Cost Accounting (Ch. 1,2,3,7)

Gamble Tailors has gathered information on utility costs for the past year. The controller has decided that utilities are a function of the hours worked during the month. The following information is available and representative of the company's utility costs: HW UCI LP . 1,300 903 HP . 1,680 1,074 If 1,425 hours are worked in a month, total utility cost (rounded to the nearest dollar) using the high-low method should be A.$954. B.$959. C.$947. D.$976.

B.$959.

Which of the following costs will vary directly with the level of production? A.total period costs B.variable period costs C.variable product costs D.total manufacturing costs

C.variable product costs

Material amounts of underapplied or overapplied overhead should be a. allocated to work in process, finished goods, and cost of goods sold. b. treated as an adjustment to cost of goods sold. c. allocated to direct materials, work in process, and finished goods. d. treated as an adjustment to work in process.

a

Mixed costs, by definition, contain both a. fixed and variable costs. b. controllable and noncontrollable costs. c. product and period costs. d. direct and indirect costs.

a

Monitoring the number of defects produced is an example of the management function of a. control. b. decision making. c. planning. d. both "planning" and "decision making".

a

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. $1,000 overapplied b. $3,000 overapplied c. $1,000 underapplied d. $2,000 underapplied

a

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

a

Selling and administrative costs are classified as a. period costs. b. product costs. c. conversion costs. d. factory overhead.

a

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. Compute the total machine maintenance cost for last year. a. $570,000 b. $20,000 c. $550,000 d. $420,000

a

The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials $20,000 Work in Process $40,000 Finished Goods $10,000 Cost of Goods Sold $50,000 If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be a. Cost of Goods Sold$12,000 Manufacturing Overhead$12,000 b. Manufacturing Overhead$12,000 Work in Process$4,800 Finished Goods$1,200 Cost of Goods Sold$6,000 c. Raw Materials$2,000 Work in Process$4,000 Finished Goods$1,000 Cost of Goods Sold$5,000 Manufacturing Overhead$12,000 d. Manufacturing Overhead$12,000 Cost of Goods Sold$12,000 e. Manufacturing Overhead$12,000 Raw Materials$2,000 Work in Process$4,000 Finished Goods$1,000 Cost of Goods Sold$5,000

a

The certification sponsored by the Institute of Management Accountants that emphasizes economics, finance, management, financial accounting and reporting, management reporting, and decision analysis is the a. CMA b. CIA c. CPA d. All of these choices are correct.

a

The following is the data for Lauren Enterprises: Selling & admin expenses $75,000 Direct materials used 265,000 Direct labor (25,000 hours) 300,000 Factory overhead application rate $16 per DLH Inventories Beginning Direct materials $50,000 Work in process 75,000 Finished goods 40,000 Ending Direct materials $45,000 Work in process 90,000 Finished goods 25,000 What is the cost of goods sold? a. $965,000 b. $565,000 c. $950,000 d. $980,000

a

The linearity assumption is most likely to be a close approximation for an underlying nonlinear cost function a. within a relevant range of activity. b. over the long run. c. for short-run periods. d. both "within a relevant range of activity" and "for short-run periods".

a

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

a

The records of Family Manufacturing show the following information: Estimated MO $690,000 Est. machine hours 46,000 Actual MH 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. $65,200 underapplied. c. $60,000 overapplied. d. $10,000 underapplied.

a

The sum of direct labor and factory overhead is referred to as a. conversion costs. b. prime costs. c. period costs. d. direct product costs.

a

Which cost assignment method would likely assign the cost of heating in a plant that makes beds and dressers when the bed product line is the cost object? a. allocation b. direct tracing c. arbitration d. driver tracing

a

Which of the following costs is a variable cost? a. materials used in production b. supervisors' salaries c. rent d. research and development

a

Which of the following statements is TRUE? a. The service sector comprises approximately three quarters of the United States' economy and employment. b. Traditional smokestack industries have increased in importance in recent years. c. The service sector has decreased in importance in recent years. d. The service sector comprises approximately 20 percent of the United States' economy and employment.

