Multiple Choice Questions

MULTIPLE CHOICE QUESTIONS
43.
Managerial accounting applies to each of the
following types of businesses except
a. service firms.
b. merchandising firms.
c. manufacturing firms.
d. Managerial accounting applies to all types of
firms.
44.
Managerial accounting information is generally
prepared for
a. stockholders.
b. creditors.
c. managers.
d. regulatory agencies.
45.
Managerial accounting information
a. pertains to the entity as a whole and is highly
aggregated.
b. pertains to subunits of the entity and may be
very detailed.
c. is prepared only once a year.
d. is constrained by the requirements of generally
accepted accounting principles.
46.
The major reporting standard for presenting
managerial accounting information is
a. relevance.
b. generally accepted accounting principles.
c. the cost principle.
d. the current tax law.
47.
Managerial accounting is also called
a. management accounting.
b. controlling.
c. analytical accounting.
d. inside reporting.
48.
Which of the following is not an internal user?
a. Creditor
b. Department manager
c. Controller
d. Treasurer
49.
Managerial accounting does not encompass
a. calculating product cost.
b. calculating earnings per share.
c. determining cost behavior.
d. profit planning.
50.
Managerial accounting is applicable to
a. service entities.
b. manufacturing entities.
c. not-for-profit entities.
d. all of these.
51.
Management accountants would not
a. assist in budget planning.
b. prepare reports primarily for external users.
c. determine cost behavior.
d. be concerned with the impact of cost and
volume on profits.
52.
Internal reports must be communicated
a. daily.
b. monthly.
c. annually.
d. as needed.
53.
Financial statements for external users can be
described as
a. user-specific.
b. general-purpose.
c. special-purpose.
d. managerial reports.
54.
Managerial accounting reports can be described as
a. general-purpose.
b. macro-reports.
c. special-purpose.
d. classified financial statements.
55.
The reporting standard for external financial reports
is
a. industry-specific.
b. company-specific.
c. generally accepted accounting principles.
d. department-specific.
56.
Which of the following statements about internal
reports is not true?
a. The content of internal reports may extend
beyond the double-entry accounting system.
b. Internal reports may show all amounts at
market values.
c. Internal reports may discuss prospective
events.
d. Most internal reports are summarized rather
than detailed.
57.
In an analogous sense, external user is to internal
user as generally accepted accounting principles
are to
a. timely.
b. special-purpose.
c. relevance to decision.
d. SEC.
58.
Internal reports are generally
a. aggregated.
b. detailed.
c. regulated.
d. unreliable.
59.
A distinguishing feature of managerial accounting is
a. external users.
b. general-purpose reports.
c. very detailed reports.
d. quarterly and annual reports.
60.
What activities and responsibilities are not
associated with management's functions?
a. Planning
b. Accountability
c. Controlling
d. Directing
61.
Planning is a function that involves
a. hiring the right people for a particular job.
b. coordinating the accounting information
system.
c. setting goals and objectives for an entity.
d. analyzing financial statements.
62.
The managerial function of controlling
a. is performed only by the controller of a
company.
b. is only applicable when the company sustains a
loss.
c. is concerned mainly with operating a
manufacturing segment.
d. includes performance evaluation by

management.
63.
Which of the following is not a management
function?
a. Constraining
b. Planning
c. Controlling
d. Directing
64.A manager that is establishing objectives is performing
which management function?
a. Controlling
b. Directing
c. Planning
d. Constraining
65.
The management function that requires managers
to look ahead and establish objectives is
a. controlling.
b. directing.
c. planning.
d. constraining.
66.
In determining whether planned goals are being
met, a manager is performing the function of
a. planning.
b. follow-up.
c. directing.
d. controlling.
67.
Which of the following is not a separate
management function?
a. Planning
b. Directing
c. Decision-making
d. Controlling
68.
Directing includes
a. providing a framework for management to have
criteria to terminate employees when needed.
b. running a department under quality control
standards universally accepted.
c. coordinating a company's diverse activities and
human resources to produce a smooth-running
operation.
d. developing a complex performance ranking
system to give certain high performers good
raises.
69.
Both direct materials and indirect materials are
a. raw materials.
b. manufacturing overhead.
c. merchandise inventory.
d. sold directly to customers by a manufacturing
company.
70.
The work of factory employees that can be
physically and directly associated with converting
raw materials into finished goods is
a. manufacturing overhead.
b. indirect materials.
c. indirect labor.
d. direct labor.
71.
Which one of the following would not be classified
as manufacturing overhead?
a. Indirect labor
b. Direct materials
c. Insurance on factory building
d. Indirect materials
Manufacturing costs include
a. direct materials and direct labor only.
b. direct materials and manufacturing overhead
only.
c. direct labor and manufacturing overhead only.
d. direct materials, direct labor, and manufacturing
overhead.
73.
Which one of the following is not a direct material?
a. A tire used for a lawn mower
b. Plastic used in the covered case for a home PC
c. Steel used in the manufacturing of steel-radial
tires
d. Lubricant for a ball-bearing joint for a large
crane
74.
Which one of the following is not a cost element in
manufacturing a product?
a. Manufacturing overhead
b. Direct materials
c. Office salaries
d. Direct labor
75.
A manufacturing process requires small amounts of
glue. The glue used in the production process is
classified as a(n)
a. period cost.
b. indirect material.
c. direct material.
d. miscellaneous expense.
76.
The wages of a timekeeper in the factory would be
classified as
a. a period cost.
b. direct labor.
c. indirect labor.
d. compliance costs.
77.
Which one of the following is not considered as
material costs?
a. Partially completed motor engines for a
motorcycle plant
b. Bolts used in manufacturing the compressor of
an engine
c. Rivets for the wings of a new commercial jet
aircraft
d. Lumber used to build tables
78.
Which of the following is not a manufacturing cost
category?
a. Cost of goods sold
b. Direct materials
c. Direct labor
d. Manufacturing overhead
79.
As current technology changes manufacturing
processes, it is likely that direct
a. labor will increase.
b. labor will decrease.
c. materials will increase.
d. materials will decrease.
80.
For the work of factory employees to be considered
as direct labor, the work must be conveniently and
a. materially associated with raw materials
conversion.
b. periodically associated with raw materials
conversion.
72.
c.
physically associated with raw materials

conversion.
d. promptly associated with raw materials
conversion.
81.
Which of the following is not classified as direct
labor?
a. Bottlers of beer in a brewery
b. Copy machine operators at a copy shop
c. Wages of supervisors
d. Bakers in a bakery
82.
Cotter pins and lubricants used irregularly in a
production process are classified as
a. miscellaneous expense.
b. direct materials.
c. indirect materials.
d. nonmaterial materials.
83.
Which of the following is not another name for the
term manufacturing overhead?
a. Factory overhead
b. Pervasive costs
c. Burden
d. Indirect manufacturing costs
84.
Because of automation, which component of
product cost is declining?
a. Direct labor
b. Direct materials
c. Manufacturing overhead
d. Advertising
85.
The product cost that is most difficult to associate
with a product is
a. direct materials.
b. direct labor.
c. manufacturing overhead.
d. advertising.
86.
Manufacturing costs that cannot be classified as
either direct materials or direct labor are known as
a. period costs.
b. nonmanufacturing costs.
c. selling and administrative expenses.
d. manufacturing overhead.
87.
Which one of the following is an example of a
period cost?
a. A change in benefits for the union workers who
work in the New York plant of a Fortune 1000
manufacturer
b. Workers' compensation insurance on factory
workers' wages allocated to the factory
c. A box cost associated with computers
d. A manager's salary for work that is done in the
corporate head office
88.Which one of the following costs would not be
inventoriable?
a. Period costs
b. Factory insurance costs
c. Indirect materials
d. Indirect labor costs
89.
Direct materials and direct labor of a company total
$6,000,000. If manufacturing overhead is
$3,000,000, what is direct labor cost?
a. $3,000,000
b. $6,000,000
90.
91.
92.
93.
94.
95.
96.
97.
98.
c. $0
d. Cannot be determined from the information
provided
Which of the following are period costs?
a. Raw materials
b. Direct materials and direct labor
c. Direct labor and manufacturing overhead
d. Selling expenses
Sales commissions are classified as
a. overhead costs
b. period costs.
c. product costs.
d. indirect labor.
Product costs consist of
a. direct materials and direct labor only.
b. direct materials, direct labor, and manufacturing
overhead.
c. selling and administrative expenses.
d. period costs.
Which one of the following represents a period
cost?
a. The VP of Sales' salary and benefits
b. Overhead allocated to the manufacturing
operations
c. Labor costs associated with quality control
d. Fringe benefits associated with factory workers
Product costs are also called
a. direct costs.
b. overhead costs.
c. inventoriable costs.
d. capitalizable costs.
For inventoriable costs to become expenses under
the matching principle,
a. the product must be finished and in stock.
b. the product must be expensed based on its
percentage-of-completion.
c. the product to which they attach must be sold.
d. all accounts payable must be settled.
As inventoriable costs expire, they become
a. selling expenses.
b. gross profit.
c. cost of goods sold.
d. sales revenue.
A manufacturing company calculates cost of goods
sold as follows:
a. Beginning FG inventory + cost of goods
purchased ending FG inventory.
b. Ending FG inventory cost of goods
manufactured + beginning FG inventory.
c. Beginning FG inventory cost of goods
manufactured ending FG inventory.
d. Beginning FG inventory + cost of goods
manufactured ending FG inventory.
A manufacturing company reports cost of goods
manufactured as a(n)
a. current asset on the balance sheet.
b. administrative expense on the income
statement.
c. component in the calculation of cost of goods
sold on the income statement.
d. component of the raw materials inventory on

the balance sheet.
99.
The subtotal, "Cost of goods manufactured"
appears on
a. a merchandising company's income statement.
b. a manufacturing company's income statement.
c. both a manufacturing and a merchandising
company's income statement.
d. neither a merchandising nor a manufacturing
company's income statement.
100.
Cost of goods manufactured in a manufacturing
company is analogous to
a. Ending inventory in a merchandising company.
b. Beginning inventory in a merchandising
company.
c. Cost of goods available for sale in a
merchandising company.
d. Cost of goods purchased in a merchandising
company.
101.
Cost of goods sold
a. only appears on merchandising companies'
income statements.
b. only appears on manufacturing companies'
income statements.
c. appears on both manufacturing and
merchandising companies' income statements.
d. is calculated exactly the same for
merchandising and manufacturing companies.
102.
Hollern Combines, Inc. has $10,000 of ending
finished goods inventory as of December 31, 2008.
If beginning finished goods inventory was $5,000
and cost of goods sold was $20,000, how much
would Hollern report for cost of goods
manufactured?
a. $22,500
b. $5,000
c. $25,000
d. $15,000
103.
Cost of goods manufactured is calculated as
follows:
104.
105.
106.
a. Beginning WIP + direct materials used + direct

labor + manufacturing overhead + ending WIP.
b. Direct materials used + direct labor +
manufacturing overhead beginning WIP +
ending WIP.
c. Beginning WIP + direct materials used + direct
labor + manufacturing overhead ending WIP.
d. Direct materials used + direct labor +
manufacturing overhead ending WIP
beginning WIP.
If the amount of "Cost of goods manufactured"
during a period exceeds the amount of "Total
manufacturing costs" for the period, then
a. ending work in process inventory is greater
than or equal to the amount of the beginning
work in process inventory.
b. ending work in process is greater than the
amount of the beginning work in process
inventory.
c. ending work in process is equal to the cost of
goods manufactured.
d. ending work in process is less than the amount
of the beginning work in process inventory.
On the costs of goods manufactured schedule,
depreciation on factory equipment
a. is not listed because it is included with
Depreciation Expense on the income
statement.
b. appears in the manufacturing overhead section.
c. is not listed because it is not a product cost.
d. is not an inventoriable cost.
On the costs of goods manufactured schedule, the
item raw materials inventory (ending) appears as
a(n)
a. addition to raw materials purchases.
b. addition to raw materials available for use.
c. subtraction from raw materials available for
use.
d. subtraction from raw materials purchases.
Use the following information for questions 107109.

