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# CMO1 Pre-Assessment

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## June 30, 2013

1) In an ice cream manufacturing plant, raw materials are added in the mixing
and flavoring stage of the production process. Which journal entry reflects the
addition of flavoring ingredients in the production process? Choose 1 answer:
o Debit Work in Process-Mixing credit Raw Materials
o Debit Raw Materials, credit Work in Process-Mixing
o Debit Raw Materials, credit Work in Process-Flavoring
o Debit Work in Process-Flavoring, credit Raw Materials
2) During the month of June, the shaping department transferred 5600 units to
the next department that were 100% complete with respect to both materials
and conversion. At the end of the month there were 500 partially completed
units in process that were 35% complete with respect to materials and 20%
complete with respect to conversion. Work in process costs to be accounted
for at the beginning of June totaled \$9300 for materials and \$16400 for
conversion. Materials costs totaling \$226,000 were added by the department
in June. What is the weighted average cost of materials per equivalent unit
for June? Choose 1 answer:
o \$47.96
o \$40.74
o \$39.65
o \$43.58
3) Your company uses the FIFO method in its process costing system. In the
cutting department in June, units were 80% complete with respect to
conversion in the beginning work in process (WIP) inventory and 33%
complete with respect to conversion in the ending work in process inventory.
Other data for the department for June follows:
Beginning WIP inventory
Units started into
production, & costs
incurred during the
month

Conversion Units
25000
140000

Cost
\$30000
\$175000

## Completed & transferred

out

135000

What would be the cost per equivalent unit for conversion cost? Choose 1
o \$1.21
o \$1.40
o \$1.35
o \$1.64
4) A company began business this year making airplane propellers. At the end
of 2005, 750,000 lbs. of raw materials had been used with 400,000 propellers
produced. The total value of these propellers was \$450,000. The material
costs were \$200,000 with the rest being conversion costs. There were 20,000
propellers left in WIP at the end of the year (100% complete for materials and
60% complete for conversion costs). What was the total cost accounted for
on the production report? Choose 1 answer:
o \$350,000
o \$250,000
o \$450,000
o \$200,000
5) What is the proper journal entry to record issuing raw materials to be used on
a job? Choose 1 answer:
o Finished Goods XXX
Raw Materials XXX
o Raw Materials XXX
Finished Goods XXX
o Raw Materials XXX
Work in Process XXX
o Work in Process XXX
Raw Materials XXX
6) Your company uses a predetermined overhead rate based on direct labor to
apply manufacturing overhead to jobs.
On September 1, the estimates for the month were:
Direct labor hours

\$17000
13,600

## During September, the actual results were:

Direct labor hours

\$18500
12,000

What will the cost records for September show? Choose 1 answer:
o Underapplied overhead of \$1500
o Overapplied overhead of \$1500
2

o
o

## Overapplied overhead of \$3500

Underapplied overhead of \$3500

## 7) What will be the effect on overhead if a plant is operated at less than

capacity and the predetermined overhead rate is based on estimated total
units in the allocation base at capacity? Choose 1 answer:
o Overhead will be underapplied if the plant is operated above capacity.
o Overhead will be underapplied.
o Overhead will be overapplied.
o Overhead applied will be equal to actual overhead.
8) Which two are acceptable treatments for overhead balances remaining at the
end of the period? Choose 2 answers:
o Close out to cost of goods sold.
o Adjust direct labor expense.
o Allocate to finished goods.
9) A chemical manufacturer produces a product by boiling a mixture of a
chemical compound in a solution. It takes one worker 35 minutes to process
one batch of the product. Employees work an 8-hour work day, which
includes 1 hour for rest breaks and cleanups. What is the standard labor time
to produce one batch of the product? Choose 1 answer:
*Note: These options may be rounded.
o 30 minutes
o 35 minutes
o 45 minutes
o 40 minutes
10)