a

With regards to products, perishability can be defined as a. services that cannot be stored. b. buyers of products who can not see, feel, hear or taste the product before it is bought. c. buyers of the product who do not need direct contact with the manufacturer of the product. d. buyers and sellers who must be in direct contact for the sale to take place.

a

Young Corporation has the following standard costs associated with the manufacture and sale of one of its products: Direct material $3.00 per unit Direct labor 2.50 per unit Variable MO 1.80 per unit Fixed MO 4.00 per unit (based on an estimate of 50,000 units per year) Variable selling exp . . 25 per unit Fixed SG&A exp . $75,000/yr During its first year of operations Young manufactured 51,000 units and sold 48,000. The selling price per unit was $25. All costs were equal to standard. Refer to Young Corporation. Under variable costing, the standard production cost per unit for the current year was A.$7.30. B.$7.55. C.$11.55. D.$11.30.

a

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

b

Another name for absorption costing is A.direct costing. B.full costing. C.job order costing. D.fixed costing.

b

Cost management is concerned with producing outputs for _____. a. creditors b. internal managers c. investors d. regulatory authorities

b

Extending the close of the fiscal year beyond December 31 so that some sales of next year are included in the current year would be a violation of which standard of ethical conduct for management accountants? a. conformance b. competence c. confidentiality d. All of these choices are correct.

b

If physical observation can NOT be used to identify the exact amount of resources consumed by a cost object, the next best approach is a. allocation. b. driver tracing. c. estimation. d. None of these choices are correct.

b

In the formula y = a + bX, a represents A.mixed cost. B.fixed cost. C.variable cost. D.total cost.

b

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

c

The following information pertains to Whitestone Industries for 2018: Est total overhead costs for 2018 $37,500 Estimated DL costs for 2018 25,000 Actual DL costs 22,500 Actual overhead costs 36,000 Activity base DL costs What is the predetermined overhead rate for Whitestone Industries for 2018? a. 150% b. 66.7% c. 62.5% d. 160%

A

An actual cost system differs from a normal cost system in that an actual cost system A.assigns overhead at the end of the manufacturing process. B.assigns overhead as it occurs during the manufacturing cycle. C.does not assign overhead at all. D.does not use an Overhead Control account.

a

Cost behavior analysis focuses on how costs a. react to changes in activity level. b. react to changes in profit. c. change over time. d. both "react to changes in profit" and "change over time".

a

Direct costs a. are those costs that can be easily and accurately traced to a cost object. b. would continue even if a particular product were discontinued. c. are incurred for the benefit of the business as a whole. d. can be assigned to products only by a process of allocation.

a

Disclosing company information (when not legally obligated to do so) would be a violation of which part of the IMA Code of Conduct? a. confidentiality b. competence c. independence d. credibility

a

Given the following graphs, which graph represents fixed costs? I is straight diagonal II is horizontal III is jagged like steps a. II b. III c. I d. None of these choices are correct.

a

In a company that supplies muffins to bakeries, delivered muffins to bakeries would be a(n) a. output. b. input. c. interrelated part. d. process.

a

Information from the records of the Abel Corporation for July 2018 was as follows: Sales $1,230,000 Selling & admin expenses 210,000 Direct materials used 264,000 Direct labor 300,000 Factory overhead * 405,000 *variable overhead is $205,000, fixed overhead is $200,000 Inventories July 1, 2018 Direct materials $36,000 Work in process 75,000 Finished goods 69,000 July 31, 2018 Direct Materials 42,000 WIP 84,000 Finished goods 57,000 The prime costs are a. $564,000 b. $300,000 c. $264,000 d. $210,000