Carly Manufacturing Company's accounting records reflect the following inventories:
Dec. 31, 2008
Dec. 31, 2007
Raw materials inventory
$310,000
$260,000
Work in process inventory
300,000
160,000
Finished goods inventory
190,000
150,000
During 2008, $500,000 of raw materials were purchased, direct labor costs amounted to $600,000, and
manufacturing overhead incurred was $480,000.
107.
108.
The total raw materials available for use during 2008 for Carly Manufacturing Company is
a. $810,000.
b. $260,000.
c. $450,000.
d. $760,000.
Carly Manufacturing Company's total manufacturing costs incurred in 2008 amounted to
a. $1,530,000.
109.
110.
111.
112.
b. $1,490,000.
c. $1,390,000.
d. $1,580,000.
If Carly Manufacturing Company's cost of goods manufactured for 2008 amounted to $1,390,000, its cost of
goods sold for the year is
a. $1,500,000.
b. $1,250,000.
c. $1,350,000.
d. $1,430,000.
What is work in process inventory generally described as?
a. Costs applicable to units that have been started in production but are only partially completed
b. Costs associated with the end stage of manufacturing that are almost always complete and ready for
customers
c. Costs strictly associated with direct labor
d. Beginning stage production costs associated with labor costs dealing with bringing in raw materials from
the shipping docks
Utley Manufacturing Company reported the following year-end information: beginning work in process
inventory, $180,000; cost of goods manufactured, $516,000; beginning finished goods inventory, $252,000;
ending work in process inventory, $220,000; and ending finished goods inventory, $264,000. Utley
Manufacturing Company's cost of goods sold for the year is
a. $504,000.
b. $528,000.
c. $476,000.
d. $252,000.
Neeley Manufacturing Company reported the following year-end information:
Beginning work in process inventory
$1,080,000
Beginning raw materials inventory
300,000
Ending work in process inventory
900,000
Ending raw materials inventory
480,000
Raw materials purchased
960,000
Direct labor
900,000
Manufacturing overhead
600,000
Neeley Manufacturing Company's cost of goods manufactured for the year is

a. $2,280,000.
b. $2,460,000.
c. $2,100,000.
d. $2,640,000.
Hopkins Manufacturing Inc.'s accounting records reflect the following inventories:
Dec. 31, 2007
Dec. 31, 2008
$ 80,000
$ 64,000
104,000
116,000
100,000
92,000
During 2008, Hopkins purchased $760,000 of raw materials, incurred direct labor costs of $100,000, and incurred
manufacturing overhead totaling $128,000.
113. How much is raw materials transferred to production during 2008 for Hopkins Manu-facturing?
a. $992,000
b. $776,000
c. $760,000
d. $744,000
114. How much is total manufacturing costs incurred during 2008 for Hopkins?
115.
116.
a. $992,000
b. $1,004,000
c. $988,000
d. $1,000,000
Assume Hopkins Manufacturings cost of goods manufactured for 2008 amounted to $960,000. How much
would it report as cost of goods sold for the year?
a. $968,000
b. $1,000,000
c. $1,060,000
d. $952,000
McNally Manufacturing Company reported the following year-end information:
$ 46,000
24,000
50,000
20,000
680,000
Direct labor
240,000
100,000
How much is McNally Manufacturings cost of goods manufactured for the year?
a. $684,000
b. $1,024,000
c. $1,020,000
d. $1,028,000

Modine Manufacturing Inc.'s accounting records reflect the following inventories:
Dec. 31, 2007
Dec. 31, 2008
$120,000
$ 96,000
156,000
174,000
150,000
138,000
During 2008, Modine purchased $1,140,000 of raw materials, incurred direct labor costs of $150,000, and incurred
manufacturing overhead totaling $192,000.
117. How much is total manufacturing costs incurred during 2008 for Modine?
a. $1,488,000
b. $1,506,000
c. $1,482,000
d. $1,500,000
118. How much would Modine Manufacturing report as cost of goods manufactured for 2008?
a. $1,464,000
b. $1,524,000
c. $1,518,000
d. $1,488,000
119. Sauder Manufacturing Company reported the following year-end information:
Direct labor
$ 35,000
18,000
38,000
15,000
510,000
180,000
75,000
How much is Sauder Manufacturings total cost of work in process for the year?
a. $513,000
b. $768,000
c. $765,000
d. $803,000
120. Hardigan Manufacturing Company reported the following year-end information: beginning work in process
inventory, $80,000; cost of goods manufactured, $980,000; beginning finished goods inventory, $50,000;
ending work in process inventory, $70,000; and ending finished goods inventory, $40,000. How much is
Hardigans cost of goods sold for the year?
a. $980,000
b. $990,000
c. $970,000
d. $1,000,000
Raw materials inventory, January 1
$ 20,000
Raw materials inventory, December 31
40,000
Work in process, January 1
18,000
Work in process, December 31
12,000
Finished goods, January 1
40,000
Finished goods, December 31
32,000
Raw materials purchases
1,000,000
Direct labor
460,000
Factory utilities
150,000
Indirect labor
50,000
Factory depreciation
400,000
Selling and administrative expenses
420,00
121. Direct materials used is
a. $1,060,000.
b. $1,020,000.
c. $1,000,000.
d. $980,000.
122. Assume your answer to question 121 above is $1,000,000. Total manufacturing costs equal
a. $2,060,000.
b. $2,054,000.
c. $1,860,000.
d. $2,480,000.
123. Assume your answer to question 122 above is $2,000,000. Cost of goods manufactured equals
a. $1,992,000.
b. $1,994,000.
c. $2,006,000.
d. $2,008,000.
124. Assume your answer to question 123 above is $2,040,000. The cost of goods sold is
a. $2,046,000.
b. $2,008,000.
c. $2,032,000.
d. $2,048,000.
Use the following information for questions 125128:
Raw materials inventory, January 1
Raw materials inventory, December 31
Work in process, January 1
Work in process, December 31
Finished goods, January 1
Finished goods, December 31
Raw materials purchases
Direct labor
Factory utilities
30,000
60,000
27,000
18,000
60,000
48,000
1,500,000
690,000
225,000
Indirect labor
75,000
Factory depreciation
600,000
Selling and administrative expenses
630,000
125. Direct materials used is
a. $1,590,000.
b. $1,530,000.
c. $1,500,000.
d. $1,470,000.
126. Assume your answer to question 125 above is $1,500,000. Total manufacturing costs equal
a. $3,090,000.
b. $3,081,000.
c. $2,790,000.
d. $3,720,000.
127. Assume your answer to question 126 above is $3,000,000. Cost of goods manufactured equals
a. $2,988,000.
b. $2,991,000.
c. $3,009,000.
d. $3,012,000.
128. Assume your answer to question 127 above is $3,060,000. The cost of goods sold is
a. $3,069,000.
b. $3,012,000.
c. $3,048,000.
d. $3,072,000.
129. Samson Company reported total manufacturing costs of $130,000, manufacturing overhead totaling
$26,000, and direct materials totaling $32,000. How much is direct labor cost?
a. Cannot be determined from the information provided.
b. $188,000
c. $58,000
d. $72,000
130. Given the following data for Mehring Company, compute (A) total manufacturing costs and (B) costs of
goods manufactured:
Direct materials used
Direct labor
Operating expenses
131.
132.
$180,000
75,000
225,000
263,000
Beginning work in process

Ending work in process
Beginning finished goods
Ending finished goods
$30,000
15,000
38,000
23,000
(A)
(B)
a.
$465,000
$495,000
b.
$480,000
$465,000
c.
$480,000
$495,000
d.
$495,000
$510,000
Penner Company reported total manufacturing costs of $195,000, manufacturing overhead totaling $39,000,
and direct materials totaling $48,000. How much is direct labor cost?
a. Cannot be determined from the information provided.
b. $282,000
c. $87,000
d. $108,000
Given the following data for Glennon Company, compute (A) total manufacturing costs and (B) costs of
goods manufactured:
Direct labor
Operating expenses
(A)
$240,000
100,000
300,000
350,000
(B)
Beginning work in process