## Raw materials purchased price before

discount
Purchase discount
Freight from supplier
Materials receiving and handling
standard
What
o
o
o
o

\$3.20
.08
.33
.07
.13
.24

## is the direct materials standard price per pound? Choose 1 answer:

\$3.76
\$3.60
\$3.89
\$3.52

11)
A company manufactures tables with vinyl tops. The standard material
cost for the vinyl used per Type-R table is \$7.80 based on 6 square feet of
vinyl at a cost of \$1.30 per square foot. A production run of 1000 tables in
January resulted in usage of 6400 square feet of vinyl at a cost of \$1.20 per
square foot, a total of \$7689. What is the quantity variance resulting from the
above production run? Choose 1 answer:
o \$120 favorable
o \$480 favorable
o \$520 favorable
o \$640 favorable
12)
The following labor standards have been established for a particular
product:
Standard labor hours per unit of output
Standard labor rate

8.3 hours
\$12.10

The following data pertain to operations concerning the product for the last
month:
Actual hours worked
Actual total labor cost
Actual output
What
o
o
o
o

6100 hours
\$71,370
900 units

## is the labor efficiency variance for the month? Choose 1 answer:

\$16,029 favorable
\$16,577 favorable
\$19,017 unfavorble
\$19,017 favorable

13)
The following standards for variable manufacturing overhead have
been established for a company that makes only one product:
Standard hours per unit of output
Standard variable overhead rate

5.6 hours
\$12.00

## The following data pertain to operations for the last month:

Actual hours worked
Actual variable overhead cost
Actual output

2,600
\$31,330
400 units

What is the variable overhead spending variance for the month? Choose 1
o \$130 unfavorable
o \$163 unfavorable
o \$100 unfavorable
o \$250 favorable

14)
What is the most probable reason a company would experience an
unfavorable labor rate variance and a favorable labor efficiency variance?
o The mix of workers assigned to the particular job was heavily weighted
towards the used of higher paid, experienced individuals.
o Defective materials caused more labor to be used to produce a
standard unit.
o The workers assigned to the particular job were mostly low paid,
unskilled workers.
o Because of the production schedule, workers from other production
areas were assigned to assist this particular process.
15)
Which cost pool is used to assign overhead in an activity-based
system? Choose 1 answer:
o Similar-level activities
o Group-level activities
o Customer-level activities
o Organizational monitoring activities
16)
How do activity-based costing and the traditional cost system treat idle
capacity costs differently? Choose 1 answer:
o There is no difference in the treatment of the idle capacity costs in the
costing methods.
o Activity-based costing treats idle capacity costs as costs spread evenly
over the number of products produced and traditional costing treats
idle capacity costs as period costs.
o Traditional costing ignores idle capacity costs but activity-based
costing does NOT ignore idle capacity costs.
o Activity-based costing treats idle capacity costs as period costs and
traditional costing spreads idle capacity costs evenly over the number
of products produced.
17)
How is the first-stage allocation defined in an activity-based costing
system? Choose 1 answer:
o The process by which overhead costs are assigned to activity cost
pools
o The method used to directly trace costs to activities and cost objects
o The identification of activities and activity cost pools
o The assignment of costs to activity cost pools
18)
What is the second-stage allocation in an activity-based costing
system? Choose 1 answer:
o The decision to divide costs into activity cost pools
o The activity rates that are used to apply costs to products and
customers
o The creation of activity cost pools
5