a

Information from the records of the Abel Corporation for July 2018 was as follows: Sales $1,230,000 Selling & admin expenses 210,000 Direct materials used 264,000 Direct labor 300,000 Factory overhead * 405,000 *variable overhead is $205,000, fixed overhead is $200,000 Inventories July 1, 2018 Direct materials $36,000 Work in process 75,000 Finished goods 69,000 July 31, 2018 Direct Materials 42,000 WIP 84,000 Finished goods 57,000 The variable product costs are a. $769,000 b. $764,000 c. $1,179,000 d. $969,000

a

Intangibility of services means that a. products cannot be seen, tasted, heard or felt before the purchase. b. products cannot be stored. c. exchange takes place in direct contact. d. both "products cannot be seen, tasted, heard or felt before the purchase" and "exchange takes place in direct contact".

a

Information from the records of the Conundrum Company for September 2018 was as follows: Sales $307,500 Selling & admin expenses 52,000 Direct materials used 66,000 Direct labor 75,000 Factory overhead 51,250 Inventories Sept 1, 2018 Direct materials $8,000 Work in process 18,750 Finished goods 17,250 Sept 30, 2018 Direct Materials 10,500 WIP 21,000 Finished goods 14,250 Conundrum Corporation produced 20,000 units. If production increased to 32,000 units next year, what is the effect on variable product costs per unit and total product costs per unit respectively? a. increase; remain the same b. remain the same; decrease c. decrease; increase d. remain the same; remain the same

b

Managers are considering outsourcing sub-components of production. Data is collected about the costs of making the sub-component. Different bids are sought about the purchase of the sub-components. Which managerial activity is applicable in this situation? a. control b. decision making c. continuous improvement d. planning

b

Staff positions are positions that are: a. supportive in nature and indirectly assess the overall cost impact of product designs over a product's life cycle. b. supportive in nature and have only indirect responsibility for an organization's basic objectives. c. directly responsible for carrying out the basic objectives of an organization. d. directly involved in both financial and nonfinancial measures of efficiency of an organization

b

The Sterling Company applies manufacturing overhead. At the end of the year the following data were available: Actual MO $115,000 Estimated MO . $110,000 Applied MO $100,000 The following accounts had the unadjusted balances: Raw Materials Inventory $100,000 WIP Inventory $100,000 FG Inventory $100,000 Cost of Goods Sold $300,000 What is the journal entry if the amount is considered material? a. Manufacturing Overhead$15,000 Work-in-Process$3,000 Finished Goods$3,000 Cost of Goods Sold$9,000 b. Work-in-Process$3,000 Finished Goods$3,000 Cost of Goods Sold$9,000 Manufacturing Overhead$15,000 c. Manufacturing Overhead$5,000 Work-in-Process$1,000 Finished Goods$1,000 Cost of Goods Sold$3,000 d. Work-in-Process$1,000 Finished Goods$1,000 Cost of Goods Sold$3,000 Manufacturing Overhead$5,000 e. None of these choices are correct.

b

The records of Apex Corporation revealed the following data for the current year. Work in Process . $ 73,150 Finished Goods 115,000 COGS 133,650 Direct Labor 111,600 Direct Material 84,200 Refer to Apex Corporation. Assume, for this question only, actual overhead is $98,700 and applied overhead is $93,250. Manufacturing overhead is: A.overapplied by $5,450. B.underapplied by $5,450. C.overapplied by $12,900. D.underapplied by $18,350.

b

The records of Bentler Shoppers, Inc. for December 2018 shows the following information: Sales $2,050,000 Selling & admin 250,000 expenses Direct materials purchases 205,000 Direct labor 298,000 Factory overhead 350,000 Direct materials, December 1 50,000 Work-in-process, December 1 85,000 Finished goods, December 1 64,000 Direct materials, December 31 41,000 Work-in-process, December 31 72,000 Finished goods, December 31 55,000 The net income for the month of December is: a. $884,000. b. $916,000. c. $875,000. d. $770,000.