Beginning finished goods
Ending finished goods
$40,000
20,000
50,000
30,000
a.
$620,000
$660,000
b.
$640,000
$620,000
c.
$640,000
$660,000
d.
$660,000
$680,000
133. Which one of the following does not appear on
the balance sheet of a manufacturing
company?
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods manufactured
d. Raw materials inventory
134. The equivalent of finished goods inventory for
a merchandising firm is referred to as
a. purchases.
b. cost of goods purchased.
c. merchandise inventory.
d. raw materials inventory.
135. What term describes all activities associated
with providing a product or service?
a. The manufacturing chain
b. The product chain
c. The supply chain
d. The value chain
136. How have many companies significantly
lowered inventory levels and costs?
a. They use activity-based costing.
b. They utilize an enterprise resource
planning system.
c. They have a just-in-time method.
d. They focus on a total quality management
system.
137. Which one of the following managerial
accounting approaches attempts to allocate
manu-facturing overhead in a more meaningful
fashion?
a. Theory of constraints
b. Just-in-time inventory
c. Activity-based costing
d. Total-quality management
138. What is one primary benefit of an enterprise
resource planning (ERP) system?
a. It reduces inventory levels.
b. It permits companies to be more
streamlined in production.
c. It replaces research and development in a
company.
d. It requires an increased emphasis on
product quality.
139. What is balanced in the balanced scorecard
approach?
a. The number of products produced
b. The emphasis on financial and nonfinancial performance measurements
c. The amount of costs allocated to products
140.
141.
142.
143.
144.
d. The number of defects found on each

product
For what purpose is the theory of constraints
used?
a. To reduce product defects
b. To balance performance measurement
c. To identify and manage constraints that
bottle-neck operations
d. To reduce inventory levels
Which one of the following characteristics
would likely be associated with a just-in-time
inventory method?
a. Ending inventory of work in process that
would allow several production runs
b. A backlog of inventory orders not yet
shipped
c. Minimal finished goods inventory on hand
d. An understanding with customers that they
may come to the showroom and select
from inventory on hand
Which one of the following is a cost that would
not likely be associated with computerintegrated manufacturing?
a. Manufacturing overhead associated with
allocation of equipment depreciation
b. Direct labor costs of a welder on the
production floor
c. Manufacturing overhead associated with
allocation of the plant lease to the latest
production run
d. Direct materials cost with several fuse
plates for a new automobile
Which one of the following is an activity not
associated with TQM?
a. Tightening the bolts on a chassis so that
the frame will not drop out
b. Redesigning the gas tank after fuel
efficiency standards are not being met
c. Verifying the 10 check points associated
with producing the highest quality loaf of
bread
d. Ensuring that the mattress just
manufactured meets the standard of
comfort of a random factory line worker
What is ERPs primary benefit?
a. It can eliminate stand alone systems that
do not share information easily for
manage-ments use.
b. It allows management to rely on the
simplest way to utilize information systems
in a manufacturing environment.
c. It permits line workers to perform

accounting and marketing tasks.
d. It calculates year end bonuses to a
precision not available in traditional
information systems management.
145. Some companies implement systems to
reduce defects in finished products with the
goal of achieving zero defects. What are these
systems called?
a. Activity-based costing systems
b. Enterprise resource planning systems
c. Value chain systems
d. Total quality management systems
146. Many companies now manufacture products
that are untouched by human hands. What do
they use to achieve this?
a. Activity-based costing
b. Computer-integrated manufacturing
c. Enterprise resource planning systems
d. Total quality management systems
a
147. When a company prepares a worksheet for a
manufacturing company, to which column is
the Indirect Labor account extended?
a. To the adjustment columns
b. To the income statement columns
c. To the cost of goods manufactured
columns
d. To the balance sheet columns
a
148. When a worksheet is prepared for a
manufacturing company, an offsetting entry
must be made to balance the cost of goods
manufactured columns. Where does the
offsetting entry appear?
a. In the balance sheet debit column
b. In the income statement debit column
c. In the balance sheet credit column
d. In the income statement credit column
a
149. Which one of the following accounts would not
appear in the cost of goods manufactured
columns of a worksheet?
a. Ending Work in Process Inventory
b. Ending Finished Goods Inventory
c. Raw Materials Inventory
d. Direct Labor
a
150. When making closing entries for a
manufacturing company, to which account do
all accounts that appear on the cost of goods
manufactured schedule get closed?
a. Income Summary
b. Materials, Labor, and Overhead
c. Manufacturing Summary
d. Finished Goods Inventor
Additional Multiple Choice Questions
151. Financial and managerial accounting are
similar in that both
152.
153.
154.
155.
156.
157.
158.
a. have the same primary users.

b. produce general-purpose reports.
c. have reports that are prepared quarterly
and annually.
d. deal with the economic events of an
enterprise.
The function that pertains to keeping the
activities of the enterprise on track is
a. planning.
b. directing.
c. controlling.
d. accounting.
Property taxes on a manufacturing plant are an
element of a
Product Cost
Period Cost
a.
Yes
No
b.
Yes
Yes
c.
No
Yes
d.
No
No
For a manufacturing company, which of the
following is an example of a period cost rather
than a product cost?
a. Depreciation on factory equipment
b. Wages of salespersons
c. Wages of machine operators
d. Insurance on factory equipment
For a manufacturing firm, cost of goods
available for sale is computed by adding the
beginning finished goods inventory to
a. cost of goods purchased.
b. cost of goods manufactured.
c. net purchases.
d. total manufacturing costs.
If the cost of goods manufactured is less than
the cost of goods sold, which of the following is
correct?
a. Finished Goods Inventory has increased.
b. Work in Process Inventory has increased.
c. Finished Goods Inventory has decreased.
d. Work in Process Inventory has decreased.
The principal difference between a
merchandising and a manufacturing income
statement is the
a. cost of goods sold section.
b. extraordinary item section.
c. operating expense section.
d. revenue section.
If the total manufacturing costs are greater
than the cost of goods manufactured, which of
the following is correct?
a. Work in Process Inventory has increased.
b. Finished Goods Inventory has increased.
c. Work in Process Inventory has decreased.
d. Finished Goods Inventory has decreased.
159.
The sum of the direct materials costs, direct

labor costs, and manufacturing overhead
incurred is the
a. cost of goods manufactured.
b. total manufacturing overhead.
c. total manufacturing costs.
d. total cost of work in process.
160.
The inventory accounts that show the cost of

completed goods on hand and the costs
Item
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
Ans.
d
c
b
a
a
a
b
d
b
d
b
c
c
d
c
b
c
Item
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
Ans.
b
c
d
a
c
c
d
c
c
a
d
b
d
d
c
b
c
Item
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
Ans.
a
a
b
c
c
c
b
a
c
d
d
a
d
d
b
b
a
Item
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
Ans.
c
c
c
d
c
b
d
c
c
c
d
b
c
d
a
c
a
applicable to production that is only partially

completed are, respectively
a. Work in Process Inventory and Raw
Materials Inventory.
b. Finished Goods Inventory and Raw
c. Finished Goods Inventory and Work in
Process Inventory.
d. Raw Materials Inventory and Work in
Process Inventory.
Item
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
Ans.
a
b
b
b
a
c
b
d
d
b
d
a
c
d
d
a
c
a.
b.
c.
d.

36.
37.
38.
Which of the following is one of the

components of cost accounting?
a. It involves measuring product costs.
b. It involves the determination of company
profits.
c. It requires GAAP to be applied.
d. It requires cost minimizing principles.
A major purpose of cost accounting is to
a. classify all costs as operating or
nonoperating.
b. measure, record, and report period costs.
c. provide information to stockholders for
investment decisions.
d. measure, record, and report product costs.
The two basic types of cost accounting
systems are
Item
128.
129.
130.
131.
132.
133.
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.
144.
Ans.
d
d
c
d
c
c
c
d
c
c
b
b
c
c
b
a
a
Item
145.
146.
147.
148.
149.
150.
151.
152.
153.
154.
155.
156.
157.
158.
159.
160.
Ans.
d
b
c
b
b
c
d
c
a
b
b
c
a
a
c
c
Answers to
Multiple
Choice
Questions
job order and job accumulation systems.

job order and process cost systems.
process cost and batch systems.
job order and batch systems.
39.
A process cost system would most likely be

used by a company that makes
a. motion pictures.
b. repairs to automobiles.
c. breakfast cereal.
d. college graduation announcements.
40.
Which of the following would be accounted for

using a job order cost system?
a. The production of personal computers
b. The production of automobiles
c. The refining of petroleum
d. The construction of a new campus building
41.
42.
43.
44.
45.
46.
47.
Process costing is used when

a. the production process is continuous.
b. production is aimed at filling a specific
customer order.
c. dissimilar products are involved.
d. costs are to be assigned to specific jobs.
Process costing is not used when
a. similar goods are being produced.
b. large volumes are produced.
c. jobs have distinguishing characteristics.
d. a series of connected manufacturing
processes is necessary.
An important feature of a job order cost system
is that each job
a. must be similar to previous jobs completed.
b. has its own distinguishing characteristics.
c. must be completed before a new job is
accepted.
d. consists of one unit of output.
As of December 31, 2008, Stand Still
Industries had $1,500 of raw materials
inventory. At the beginning of 2008, there was
$1,200 of materials on hand. During the year,
the company purchased $183,000 of materials;
however, it paid for only $175,500. How much
inventory was requisitioned for use on jobs
during 2008?
a. $175,200
b. $182,700
c. $183,300
d. $175,800
The flow of costs in a job order cost system
a. involves accumulating manufacturing costs
incurred and assigning the accumulated
costs to work done.
b. cannot be measured until all jobs are
complete.
c. measures product costs for a set time
period.
d. generally follows a LIFO cost flow
assumption.
In a job order cost accounting system, the Raw
Materials Inventory account is
a. an expense.
b. a control account.
c. not used.
d. a period cost.
When a job is completed and all costs have
been accumulated on a job cost sheet, the
journal entry that should be made is
a. Finished Goods Inventory

Direct Materials
Direct Labor
Manufacturing Overhead
b. Work In Process Inventory
Direct Materials
Direct Labor
c. Raw Materials Inventory
Work In Process Inventory
d. Finished Goods Inventory
48.
Work In Process Inventory

The two major steps in the flow of costs are
a. allocating and assigning.
b. acquiring and accumulating.
c. accumulating and assigning.
d. accumulating and amortizing.
49.
The Raw Materials Inventory account is

a. a subsidiary account.
b. debited for invoice costs and freight costs
chargeable to the purchaser.
c. debited for purchase discounts taken.
d. debited for purchase returns and
allowances.
50.
Records of individual items of raw materials

would not be maintained
a. electronically.
b. manually.
c. on store ledger cards.
d. in the Raw Materials Inventory account.
51.
Cost of raw materials is debited to Raw

Materials Inventory when the
a. materials are ordered.
b. materials are received.
c. materials are put into production.
d. bill for the materials is paid.
52.
Raw Materials Inventory records are also

referred to as
a. the Raw Materials control account.
b. the store ledger cards.
c. the purchases journal.
d. periodic inventory records.
53.
After all postings have been completed, the

sum of the balances in the raw materials
subsidiary ledger should equal the
a. balance in the Raw Materials Inventory
control account.
b. cost of materials charged to Work in