## The decision to trace overhead costs to activities and cost objects

19)
In the variable costing periods income statement, where should the
periods fixed costs be included? Choose 1 answer:
o In variable costing, you do NOT include the fixed costs in the income
statement.
o The fixed costs are expensed as period costs and NOT included in the
value of the inventory.
o The variable cost as well as the fixed expenses are included in the cost
of goods sold.
o The income statement allows for the allocation of the fixed expenses
into the inventory value.
20)
When fixed manufacturing expenses are generated n the
manufacturing process, how do they impact the net income of both
absorption costing and variable costing? Choose 1 answer:
o In variable costing, the fixed manufacturing expenses is included in the
inventory values, unlike absorption costing.
o In absorption costing, the fixed manufacturing expenses is included in
the inventory values, unlike variable costing.
o In absorption costing, the fixed manufacturing costing is expensed to
the period, unlike variable costing.
o In variable costing, all fixed costs, NOT manufacturing costs, are
absorbed into the inventory values, unlike absorption costing.
21)
When using absorption costing as compared to variable costing, which
action creates a difference in the net income? Choose 1 answer:
o In variable costing, fixed manufacturing are expensed into the cost of
goods sold.
o In variable costing, the inclusion of the selling and administrative fixed
costs increases the value of the inventory.
o In absorption costing, a higher cost of goods are sold due to the
inclusion of the fixed manufacturing expenses with the variable costs.
o Both methods provide the same net income.
22)
Which two statements reflect the advantages of using the variable
costing method rather than the absorption costing method? Choose 2
o Variable costing reflects total costs of operations.
o Variable costing better matches fixed expenses to the period in which
they are incurred.
o Variable costing provides managers with information needed to
implement cost controls.
o Variable costing is required in IRS filings.

23)
What is an advantage of the absorption cost approach? Choose 1
o Absorption costing assigns full costs of production to products.
o Absorption costing matches fixed costs to the period incurred.
o Absorption costing ties most closely to cash flows.
o Absorption costing is well suited to cost volume profit (CVP) analyses.
24)
Which statement describes how differential analysis affects decisions?
o It results in avoidable costs being eliminated from consideration in the
decision.
o It results in costs that differ between alternatives being the only costs
that are considered in the decision.
o It results in costs and benefits that do NOT differ between alternatives
being the only costs that are considered in the decision.
o It results in a greater number of different types of costs being
considered in the decision.
25)
Given the following:
Marginal cost is \$14.61.
Average fixed cost is \$7.19.
Average total cost is \$25.06
Which selling price is closest to the minimum selling price per unit that will
result in a contribution to profit? Choose 1 answer:
o \$14.62
o \$25.07
o \$21.81
o \$7.20
26)
The following costs are being considered as a firm contemplates
acceptance of a special order: total incremental fixed cost of \$28,000; total
variable cost of \$47,000; total sunk cost of \$31,000. Which price is closest to
the minimum selling price for the special order that will make a positive
contribution to profit? Choose 1 answer:
o \$106,001
o \$75,001
o \$47,001
o \$28,001
27)
What will be the result of using opportunity costs in the decision
analysis? Choose 1 answer:
o It will result in appropriate consideration of economic benefits.
o It will result in appropriate consideration of expenses recorded in the
firms accounts.
o It will NOT impact the decision analysis.
o It will result in appropriate consideration of expenses that are NOT
recorded in the firms accounts.
7

28)
Which statement regarding accounting data would consistently support
a decision to retain a product line? Choose 1 answer:
o Contribution margin is greater than traceable variable costs.
o Contribution margin is greater than traceable fixed costs.
o Sales revenue is greater than traceable variable costs.
o Sales revenue is greater than traceable fixed costs.
29)
Which benefit should be used as the criterion for whether to accept or
reject a special order? Choose 1 answer:
o The selling price per unit is greater than the marginal cost per unit less
the indirect incremental cost per unit.
o The selling price per unit is greater than the total incremental cost per
unit.
o The selling price per unit is greater than the average fully allocated
cost per unit.
o The selling price per unit is greater than the average fixed cost per
unit.
30)
A food manufacturer spends \$80,000 on raw materials and refining
costs. The refined flour can be sold at the split-off point for \$100,000 or, with
further processing and packaging, as cake meal for \$180,000. Incremental
costs of further processing the flour to produce cake meal are \$10,000, and
further packaging costs are \$20,000. What is the incremental profit or loss
from further processing of the flour into cake meal? Choose 1 answer:
o \$70,000 profit
o \$50,000 profit
o \$150,000 profit
o \$30,000 loss
31)
Which two statements reflect benefits of flexible budgets? Choose 2
o Flexible budgets account for actual production levels.
o Flexible budgets allow for revenues and costs to be specified.
o Flexible budgets facilitate monitoring production levels.
o Flexible budgets consider overhead costs in determining estimated
costs.
32)
o
o
o
o

