 If normal costing is used, the amount of overhead applied for the year is: a. $675,000. b. $450,000. c. $550,000. d. $300,000.

Overhead = $5,700 + $45X

The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs: Slope 45 Intercept 5,700 Correlation coefficient .72 Activity variable Direct labor hours The cost formula is a. Overhead = $5,700 + $45X b. Overhead = $5,700 + ($45 × 0.72) c. Overhead = $5,700 × 0.72 d. Overhead = $5,700 − $45X

salary plus commission on sales

The following is an example of a mixed cost: a. direct materials b. salary plus commission on sales c. materials used in production d. supervisors' salaries

Profit will increase by $10,000

The income statement for Sapphire Manufacturing Company for 2018 is as follows: Sales (20,000 units) $150,000 Variable expenses 50,000 Contribution margin $100,000 Fixed expenses 30,000 Operating income $70,000 If sales increase by 2,000 units, what will happen to profit? a. Profit will decrease by $15,000. b. Profit will decrease by $18,000. c. Profit will increase by $10,000. d. Profit will increase by $13,000.

40%

The income statement for Symbiosis Manufacturing Company for 2018 is as follows: Sales (10,000 units) $120,000 Variable expenses 72,000 Contribution margin $48,000 Fixed expenses 36,000 Operating income $12,000 What is the contribution margin ratio? a. 40% b. 60% c. 30% d. 100%

beginning of the year

The predetermined overhead rate is usually calculated at the a. end of the year. b. beginning of each month. c. end of each month. d. beginning of the year.

relevant range

The range of activity within which a linear cost function is valid is called the a. normal range. b. activity range. c. relevant range. d. None of these choices are correct.

$50,000 overapplied

The records of Family Manufacturing show the following information: Estimated manufacturing overhead $690,000 Estimated machine hours 46,000 Actual machine hours worked 50,000 Actual costs incurred: Indirect materials $170,000 Indirect labor 230,000 Utilities 120,000 Insurance 100,000 Rent 80,000 The amount of overapplied or underapplied overhead is a. $50,000 overapplied. b. $10,000 underapplied. c. $65,200 underapplied. d. $60,000 overapplied.

Equivalent units

The term given to units that represents the number of completed units that is equal, in terms of production inputs, to a given number of partially completed units is: a. Equivalent units b. Units started and completed c. Total units in production d. Units completed

applied overhead

The total overhead assigned to actual production at any point in time is called: a. non-unit-based overhead. b. overhead assignment. c. budgeted overhead. d. applied overhead.

Weighted average method

The unit-costing method that merges prior-period work and costs with current-period work and costs is called: a. Operating costing b. FIFO costing method c. Weighted average method d. Transferred-in cost

It uses only current output to calculate the current-period unit cost.

Which of the following is true of the first-in, first-out costing method? a. It calculates the equivalent units of output at the beginning of a reporting period. b. It treats the work in beginning work-in-process as belonging to the current period. c. It includes only prior-period work in determining the completed units of output. d. It uses only current output to calculate the current-period unit cost.

chemicals

Which of the following products would NOT use job-order costing? a. custom-built furniture b. ships c. houses d. chemicals

All of these choices are correct

Which of the following quantities is an example of an activity driver in activity-based costing? a. number of machine hours b. number of labor transactions c. number of direct labor hours d. All of these choices are correct.

All of these choices are correct

Which of the following quantities is an example of an activity driver in activity-based costing? a. number of setups b. number of machine hours c. number of orders placed d. All of these choices are correct.

satellites

Which of the following would NOT use a process costing system? a. satellites b. cotton yarn c. electrical wire d. newsprint

operational control

_____ is concerned with determining what activities should be performed and assessing how well they are performed. a. Operational control b. The financial accounting system c. Traditional costing d. The value chain