Process Inventory.
c. cost of materials purchased.
d. cost of materials placed into production.
54.
Factory labor costs

a. are accumulated in a control account.
b. do not include pension costs.
c. include vacation pay.
d. are based on workers net pay.
55.
Factory Labor is a(n)

a. expense account.
b. control account.
c. subsidiary account.
d. manufacturing cost clearing account.
56. Kline Manufacturing has the following labor

costs:
FactoryGross wages
FactoryNet wages
Employer Payroll Taxes Payable
The entry to record the cost of factory labor
and the associated payroll tax expense will
include a debit to Factory Labor for
a.
b.
c.
d.
57.
$220,000.
$195,000.
$185,000.
$170,000.
Factory labor costs

a. accumulate in advance of utilization.
b. accumulate in a control account.
c. include sick pay earned by factory workers.
d. accumulate in the Factory Labor Expense
account.
c. Accounts Receivable
d. Raw Materials Inventory
59.
Manufacturing Overhead would not have a

subsidiary account for
a. utilities.
b. property taxes.
c. insurance.
d. raw materials inventory.
60. The entry to record the acquisition of raw

materials on account is
a. Work in Process Inventory
Accounts Payable
b. Manufacturing Overhead
Raw Materials Inventory
Accounts Payable
c. Accounts Payable
d. Raw Materials Inventory
Accounts Payable
61.
Which one of the following best describes a job

cost sheet?
a. It is a form used to record the costs
chargeable to a specific job and to
determine the total and unit costs of the
completed job.
b. It is used to track manufacturing overhead
costs to specific jobs.
c. It is used by management to understand
how direct costs affect profitability.
d. It is a daily form that management uses for
tracking worker productivity on which
employee raises are based.
62. Job cost sheets constitute the subsidiary

ledger for the
a. Finished Goods Inventory account.
b. Cost of Goods Sold account.
c. Work In Process Inventory account.
d. Cost of Goods Manufactured account.
58.
Which of the following is not a control account?

a. Manufacturing Overhead
b. Factory Labor
63.
A materials requisition slip showed that direct materials requested were $53,000 and indirect materials
requested were $9,000. The entry to record the transfer of materials from the storeroom is
a. Work In Process Inventory...................................................
53,000
Raw Materials Inventory..............................................
53,000
b. Direct Materials....................................................................
53,000
Indirect Materials.................................................................
9,000
Work in Process Inventory..........................................
62,000
c. Manufacturing Overhead.....................................................
62,000
62,000
d. Work In Process Inventory...................................................
53,000
Manufacturing Overhead.....................................................
9,000

64.The job cost sheet does not show
a. costs chargeable to a specific job.
b. the total costs of a completed job.
c. the unit cost of a completed job.
d. the cost of goods sold.
65.
Under an effective system of internal control,

the authorization for issuing materials is made
a. orally.
b. on a prenumbered materials requisition
slip.
c. by the accounting department.
d. by anyone on the production line.
66.
A copy of the materials requisition slip

a. is routed to the treasurer's office for
payment.
b. becomes the subsidiary ledger for the
Work in Process Inventory.
c. can be used as a subsidiary ledger for Raw
d. is retained by the storeroom, and the
original is sent to accounting.
67.
68.
69.
Materials requisition slips are costed

a. by production supervisors.
b. by factory personnel who work on the
production line.
c. after the goods have been sold.
d. using any of the inventory costing
methods.
Posting to control accounts in a costing system
are made
a. monthly.
b. daily.
c. annually.
d. semi-annually.
Which one of the following should be equal to
the balance of the work in process inventory
account at the end of the period?
a. The total of the amounts transferred from
raw materials for the current period
b. The sum of the costs shown on the job
cost sheets of unfinished jobs
c. The total of manufacturing overhead
applied to work in process for the period
d. The total manufacturing costs for the
period
62,000
70.
Which of the following shows entries only to

control accounts?
a. Factory Labor
Wages Payable
b. Work in Process
Factory Labor
Wages Payable
c. Work in Process
d. Factory Labor
Accounts Payable
Wages Payable
71.
A time ticket does not indicate the

a. employee's name.
b. account to be charged.
c. number of personal exemptions claimed by
the employee.
d. job number.
72.
Which one of the following is a source

document that impacts the job cost sheet?
a. Raw materials receiving slips
b. Materials purchase orders
c. Labor time tickets
d. Finished goods shipping documents
73.
Time tickets should be approved by

a. the audit committee.
b. co-workers.
c. the employee's supervisor.
d. the payroll department.
74.
If the entry to assign factory labor showed only

a debit to Work In Process Inventory, then all
labor costs were
a. direct labor.
b. indirect labor.
c. overtime related.
d. regular hours.
75.
The principal accounting record used in

assigning costs to jobs is
a. a job cost sheet.
b. the cost of goods manufactured schedule.
c. the Manufacturing Overhead control
account.
d. the store ledger cards.
76.
The following information is available for

completed Job No. 402: Direct materials,
$60,000; direct labor, $90,000; manufacturing
overhead applied, $45,000; units produced,
5,000 units; units sold, 4,000 units. The cost of
the finished goods on hand from this job is
77.
Sportly, Inc. completed Job No. B14 during 2008. The job cost sheet listed the following:
Direct materials
Direct labor
Manufacturing overhead applied
Units produced
Units sold
a.
b.
c.
d.
$30,000.
$195,000.
$39,000.
$156,000.
$33,000
$18,000
$12,000
3,000 units
1,800 units
How much is the cost of the finished goods on hand from this job?
a. $63,000
b. $37,800
c. $25,200
d. $30,600
78.Madison Inc. uses job order costing for its brand
new line of sewing machines. The cost
incurred for production during 2008 totaled
$12,000 of materials, $6,000 of direct labor
costs, and $4,000 of manufacturing overhead
applied. The company ships all goods as soon
as they are completed which results in no
finished goods inventory on hand at the end of
any year. Beginning work in process totaled
$10,000, and the ending balance is $6,000.
During the year, the company completed 40
machines. How much is the cost per machine?
a. $450
b. $650
c. $550
d. $800
79.
80.
As of December 31, 2008, Nilsen Industries

had $2,000 of raw materials inventory. At the
beginning of 2008, there was $1,600 of
materials on hand. During the year, the
company purchased $244,000 of materials;
however it paid for only $234,000. How much
inventory was requisitioned for use on jobs
during 2008?
a. $244,400
b. $234,400
c. $233,600
d. $243,600
Cost of goods manufactured equals $44,000
for 2008. Finished goods inventory is $2,000 at
the beginning of the year and $5,500 at the
end of the year. Beginning and ending work in
process for 2008 are $4,000 and $5,000,

respectively. How much is cost of goods sold
for the year?
a. $46,500
b. $42,000
c. $40,500
d. $47,500
81.
A company expected its annual overhead

costs to be $600,000 and direct labor costs to
be $1,000,000. Actual overhead was
$580,000, and actual labor costs totaled
$1,100,000. How much is the companys
predetermined overhead rate to the nearest
cent?
a. $0.58
b. $0.53
c. $0.60
d. $0.55
82.
Vektek, Inc. thinks machine hours is the best

activity base for its manufacturing overhead.
The estimate of annual overhead costs for its
jobs was $615,000. The company used 1,000
hours of processing on Job No. B12 during the
period and incurred overhead costs totaling
$630,000. The budgeted machine hours for the
year totaled 20,000. How much overhead
should be applied to Job No. B12?
a. $630
b. $30,750
c. $31,500
d. $615
83.
Hill Mfg. provided the following information from its accounting records for 2008:
Expected production
Actual production
Budgeted overhead
Actual overhead
30,000 labor hours

28,000 labor hours
$900,000
$870,000
How much is the overhead application rate if Hill bases the rate on direct labor hours?
a. $31.07 per hour
b. $30.00 per hour
c. $29.00 per hour
d. $28.00 per hour
84.
Kinney Company applies overhead on the basis of 150% of direct labor cost. Job No. 176 is charged with
$50,000 of direct materials costs and $60,000 of manufacturing overhead. The total manufacturing costs for
Job No. 176 is
a. $110,000.
b. $200,000.
c. $150,000.
d. $135,000.
85.
Redman Company manufactures customized desks. The following pertains to Job No. 978:
Direct labor hours worked
Direct labor rate per hour
Machine hours used
Applied factory overhead rate per machine hour
$6,300
300
$12.00
200
$22.00
What is the total manufacturing cost for Job No. 978?

a. $13,100
b. $14,300
c. $15,300
d. $16,500
86.
Henson Company applies overhead on the basis of 120% of direct labor cost. Job No. 190 is charged with
$60,000 of direct materials costs and $90,000 of manufacturing overhead. The total manufacturing costs for
Job No. 190 is
a. $150,000.
b. $258,000.
c. $162,000.
d. $225,000.
87.
Norman Company manufactures customized desks. The following pertains to Job No. 953:
Direct labor hours worked
Direct labor rate per hour
Machine hours used
Applied factory overhead rate per machine hour
$8,400
300
$16.00
200
$30.00
What is the total manufacturing cost for Job No. 953?

a. $17,600
b. $19,200
c. $20,600
d. $22,200
88.
Oliver Company provided the following information from its accounting records for 2008:
Expected production
Actual production
Budgeted overhead
Actual overhead
60,000 labor hours

56,000 labor hours
$1,500,000
$1,450,000
How much is the overhead application rate if Oliver Company bases it on direct labor hours?
a. $25.00 per hour
b. $26.79 per hour
c. $25.89 per hour
d. $24.17 per hour
89.The labor costs that have been identified as
indirect labor should be charged to
a. manufacturing overhead.
b. direct labor.
c. the individual jobs worked on.
d. salary expense.
90.
91.
92.
93.
Manufacturing overhead is applied to each job

a. at the time when the overhead cost is
incurred.
b. by means of a predetermined overhead
rate.
c. at the end of the year when actual costs
are known.
d. only if the overhead costs can be directly
traced to that job.
The predetermined overhead rate is based on
the relationship between
a. estimated annual costs and actual activity.
b. estimated annual costs and expected
annual activity.
c. actual monthly costs and actual annual
activity.
d. estimated monthly costs and actual
monthly activity.
The predetermined overhead rate is
a. determined on a moving average basis
throughout the year.
b. not calculated until actual overhead costs
are incurred.
c. determined at the beginning of the year.
d. determined at the end of the current year.
In calculating a predetermined overhead rate,
a recent trend in automated manufacturing
operations is to choose an activity base related
to
a. direct labor hours.
b. indirect labor dollars.
c. machine hours.
d. raw materials dollars.
94.
If annual overhead costs are expected to be