## What is a limitation in a flexible budget system? Choose 1 answer:

The analysis of costs is NOT possible when there are fixed costs that do
NOT change.
The analysis of costs is simple in companies that provide a variety of
products and services.
The analysis of costs is NOT simple in companies that provide a variety
of products and services.
The analysis of costs is accurate when there are fixed costs that do
NOT change.
8

33)
What represents a profit center as opposed to a cost center? Choose 1
o Independent subsidiary
o Sales division
o Human resources
o Accounting department
34)
In a segmented reporting statement of a grocery store, which cost
component would be a common fixed cost? Choose 1 answer:
o Store manager
o Pharmacist
o Meat freezers
o Produce manager
35)
Table:
CDs
400K
100

DVDs
600K
400

Total
1000K
500

Contribution Margin
Traceable Fixed
Costs

300
250

200
100

500
350

Segment Margin
Common Fixed
Costs
Net Income

50

100

150
100

Sales
Variable Costs

50

In the exhibit, what is the net profit margin for the DVD division? Choose 1
o 200
o 300
o 100
o 50
36)
Company X has two sales divisions with separate product lines. Line 1
has a \$500,000 contribution margin and line 2 has a \$400,000 contribution
margin. Line 1 pays \$50,000 rent annually for its sales office and line 2 pays
\$60,000 rent annually for its sales office. Company X headquarters is located
adjacent to line 1 sales office and pays \$100,000 annual rent. What is the
segment margin for Line 1? Choose 1 answer:
o \$500,000
o \$400,000
o \$450,000
o \$350,000

37)
Which is one reason that a firm would use residual income to
determine their investment program? Choose 1 answer:
o The use of residual income encourages the managers in the firm to
focus on their particular area of concern.
o The use of the return on investments is generally more difficult to
calculate.
o Residual income provides a focus on the overall financial betterment of
the firm.
o Segment reporting is generally too difficult to manage.
38)
What is an important consideration with transfer pricing? Choose 1
o That both divisions in the company be profitable from their point of
view in equal proportion.
o That transfer pricing always be based on the current market price
outsid3 of the firm.
o That the selling and purchasing price falls somewhere in the range of
acceptable transfer pricing.
o That the transfer price always be based on the costs incurred buy the
selling entity.
39)
upon
o
o
o
o
40)
o
o
o
o

What does the absorption costing approach to cost plus pricing rely
that is considered a disadvantage to this approach? Choose 1 answer:
Incremental direct costs
Incremental indirect costs
Forecast of unit sales
Forecasted return on investment
Which cost is contained in a quality cost report? Choose 1 answer:
Costs of goods sold
Prevention cots
Variable product costs

41)
Which two journal entries correctly identify the flow of conversion costs
through a process costing system? Choose 2 answers:
o Debit Salaries and Wages Payable, credit Work in Process
o Debit Work in Process, credit Manufacturing Overhead
o Debit Work in Process, credit Salaries and Wages Payable
o Debit Salaries and Wages Payable, credit Manufacturing Overhead
42)
Which two production processes would be accounted for by a process
rather than a job-order costing system? Choose 2 answers:
o Bricks
o Condominiums
o Boats
o Beer
10

43)
order
o
o
o
o

For which two production processes would be appropriate to use a jobcosting system?
Apartment construction
Commercial aircraft
Paper
Aluminum

44)
Which tow issues are relevant to make or buy decision? Choose 2