b

When a management accountant attends training seminars on new FASB rules, which part of the IMA Code of Conduct is being observed? a. integrity b. competence c. credibility d. confidentiality

b

Which of the following are standards of ethical conduct for management accountants? a. Perseverance and creativity b. Competence, confidentiality, integrity, and resolution and credibility c. Discipline, confidence, competitive, and observance d. Determination and respect for others

b

Which of the following cost management tools supports the firm's concentration on the delivery of value to the customer? a. service industry growth b. value-chain analysis c. preparing an earnings report for the SEC d. global competition

b

Which of the following is NOT a process associated with an accounting information system? a. providing information to users b. auditing existing data c. analyzing and managing data d. collecting and recording data

b

Young Corporation has the following standard costs associated with the manufacture and sale of one of its products: Direct material $3.00 per unit Direct labor 2.50 per unit Variable MO 1.80 per unit Fixed MO 4.00 per unit (based on an estimate of 50,000 units per year) Variable selling exp . . 25 per unit Fixed SG&A exp . $75,000/yr During its first year of operations Young manufactured 51,000 units and sold 48,000. The selling price per unit was $25. All costs were equal to standard. Refer to Young Corporation. Under absorption costing, the standard production cost per unit for the current year was A.$13.05. B.$11.30 C.$11.55. D.$ 7.30. Hint(s)

b

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

d

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

c

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

c

Disclosing all information, unfavorable as well as favorable, that could influence an intended user's understanding of reports, would relate to what section of the IMA Code of Conduct? a. integrity b. competence c. credibility d. independence

c

Information from the records of the Abel Corporation for July 2018 was as follows: Sales $1,230,000 Selling & admin expenses 210,000 Direct materials used 264,000 Direct labor 300,000 Factory overhead * 405,000 *variable overhead is $205,000, fixed overhead is $200,000 Inventories July 1, 2018 Direct Materials $36,000 WIP 75,000 Finished goods 69,000 July 31, 2018 Direct Materials 42,000 WIP 84,000 Finished goods 57,000 The conversion cost is a. $960,000 b. $1,179,000 c. $705,000 d. $564,000

c

Inventory balances for the Jameson Company in October 2018 are as follows: October 1, 2018 October 31, 2018 Raw materials $ 27,000 $21,000 Work in process 48,000 37,200 Finished goods 108,000 90,000 During October, purchases of direct materials were $36,000. Direct labor and factory overhead costs were $60,000 and $84,000, respectively. What is the cost of goods manufactured? a. $186,000 b. $180,000 c. $196,800 d. $194,000

c

Prime product costs include a. only direct labor. b. only factory overhead. c. direct materials and direct labor. d. direct labor and factory overhead.

c

Sandusky Corporation has the following costs for 1,000 units: Total C Cost/unit DM $1,500 $1.50 DL . 7,500 7.50 Depr on 30,000 30.00 Blding What is the total cost of direct materials for 100 units? a. $3.00 b. $225.00 c. $150.00 d. $1.50

c

Setting the company's profit targets for the upcoming year is an example of the management function of a. variance analysis. b. internal auditing. c. planning. d. control.

c

The _____ information system is concerned with producing outputs for external users. a. forensic accounting b. lean accounting c. financial accounting d. operational accounting

c

The acceptance of a savings bond from a supplier would be a violation of which standard of ethical conduct for management accountants? a. confidentiality b. reliability c. integrity d. None of these choices are correct.

c

The internal auditor performs a a. production function. b. line function. c. staff function. d. marketing function.

c

The most likely method to assign the cost of an assembly-line supervisor when the assembly line is the cost object is the: a. driver tracing method b. allocation method c. direct tracing method d. arbitration method

c

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

c

The type of management which broadens the focus of accounting because it is concerned with factors that drive costs, such as cycle time and process productivity is called: a. Financial management b. Financial accounting c. Cost management d. Cost accounting

c

Which of the following costing activities is associated with the financial accounting system? a. preparing budgets b. determining the cost of a customer c. determining the cost of goods sold for financial statements d. determining the cost of a department

c

Which of the following costs would NOT be included in operating product costs? a. production b. marketing c. research and development d. All of these choices are correct.