$750,000 and direct labor costs are expected
to be $1,000,000, then
a. $1.33 is the predetermined overhead rate.
b. for every dollar of manufacturing overhead,
75 cents of direct labor will be assigned.
c. for every dollar of direct labor, 75 cents of
manufacturing overhead will be assigned.
d. a predetermined overhead rate cannot be
determined.
95.
Overhead application is recorded with a

a. credit to Work in Process Inventory.
b. credit to Manufacturing Overhead.
c. debit to Manufacturing Overhead.
d. credit to job cost sheets.
96.
Manufacturing overhead applied is added to

direct labor incurred and to what other item to
equal total manufacturing costs for the period?
a. Goods available for sale
b. Raw materials purchased
c. Work in process
d. Direct materials used
97.
At the beginning of the year, Monroe Company

estimates annual overhead costs to be
$1,500,000 and that 300,000 machine hours
will be operated. Using machine hours as a
base, the amount of overhead applied during
the year if actual machine hours for the year
was 315,000 hours is
a. $1,500,000.
b. $1,428,572.
c. $1,050,000.
d. $1,575,000.
98.
Cost of goods sold is obtained from

a. analysis of all the control accounts in the
cost system.
b. the finished goods inventory records.
c. the work in process inventory records.
d. the Raw Materials Inventory control
account.
99.
100.
101.
When determining costs of jobs, how does a

company account for indirect materials?
a. It is added to work in process as used.
b. It remains part of raw materials inventory.
c. It is transferred out of raw materials into
manufacturing overhead when used.
d. It is transferred out of raw materials into
work in process as used.
In a job order cost system, a credit to
Manufacturing Overhead will be accompanied
by a debit to
a. Cost of Goods Manufactured.
b. Finished Goods Inventory.
c. Work in Process Inventory.
d. Raw Materials Inventory.
During 2008, Lawson Manufacturing expected
Job No. 26 to cost $600,000 of overhead,
$1,000,000 of materials, and $400,000 in
labor. Lawson applied overhead based on
direct labor cost. Actual production required an
overhead cost of $560,000, $1,100,000 in
materials used, and $440,000 in labor. All of
the goods were completed. What amount was
transferred to Finished Goods?
a. $2,000,000
b. $2,100,000
c. $2,140,000
d. $2,200,000
a.
b.
c.
d.
103.
Which of the following is not viewed as part of

accumulating manufacturing costs in a job
order cost system?
a. Cost of goods sold is recognized
b. Raw materials are purchased
c. Factory labor is incurred
d. Manufacturing overhead is incurred
104.
Which of the following is not viewed as part of

assigning manufacturing costs in a job order
cost system?
a. Manufacturing overhead is applied
b. Raw materials are used
c. Manufacturing overhead is incurred
d. Completed goods are recognized
105.
In determining total manufacturing costs on the

cost of goods manufactured schedule,
a. beginning work in process inventory should
have a zero balance.
b. actual manufacturing overhead costs
appear as a deduction.
c. manufacturing overhead applied is added
to direct materials and direct labor.
d. ending work in process inventory is
deducted from beginning work in process
inventory.
102.
Debits to Work in Process Inventory are

accompanied by a credit to all but which one of
the following accounts?
Baxter Company developed the following data for the current year:
Actual overhead
Overhead applied
Cost of goods manufactured
Total manufacturing costs

Factory Labor
Cost of Goods Sold
$150,000
90,000
180,000
135,000
165,000
450,000
106.
Baxter Company's direct labor cost for the year is

a. $45,000.
b. $225,000.
c. $135,000.
d. $180,000.
107.
Baxter Company's ending work in process inventory is

a. $435,000.
b. $300,000.
c. $285,000.
d. $135,000.
108.
Russell Manufacturing Company developed the following data:

Actual overhead
Overhead applied
$180,000
140,000
220,000
160,000
240,000
300,000
Russell Manufacturing Company's total manufacturing costs for the period is

a. $380,000.
b. $360,000.
c. $260,000.
d. cannot be determined from the data provided.
109.
Which of the following is not used in assigning manufacturing costs to work in process inventory?
a. Actual manufacturing overhead
b. Time tickets
c. Materials requisitions
d. Predetermined overhead rate
110.
On the cost of goods manufactured schedule, the cost of goods manufactured agrees with the
a. balance of Finished Goods Inventory at the end of the period.
b. total debits to Work in Process Inventory during the period.
c. amount transferred from Work in Process Inventory to Finished Goods during the period.
d. debits to Cost of Goods Sold during the period.
111.
Gannon Company had the following information at December 31:

Finished goods inventory, January 1
Finished goods inventory, December 31
$ 50,000
150,000
If the cost of goods manufactured during the year amounted to $2,100,000 and annual sales were
$2,750,000, the amount of gross profit for the year is
a. $650,000.
b. $2,000,000.
c. $750,000.
d. $550,000.
112.
Vernon Company incurred direct materials costs of $500,000 during the year. Manu-facturing overhead
applied was $90,000 and is applied at the rate of 60% of direct labor costs. Vernon Companys total
manufacturing costs for the year was
a. $740,000.
b. $644,000.
c. $590,000.
d. $944,000.

Payne Company developed the following data for the current year:
Actual overhead
Overhead applied
Total manufacturing costs
$ 34,000
52,000
44,000
46,000
225,000
214,000
113.
How much is Payne Company's direct labor cost for the year?
a. $127,000
b. $150,000
c. $116,000
d. $82,000
114.
How much is Payne Company's ending work in process inventory for the year?
a. $23,000
b. $121,000
c. $21,000
d. $93,000
115.
Chmelar Manufacturing Company developed the following data:

Actual overhead
Overhead applied
How much are total manufacturing costs for the period?
a. $395,000
b. $315,000
c. $275,000
d. $305,000
116.
$ 20,000
120,000
140,000
135,000
320,000
15,000
Barger Company had the following information at December 31:

Finished goods inventory, January 1
Finished goods inventory, December 31
$30,000
42,000
If the cost of goods manufactured during the year amounted to $665,000 and annual sales were $998,000,
how much is the amount of gross profit for the year?
a. $333,000
b. $303,000
c. $653,000
d. $345,000
117.
118.
Chin Company incurred direct materials costs

of $300,000 during the year. Manufacturing
overhead applied was $280,000 and is applied
based on direct labor costs. The
predetermined overhead rate is 70%. How
much are Chin Companys total manufacturing
costs for the year?
a. $776,000
b. $700,000
c. $580,000
d. $980,000
During 2008, Denson Manufacturing expected
$750,000 of materials, and $300,000 in labor.
Denson applied overhead based on direct
labor cost. Actual production required an
overhead cost of $420,000, $825,000 in
materials used, and $330,000 in labor. All of
the goods were completed. What amount was

transferred to Finished Goods?
a. $1,605,000
b. $1,650,000
c. $1,500,000
d. $1,575,000
119.
During 2008, Speck Manufacturing expected

$750,000 of materials, and $300,000 in labor.
Speck applied overhead based on direct labor
cost. Actual production required an overhead
cost of $420,000, $825,000 in materials used,
and $330,000 in labor. All of the goods were
completed. How much is the amount of overor underapplied overhead?
a. $30,000 underapplied
b. $30,000 overapplied
c. $75,000 underapplied
d. $75,000 overapplied
120.
Kimble Company applies overhead on the basis of machine hours. Given the following data, compute
overhead applied and the under- or overapplication of overhead for the period:
Estimated annual overhead cost
$1,200,000
Actual annual overhead cost
$1,145,000
Estimated machine hours
300,000
Actual machine hours
280,000
a. $1,120,000 applied and $25,000 overapplied
b. $1,200,000 applied and $25,000 overapplied
c. $1,120,000 applied and $25,000 underapplied
d. $1,145,000 applied and neither under- nor overapplied
121.
Barnes Company applies overhead on the basis of machine hours. Given the following data, compute
overhead applied and the under- or overapplication of overhead for the period:
Estimated annual overhead cost
Actual annual overhead cost
Estimated machine hours
Actual machine hours
a.
b.
c.
d.
122.
123.
124.
$1,500,000
$1,430,000
375,000
350,000
$1,400,000 applied and $30,000 overapplied

$1,500,000 applied and $30,000 overapplied
$1,400,000 applied and $30,000 underapplied
$1,430,000 applied and neither under- nor overapplied
A company assigned overhead to work in

process. At year end, what does the amount of
overapplied overhead mean?
a. The overhead assigned to work in process
is greater than the estimated overhead
costs.
b. The overhead assigned to work in process
is less than the estimated overhead costs.
c. The overhead assigned to work in process
is less than the actual overhead.
d. The overhead assigned to work in process
is greater than the overhead incurred.
If the Manufacturing Overhead account has a
debit balance at the end of a period, it means
that
a. actual overhead costs were less than
overhead costs applied to jobs.
b. actual overhead costs were greater than
c. actual overhead costs were equal to
d. no jobs have been completed.
If the manufacturing overhead costs applied to
jobs worked on were greater than the actual
manufacturing costs incurred during a period,
overhead is said to be
a. underapplied.
b. overapplied.
c. in error.
d. prepaid.
125.
At the end of the year, any balance in the

Manufacturing Overhead account is generally
eliminated by adjusting
a. Work In Process Inventory.
b. Finished Goods Inventory.
c. Cost of Goods Sold.
d. Raw Materials Inventory.
126.
If Manufacturing Overhead has a credit

balance at the end of the period, then
a. overhead has been underapplied.
b. the overhead assigned to Work in Process
Inventory is less than the overhead
incurred.
c. overhead has been overapplied.
d. management must take corrective action.
The Manufacturing Overhead account shows
debits of $30,000, $24,000, and $28,000 and
one credit for $86,000. Based on this
information, manufacturing overhead
a. has been overapplied.
b. has been underapplied.
c. has not been applied.
d. shows a zero balance.
127.
128.
When monthly financial statements are

prepared, a difference between actual
overhead and overhead applied will appear on
a. the balance sheet.
b. the income statement.

c. the statement of stockholders' equity.
d. none of the financial statements.
129.
130.

prepared, overapplied overhead will appear as
a. unearned revenue.
b. a current asset.
c. a loss on the income statement under
"Other Expenses and Losses."
d. miscellaneous expense.
prepared, underapplied overhead will appear
as
a. unearned revenue.
b. a current asset.
c. "Other Revenues and Gains," on the
income statement.
d. a reduction to cost of goods sold.
a.
b.
c.
d.
133.
The existence of under- or overapplied

overhead at the end of the month
a. is expected to be offset in future months.
b. indicates that an error has been made.
c. requires a retroactive adjustment to the
cost of all jobs completed.
d. is written off as a bad estimate expense.
134.
Conceptually, any under- or overapplied

overhead at the end of the year should be
allocated among all of the following except
a. cost of goods sold.
b. ending work in process inventory.
c. ending raw materials inventory.
d. ending finished goods inventory.
If, at the end of the year, Manufacturing
Overhead has been overapplied, it means that
a. actual overhead costs were greater than
the overhead assigned to jobs.
b. actual overhead costs were less than the
overhead assigned to jobs.
c. overhead has not been applied to jobs still
in process.
d. cost of goods will have to be increased by
the amount of the overapplied overhead.
135.
131.
If manufacturing overhead has been

underapplied during the year, the adjusting
entry at the end of the year will show a
a. debit to Manufacturing Overhead.
b. credit to Cost of Goods Sold.
c. debit to Work in Process Inventory.
d. debit to Cost of Goods Sold.
132.
If manufacturing overhead has been

overapplied during the year, the adjusting entry
at the end of the year will show a

136.
137.
138.
A process cost system would be used for all of

the following except the
a. manufacture of cereal.
b. refining of petroleum.
c. printing of wedding invitations.
d. production of automobiles.
In a job order cost system, it would be correct
in recording the purchase of raw materials to
debit
a. Work in Process Inventory.
b. Work in Process and Manufacturing
Overhead.
c. Raw Materials Inventory.
d. Finished Goods Inventory.
In a manufacturing company, the cost of
factory labor consists of all of the following
except
a. employer payroll taxes.
debit to Manufacturing Overhead.

credit to Finished Goods Inventory
debit to Cost of Goods Sold.
credit to Work in Process Inventory.
b. fringe benefits incurred by the employer.

c. net earnings of factory workers.
d. gross earnings of factory workers.
139.
Which of the following is not a control account?

a. Raw Materials Inventory
b. Factory Labor
c. Manufacturing Overhead
d. All of these are control accounts.
140.
When the company assigns factory labor costs

to jobs, the direct labor cost is debited to
a. Direct Labor.
b. Factory Labor.
c. Manufacturing Overhead.
d. Work in Process Inventory.
141.
Jinnah Company applies overhead on the

basis of 200% of direct labor cost. Job No. 501
is charged with $60,000 of direct materials
costs and $80,000 of manufacturing overhead.
The total manufacturing costs for Job No. 501

is
a. $140,000.
b. $220,000.
c. $180,000.
d. $200,000.
142.
143.
d. less than overhead incurred and there is a

credit balance in Manufacturing Overhead
at the end of a period.
Companies assign Manufacturing overhead to

work in process on an estimated basis through
the use of a(n)
a. actual overhead rate.
b. estimated overhead rate.
c. assigned overhead rate.
d. predetermined overhead rate.
144.
Usually, under- or overapplied overhead is

considered to be an adjustment to
a. work in process.
b. finished goods.
c. finished goods and cost of goods sold.
d. cost of goods sold.
145.
Which of the following statements about underor overapplied manufacturing overhead is

correct?
a. After the entry to transfer over- or
underapplied overhead to Cost of Goods
Sold is posted, Manufacturing Overhead
will have a zero balance.
b. When Manufacturing Overhead has a
credit balance, overhead is said to be
under-applied.
c. At the end of the year, under- or
overapplied overhead is eliminated by a
closing entry.
d. When annual financial statements are
prepared, overapplied overhead is reported
in current liabilities.
Overapplied manufacturing overhead exists

when overhead assigned to work in process is
a. more than overhead incurred and there is a
debit balance in Manufacturing Overhead
b. less than overhead incurred and there is a
debit balance in Manufacturing Overhead
c. more than overhead incurred and there is a
credit balance in Manufacturing Overhead
Answers to Multiple Choice Questions

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36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
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51.
An
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52.
53.
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An
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C
D
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D
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68.
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83.
An
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84.
85.
86.
87.
88.
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90.
91.
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An
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Item
116
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117
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119
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120
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121
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122
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124
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125
.126
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127
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128
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129
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130
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Item
132
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133
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135
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137
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138
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139
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140
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141
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142
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143
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144
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145
.
An
s.
a
a
c
b
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c
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b
d
c
d
c
d
a

38.
39.
40.
A process cost accounting system is most

appropriate when
a. a variety of different products are
produced, each one requiring different
types of materials, labor, and overhead.
b. the focus of attention is on a particular job
or order.
c. similar products are mass-produced.
d. individual products are custom made to the
specification of customers.
44.
Which of the following is a true statement

about process cost systems?
a. In process cost systems, costs are
accumulated but not assigned.
b. A process cost system has one work in
process account for each process.
c. In process cost systems, costs are
summarized on job cost sheets.
d. Unit costs are not computed in process
cost systems.
45.
Which of the following is correct regarding cost

systems?
A characteristic of products that are massproduced in a continuous fashion is that

a. the products are identical or very similar in
nature.
b. they are grouped in batches.
c. they are produced at the time an order is
received.
d. their costs are accumulated on job cost
sheets.
A process cost system would be used for all of
the following products except
a. chemicals.
b. computer chips.
c. motion pictures.
d. soft drinks.
In a process cost system,

a. a Work in Process account is maintained
for each product.
b. a materials requisition must identify the job
on which the materials will be used.
c. a Work in Process account is maintained
for each process.
d. one Work in Process account is maintained
for all the processes, similar to a job order
cost system.
42.
Differences between a job order cost
system and a process cost system include all of the
following except the
a. documents used to track costs.
b. point at which costs are totaled.
c. unit cost computations.
d. flow of costs.
Job Order
Process
a. Work in process account
one for each process
b. Work in process account
one
c. Work in process account
one for each process
d. Work in process account
one
Which of these best reflects a distinguishing

factor between a job order cost system and a
process cost system?
a. The detail at which costs are calculated
b. The time period each covers
c. The number of work in process accounts
d. The manufacturing cost elements included
one
one
several
46.
In a process cost system, unit costs are

determined using a
a. numerator of costs of each job.
b. denominator of units produced during the
period.
c. denominator of units produced for the job.
d. denominator of units produced for the day.
47.
In process cost accounting, manufacturing

costs are summarized on a
a. job order cost sheet.
b. process order cost sheet.
c. production cost report.
d. manufacturing cost sheet.
48.
Which of the following manufacturing cost

elements occurs in a process cost system?
a. Direct materials
b. Direct labor
c. Manufacturing overhead
d. All of these
49.
In a process cost system, product costs are

summarized
a. on job cost sheets.
b. on production cost reports.
c. after each unit is produced.
d. when the products are sold.
41.
43.
several
50.
When manufacturing overhead costs are

assigned to production in a process cost
system, they are debited to
a. the Finished Goods Inventory account.
b. Cost of Goods Sold.
c. a Manufacturing Overhead account.
d. the Work in Process account.
51.
A product requires processing in two

departments, Department A and then
Department B, before it is completed. Costs
transferred out of Department A will be
transferred to
a. Finished Goods Inventory.
b. Cost of Goods Sold.
c. Work in ProcessDepartment B.
d. Manufacturing Overhead.
52.
Which of the following would not appear as a

debit in the Work in Process account of a
second department in a two stage production
process?
a. Materials used
b. Overhead applied
c. Labor assigned
d. Cost of products transferred out
53.
Materials requisitions are

a. not used in process costing.
b. generally used more frequently in process
costing than job order costing.
c. generally used less frequently in process
costing than job order costing.
d. used more frequently by latter stage
production departments.
54.
A primary driver of overhead costs in

continuous manufacturing operations is
a. direct labor dollars.
b. direct labor hours.
c. machine hours.
d. machine maintenance dollars.
55.
Price Manufacturing assigns overhead based

on machine hours. Department A logs 1,200
machine hours and Department B shows 2,000
machine hours for the period. If the overhead
rate is $5 per machine hour, the entry to assign
overhead will show a
a. debit to Manufacturing Overhead for
$16,000.
b. credit to Work in ProcessDepartment B
for $10,000.
c. debit to Work in Process for $10,000.
d. credit to Manufacturing Overhead for

$16,000.
56.
Barnes and Miller Manufacturing is trying to

determine the equivalent units for conversion
costs with 3,000 units of ending work in
process at 80% completion and 14,000
physical units. There are no beginning units in
the department. Conversion costs occur evenly
throughout the entire production period. What
are the equivalent units for conversion costs
for the current period?
a. 17,000
b. 16,800
c. 2,400
d. 13,400
57.
7,000 units in a process that are 70%
complete are referred to as
a. 7,000 equivalent units of production.
b. 2,100 equivalent units of production.
c. 4,900 equivalent units of production.
d. 2,100 unequivalent units of production.
58.
A process with no beginning work in process,

completed and transferred out 45,000 units
during a period and had 30,000 units in the
ending work in process inventory that were
30% complete. The equivalent units of
production for the period were
a. 45,000 equivalent units.
b. 75,000 equivalent units.
c. 54,000 equivalent units.
d. 22,500 equivalent units.

A department adds raw materials to a process at the
beginning of the process and incurs conversion costs
uniformly throughout the process. For the month of
January, there were no units in the beginning work in
process inventory; 80,000 units were started into
production in January; and there were 20,000 units
that were 40% complete in the ending work in process
inventory at the end of January.
59.
What were the equivalent units of production

for materials for the month of January?
a. 88,000 equivalent units
b. 72,000 equivalent units
c. 60,000 equivalent units
d. 80,000 equivalent units
60.
What were the equivalent units of production

for conversion costs for the month of January?

61.
62.
63.
b. dividing physical units by the percentage of

work done.
c. multiplying the percentage of work done by
the physical units.
d. dividing equivalent units by the percentage
of work done.
Equivalent units are calculated by

a. multiplying the percentage of work done by
the equivalent units of output.
Minor Company had the following department data:
Physical Units
Work in process, July 1
16,000
Completed and transferred out
72,000
Work in process, July 31
24,000
Materials are added at the beginning of the process. What is the total number of equivalent units for
materials in July?
a. 72,000
b. 80,000
c. 112,000
d. 96,000
Corsi Company had the following department data:
Physical Units
Work in process, beginning
-0Completed and transferred out
70,000
Work in process, ending
7,000
materials during the period?
a. 70,000
b. 7,000
c. 77,000
d. 63,000
64.
Gantner Company had the following department information about physical units and percentage of
completion:
Physical Units
Work in process, May 1 (60%)
36,000
90,000
30,000
If materials are added at the beginning of the production process, what is the total number of equivalent
units for materials during May?
a. 126,000
b. 120,000
c. 116,400
d. 102,000
65.
It is necessary to calculate equivalent units of production in a department because

a. a physical count of units is impossible.
b. some units worked on in the department are not fully complete.
c. the physical units in the department are always 100% complete.
d. at times a department may use a job order cost system and then switch to a process cost system.