c

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

c

Which of the following does NOT describe cost management system? a. emphasis on the future b. focus on effective use of resources c. externally focused d. evaluation of segments or products within the firm

c

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

c

Which of the following statements is true of traceability? a. It is used for investment decisions, stewardship evaluation, activity monitoring, and regulatory measures. b. It is concerned with determining what activities should be performed by managers and assessing how well they are performed. c. It is the ability to assign a cost directly to a cost object in an economically feasible way by means of a causal relationship. d. It uses well-specified economic events as inputs, and its processes follow certain rules and conventions.

c

Which of the following would be an example of a unit-based cost driver? a. engineering orders b. inspection hours c. direct labor hours d. material moves

c

A manufacturing company pays an assembly line worker $12 per hour. What is the proper classification of this labor cost? a. fixed cost b. mixed cost c. semivariable cost d. variable cost

d

Account balances from the Boilermakers Company are as follows: MO $240,000 underapplied Work in Process 100,000 Finished Goods 300,000 Cost of Goods Sold . 800,000 If underapplied or overapplied overhead is material and is allocated to Work in Process, Finished Goods, and Cost of Goods Sold (based on ending account balances), Cost of Goods Sold after adjustment would have a balance of a. $ 640,000. b. $1,440,000. c. $1,040,000. d. $ 960,000.

d

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

d

Comparing actual quality costs with planned quality costs is an example of a. performance evaluation. b. planning. c. controlling. d. both "controlling" and "performance evaluation".

d

Cost accounting a. is concerned with assigning costs to various cost objects. b. provides cost information that supports planning, controlling, and decision making. c. attempts to satisfy the costing objectives of both financial accounting and management accounting. d. All of these choices are correct.

d

Direct materials are an example of a a. fixed cost. b. mixed cost. c. step cost. d. variable cost.

d

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. $200,000 b. $12 c. $130,000 d. $175,000

d

If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in A.higher income but lower assets. B.lower income but higher assets. C.lower income and assets. D.higher income and assets.

d

In a traditional manufacturing company, product costs include a. direct materials and direct labor only. b. direct materials only. c. direct labor only. d. direct materials, direct labor, and factory overhead.

d

JIT is a critical part of a more comprehensive approach referred to as: a. computer-integrated manufacturing b. just-in-time manufacturing c. supply chain management d. lean manufacturing

d

Persons in the United States who provide external auditing services are designated as a. Chartered Accountants. b. Certified Financial Accountants. c. Certified Management Accountants. d. Certified Public Accountants.

d

The Magnanimous Company uses a predetermined overhead rate of $12 per direct labor hour to apply overhead. During the year, 30,000 direct labor hours were worked. Actual overhead costs for the year were $320,000. The overhead variance is a. $36,000 overapplied. b. $40,000 underapplied. c. $35,560 underapplied. d. None of these choices are correct.

d

The assignment of indirect costs to cost objects is referred to as: a. Direct tracing b. Cost management c. Physical observation d. Allocation

d

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. An activity b. A loss c. Expenses d. Cost

d

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

d

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

d

The setting of objectives and the identification of methods to achieve those objectives is called a. controlling. b. decision making. c. performance evaluation. d. planning.

d

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

d

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

d

Which of the following expenses incurred by a department store is a direct cost for the women's shoe department? a. the advertising expense for the service department b. the salaries for individuals working in the accounting department c. the allocated rent expense for the clothing department d. the salespersons' commissions in the women's shoe department

d

Which of the following manufacturing management approaches has allowed firms to increase quality, reduce inventories, eliminate waste, and reduce costs? a. The operational manufacturing system b. Online analytic programs c. The decision-support system d. Lean manufacturing

d

Which of the following positions would most likely be a line manager? a. treasurer b. purchasing department manager c. personnel department manager d. production supervisor

d