In the month of June, a department had 10,000 units in beginning work in process that were 70% complete. During
June, 40,000 units were transferred into production from another department. At the end of June there were 5,000
units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while
conversion costs are incurred uniformly throughout the process.
66.
How many units were transferred out of the process in June?

a. 40,000 units
b. 35,000 units
c. 45,000 units
d. 50,000 units
67.
The equivalent units of production for materials for June were

68.
The equivalent units of production for conversion costs for June were
69.
A process with no beginning work in process, completed and transferred out 10,000 units during a period
and had 5,000 units in the ending work in process that were 50% complete. How much is equivalent units
of production for the period for conversion costs?
70.
A process with 800 units of beginning work in process, completed and transferred out 10,000 units during a
period. There were 5,000 units in the ending work in process that were 50% complete as to conversion
costs. Materials are added 80% at the beginning of the process and 20% when the units are 90% complete.
How much is equivalent units of production for the period for material costs?
71.
Hanker Company had the following department data on physical units:

1,000
4,000
800
materials during the period?
a. 4,200
b. 800
c. 4,800
d. 3,000
72.
Super-Tech Industries had the following department information about physical units and percentage of
completion:
Physical Units
Work in process, June 1 (75%)
2,000
4,500
Work in process, June 30 (50%)
3,000
If materials are added at the beginning of the production process, what is the total number of equivalent
units for materials during June?
a. 3,750
b. 7,500
c. 8,000
d. 6,000
73. Gloria Company had no beginning work in process. During the period, 5,000 units were completed,
and there were 500 units of ending work in process. How many units were started into production?
a. 5,500
b. 5,000
c. 4,500
d. 500
74.
Cohen Manufacturing is trying to determine the equivalent units for conversion costs with 2,000 units of
ending work in process at 80% completion and 14,000 physical units that are 100% completed. There are
no beginning units in the department. Materials are added at the beginning of the process, and conversion
costs occur evenly throughout the entire production period. What is the equivalent units for conversion costs
for the current period?
a. 16,000
b. 15,600
c. 1,600
d. 13,600
75.
If beginning work in process is 2,000 units, ending work in process is 1,000 units, and the units accounted
for equals 5,000 units, what must units started into production be?
a. 7,000
b. 6,000
c. 3,000
d. 4,000
76.
Cinder Company had the following department information for the month:
Total materials costs
Equivalent units of materials
Total conversion costs
Equivalent units of conversion costs
$ 80,000
10,000
$120,000
20,000
How much is the total manufacturing cost per unit?

a. $14.00
b. $6.67
c. $6.00
d. $8.00
Materials costs of $200,000 and conversion costs of
$214,200 were charged to a processing department in
the month of September. Materials are added at the
beginning of the process, while conversion costs are
incurred uniformly throughout the process. There were
no units in beginning work in process, 100,000 units
were started into production in September, and there
were 8,000 units in ending work in process that were
40% complete at the end of September.
77.
78.
What was the total amount of manufacturing

costs assigned to those units that were
completed and transferred out of the process
in September?
a. $184,000
b. $391,000
c. $414,200
d. $425,200
costs assigned to the 8,000 units in the ending
work in process?
a. $16,000
b. $7,200
c. $13,600
d. $23,200
79.
80.
81.
Charley Companys Assembly Department has

materials cost at $3 per unit and conversion
cost at $6 per unit. There are 9,000 units in
ending work in process, all of which are 70%
complete as to conversion costs. How much
are total costs to be assigned to inventory?
a. $37,800
b. $64,800
c. $56,700
d. $81,000
Byrd Manufacturing decided to analyze certain
costs for June of the current year. Units started
into production equaled 14,000 and ending
work in process equaled 2,000 units. With no
beginning work in process inventory, how
much is the conversion cost per unit if ending
work in process was 25% complete and total
conversion costs equaled $50,000?
a. $3.13
b. $12.50
c. $4.00
d. $2.00
Reed Manufacturing has recently tried to
improve its analysis for its manufacturing
process. Units started into production equaled
6,000 and ending work in process equaled 400
units. Reed had no beginning work in process
inventory. Conversion costs are applied
equally throughout production, and materials
are applied at the beginning of the process.
How much is the materials cost per unit if
ending work in process was 25% complete and
total materials costs equaled $60,000?
a. $10.00
b. $10.53
c. $37.50
d. $9.38
82.
Conversion cost per unit equals $6.00. Total

materials costs are $40,000. Equivalent units
are 20,000. How much is the total
manufacturing cost per unit?
a. $8.00
b. $6.00
c. $10.00
d. $2.00
83.
Physical units are 40,000. Total conversion

costs are $197,500. There are 1,000 units in
ending inventory which are 50% complete as

to conversion costs. How much are conversion
costs per unit?
a. $5.00
b. $4.93
c. $9.88
d. $4.82
84.
Madison Industries has equivalent units of

2,000 for materials and for conversion costs.
Total manufacturing costs are $200,000. Total
materials costs are $150,000. How much is the
conversion cost per unit?
a. $10.00
b. $25.00
c. $100.00
d. $20.00
85.
Equivalent units for materials total 15,000.

There were 12,000 units completed and
transferred out. Equivalent units for conversion
costs equals 13,500. How much are the
physical units for conversion costs if ending
work in process is 50% complete?
a. 14,000
b. 15,000
c. 4,000
d. 12,000
86.
If equivalent units are 6,000 for conversion

costs and units transferred out equals 4,000,
what stage of completion should the ending
work in process be for the 8,000 units
remaining?
a. 75%
b. 25%
c. 10%
d. 20%

In the month of April, a department had 500 units in
the beginning work in process inventory that were
60% complete. These units had $20,000 of materials
costs and $15,000 of conversion costs. Materials are
added at the beginning of the process and conversion
costs are added uniformly throughout the process.
During April, 10,000 units were completed and
transferred to the finished goods inventory and there
were 2,000 units that were 25% complete in the
ending work in process inventory on April 30. During
April, manufacturing costs charged to the department
were: Materials $460,000; Conversion costs
$510,000.
87. The cost assigned to the units transferred to

finished goods during April was
a. $900,000.
b. $905,000.
c. $940,000.
d. $895,000.
88.
The cost assigned to the units in the ending

work in process inventory on April 30 was
a. $180,000.
b. $105,000.
c. $80,000.
d. $145,000.
89.
Zibba Company enters materials at the

beginning of the process. In January, there
was no beginning work in process, but there
were 100 units in the ending work in process
inventory. The number of units completed
equals the number of
a. units started.
b. units started less 100.
c. units started plus 100.
d. equivalent units.
If there are no units in process at the beginning
of the period, then
a. the company must be using a job order
cost system.
b. only one computation of equivalent units of
production will be necessary.
c. the units started into production will equal
the number of units transferred out.
d. the units to be accounted for will equal the
units transferred out and the units in
process at the end of the period.
90.
91.
a.
b.
c.
d.
92.
Honrad Company's Assembly Department has

materials cost at $4 per unit and conversion
cost at $8 per unit. There are 9,000 units in
ending work in process, all of which are 70%
complete as to conversion costs. How much
are total costs to be assigned to inventory?
a. $50,400
b. $86,400
c. $75,600
d. $108,000
93.
In a process cost system, units to be

accounted for in a department are equal to the
a. number of units started or transferred into
the department.
b. number of units transferred out of the
department.
c. units in the beginning inventory plus the
units started or transferred into the
department.
d. ending inventory plus the units started or
transferred into the department.
94.
The total units accounted for equals units in

a. beginning work in process units
transferred out.
b. beginning work in process + ending work in
process.
c. ending work in process + units transferred
out.
d. ending work in process units started into
production.
Which of the following is not a necessary step

in preparing a production cost report?

Department 1 of a two department production process shows:
Beginning Work in Process
Ending Work in Process
Total units to be accounted for
Compute the equivalent units of production

Compute the physical unit flow
Prepare the job order cost sheet
Prepare a cost reconciliation schedule
Units
10,000
50,000
120,000
95.
How many units were started into production in Department 1?

a. 50,000
b. 70,000
c. 120,000
d. 110,000
96.
How many units were transferred out to Department 2?

a. 50,000
b. 70,000
97.
c. 120,000
d. 110,000
The Assembly Department shows the following information:
Units Transferred Out
Units
20,000
50,000
90,000
How many total units are to be accounted for by the Assembly Department?
a. 140,000
b. 50,000
c. 70,000
d. 120,000
98.
The last department in a production process shows the following information at the end of the period:
Units
15,000
Started into Production
105,000
30,000
How many units have been transferred out to finished goods during the period?
a. 105,000
b. 120,000
c. 135,000
d. 90,000
99.
A process began the month with 3,000 units in the beginning work in process inventory and ended the
month with 2,000 units in the ending work in process. If 9,000 units were completed and transferred out of
the process during the month, how many units were started into production during the month?
a. 8,000
b. 10,000
c. 9,000
d. 7,000
100.
If 75,000 units are started into production and 30,000 units are in process at the end of the period, how
many units were completed and transferred out?
a. 75,000
b. 30,000
c. 45,000
d. 105,000
101.
Total units to be accounted for less units in beginning work in process equals
a. total units accounted for.
b. units transferred out.
c. units started into production.
d. equivalent units.
102.
If 80,000 units are transferred out of a department and there are 16,000 units still in process at the end of a
period, the number of units that were started into production during the period is
a. 96,000.
b. 80,000.
c. 64,000.
d. 16,000.
A department adds materials at the beginning of the process and incurs conversion costs uniformly
throughout the process. For the month of July, there was no beginning work in process; 20,000 units were
completed and transferred out; and there were 10,000 units in the ending work in process that were 40%
103.
complete. During July, $72,000 materials costs and $63,000 conversion costs were charged to the
department.
The unit production costs for materials and conversion costs for July was
a.
b.
c.
d.
Materials
$2.40
$2.40
$3.00
$3.60
Conversion Costs
$2.10
$2.63
$2.10
$3.15
104.
Conversion cost per unit equals $6.00. Total materials costs equal $60,000. Equivalent units for materials
are 20,000. How much is the total manufacturing cost per unit?
a. $9.00
b. $6.00
c. $12.00
d. $3.00
105.
The following department data are available:

$120,000
60,000
$70,000
30,000
What is the total manufacturing cost per unit?

a. $2.00
b. $2.33
c. $4.33
d. $2.11
106.
Byers Company had the following department information for the month:
$30,000
5,000
$50,000
10,000
What is the total manufacturing cost per unit?

a. $5.34
b. $5.00
c. $6.00
d. $11.00
107.
Physical units are 80,000. Total conversion costs are $197,500. There are 2,000 units in ending inventory
which are 50% complete as to conversion costs. How much is the conversion cost per unit?
a. $2.50
b. $2.47
c. $2.44
d. $2.41
108.
A department had the following information for the month:

Conversion cost per unit
Total manufacturing cost per unit
$120,000
$3.00
$5.00
What are the equivalent units of production for materials?

a. 60,000
b. 40,000
c. 24,000
d. Cannot be determined
109.
Maisley Manufacturing decided to analyze certain costs for June of the current year. Units started into
production equaled 28,000 and ending work in process equaled 4,000. With no beginning work in process
inventory, how much is the conversion cost per unit if ending work in process was 25% complete and total
conversion costs equaled $50,000?
a. $1.57
b. $6.25
c. $2.00
d. $1.00

113.
Materials costs of $400,000 and conversion costs of
$510,000 were charged to a processing department in
the month of September. Materials are added at the
beginning of the process, while conversion costs are
incurred uniformly throughout the process. There were
no units in beginning work in process, 20,000 units
were started into production in September, and there
were 5,000 units in ending work in process that were
40% complete at the end of September.
110.
111.
112.

costs assigned to those units that were
completed and transferred out of the process
in September?
a. $750,000
b. $1,000,000
c. $803,250
d. $682,500
costs assigned to the 5,000 units in the ending
work in process?
a. $227,500
b. $250,000
c. $160,000
d. $100,000
Snead Manufacturing has recently tried to
improve its analysis for its manufacturing
process. Units started into production equaled
9,000 and ending work in process equaled 600
units. Snead had no beginning work in process
inventory. Conversion costs are applied
equally throughout production, and materials
are applied at the beginning of the process.
How much is the materials cost per unit if
ending work in process was 25% complete and
total materials costs equaled $60,000?
a. $6.67
b. $7.02
c. $25.00
d. $6.25
Madison Industries has equivalent units of
4,000 for materials and for conversion costs.
Total manufacturing costs are $200,000. Total
materials costs are $150,000. How much is the
conversion cost per unit?
a. $37.50
b. $12.50
c. $50.00
d. $10.00
114.
In a process cost system, a production cost

report is prepared
a. only for the first processing department.
b. for all departments in the aggregate.
c. for each processing department.
d. only for the last processing department.
115.
A production cost report

a. is prepared for each product.
b. is prepared from a job cost sheet.
c. will show quantity and cost data for a
production department.
d. will not identify a specific department if
more than one department is involved in
the production process.
116.
In the production cost report, the total

a. physical units accounted for equals the
costs accounted for.
b. physical units accounted for equals the
units to be accounted for.
c. costs charged equals the units to be
accounted for.
d. costs accounted for equals the costs of the
units started into production.
The Cutting Departments output during the

period consists of 12,000 units completed and
transferred out, and 3,000 units in ending work
in process that were 25% complete as to
materials and conversion costs. Beginning
inventory was 1,500 units that were 25%
117.
complete as to materials and conversion costs.

Under the FIFO method, what are the
equivalent units of production for materials?
a. 13,725
b. 12,375
c. 14,475
d. 13,500
a
118.
process that were 75% complete as to

materials and conversion costs. Beginning
inventory was 800 units that were 30%
complete as to materials and conversion costs.
Under the FIFO method, what are the
equivalent units of production for materials?
a. 10,690
b. 11,010
c. 10,450
d. 10,210
The Wrapping Departments output during the

period consists of 10,000 units completed and
transferred out, and 600 units in ending work in
Use the following information to answer questions

119120.
Chicotti Company has 3,000 units in beginning work in
process, 30% complete as to conversion costs,
25,000 units transferred out to finished goods, and
1,000 units in ending work in process 20% complete
as to conversion costs. The beginning and ending
inventory is fully complete as to materials costs.
a
119. How much are equivalent units for conversion
costs if the FIFO method is used?
a. 25,200
b. 27,300
c. 23,000
d. 24,300
a
120.
How much are equivalent units for materials if

the FIFO method is used?
a. 25,200
b. 26,000
c. 23,000
d. 29,000
121. Schiller Company has unit costs of $5 for

materials and $15 for conversion costs. There
123.
are 4,200 units in ending work in process

which are 25% complete as to conversion
costs, and fully complete as to materials cost.
How much is the total cost assignable to the
ending work in process inventory if the FIFO
method is used?
a. 36,750
b. 84,000
c. 21,000
d. 15,750
a
122.
Solis Company uses the FIFO method to

compute equivalent units. It has 2,000 units in
beginning work in process, 20% complete as
to conversion costs and 50% complete as to
materials costs, 25,000 units started, and
3,000 units in ending work in process, 30%
complete as to conversion costs, and 80%
complete as to materials cost. How much are
the equivalent units for materials under the
FIFO method?
a. 25,400
b. 25,000
c. 26,400
d. 27,000
Special Company had the following department information about physical units and percentage of
completion:
Physical Units
14,400
26,000
12,000
Materials are added at the beginning of the production process. Conversion costs are added equally
throughout production. What is the total number of equivalent units during May for conversion costs if the
FIFO method is used?
a. 52,400
b. 32,000
c. 23,360
d. 43,760
124.
Hanker Company had the following department data on physical units:

1,000

4,000
800
materials if the FIFO method is used?
a. 4,200
b. 3,800
c. 4,800
d. 3,000
125.
A process cost system would be used by all of

the following except a(n)
a. chemical company.
b. advertising company.
c. oil company.
d. computer chip company.
126.
Which of the following is considered a

difference between a job order cost and a
process cost system?
a. The manufacturing cost elements
b. Documents used to track costs
c. The accumulation of the costs of materials,
labor, and overhead
d. The flow of costs
127.
The basic similarities between job order cost

and process cost systems include all of the
following except the
a. manufacturing cost elements.
b. flow of costs.
c. point at which costs are totaled.
d. accumulation of the costs of materials,
labor, and overhead.
128
Equivalent units of production are a measure

of
a. units completed and transferred out.
b. units transferred out.
c. units in ending work in process.
d. the work done in a period expressed in
fully completed units.
129.
Total physical units to be accounted for are

equal to the units
a. started (or transferred) into production.
b. started (or transferred) into production plus
the units in beginning work in process.
c. started (or transferred) into production less
the units in beginning work in process.
d. completed and transferred out.
130.
In computing equivalent units, ___________ is

not part of the equivalent units of production
formula.
a. units transferred out
b. beginning work in process
c. ending work in process
d. None of these is correct.
131.
In Saint-Simon, Inc., the Assembly
Department started 12,000 units and completed
14,000 units. If beginning work in process was 6,000
units, how many units are in ending work in process?
a. 0
b. 2,000
c. 4,000
d. 8,000
132.
The total units to be accounted for is computed

by adding
a. beginning units in process to units
transferred out.
b. ending units in process to units started into
production.
c. beginning units in process to units started
into production.
d. ending units in process to total units
accounted for.
133.
In the Camria Company, materials are entered

at the beginning of the process. If there is no
beginning work in process, but there is an
ending work in process inventory, the number
of equivalent units as to materials costs will be
a. the same as the units started.
b. the same as the units completed.
c. less than the units started.
d. less than the units completed.
134.
For the Assembly Department, unit materials

cost is $8 and unit conversion cost is $12. If
there are 6,000 units in ending work in process
75% complete as to conversion costs, the
costs to be assigned to the inventory are
a. $120,000.
b. $102,000.
c. $90,000.
d. $108,000.
135.
d. cost of beginning work in process plus the

cost of units completed and transferred
out.
The total costs accounted for in a production

cost report equal the
a. cost of units completed and transferred out
only.
b. cost of units started into production.
c. cost of units completed and transferred out
plus the cost of ending work in process.
136.
In a production cost report, which one of the

following sections is not shown under Costs?
a. Unit costs
b. Costs to be accounted for
c. Costs during the period
d. Units accounted for

Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
c
a
c
c
d
c
b
c
b
c
d
b
d
c
d
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
c
c
d
d
c
c
d
c
c
d
c
b
b
c
b
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
b
a
d
c
b
a
b
c
a
b
d
b
c
a
a
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
a
b
b
b
a
b
b
d
c
b
c
c
d
b
a

31.
Which of the following is not typical of

traditional costing systems?
a. Use of a single predetermined overhead
rate.
b. Use of direct labor hours or direct labor
cost to assign overhead.
c. Assumption of correlation between direct
labor and incurrence of overhead cost.
d. Use of multiple cost drivers to allocate
overhead.
32.
In traditional costing systems, overhead is

generally applied based on
a. direct labor.
b. machine hours.
c. direct material dollars.
d. units of production.
An activity that has a direct cause-effect
relationship with the resources consumed is
a(n)
a. cost driver.
33.
Item
Ans.
Item
Ans.
Item
Ans.
98.
d
113.
b
128. d
99.
a
114.
c
129. b
100. c
115.
c
130. b
101. c
116.
b
131. c
a
102. a
117. b
132. c
a
103. b
118. d
133. a
a
104. a
119. d
134. b
a
105. c
120. c
135. c
a
106. d
121. a
136. d
a
107. a
122. a
a
108. a
123. c
a
109. c
124. b
110. a
125. b
111. c
126. b
112. a
127. c
b. overhead rate.
c. cost pool.
d. product activity.
34. Which best describes the flow of overhead
costs in an activity-based costing system?
a. Overhead costs direct labor cost or
hours products
b. Overhead costs products
c. Overhead costs activity cost pools
cost drivers products
d. Overhead costs machine hours
products
35.
The costs that are easiest to trace directly to

products are
a. direct materials and direct labor.
b. direct labor and overhead.
c. direct materials and overhead.
d. none of the above; all three costs are
equally easy to trace to the product.
36.
Often the most difficult part of computing

accurate unit costs is determining the proper
amount of _________ to assign to each

product, service, or job.
a. direct materials
b. direct labor
c. overhead
d. direct materials and direct labor
37.
38.
Predetermined overhead rates in traditional

costing are often based on
a. direct labor cost for job order costing and
machine hours for process costing.
b. machine hours for job order costing and
direct labor cost for process costing.
c. multiple bases for job order costing and
direct labor cost for process costing.
d. multiple bases for both job order costing
and process costing.
Direct labor is sometimes the appropriate basis
for assigning overhead cost to products. It is
appropriate to use direct labor when which of
the following is true?
a. allocates overhead to multiple activity cost

pools, and it then assigns the activity cost
pools to products and services by means
of cost drivers.
b. accumulates overhead in one cost pool,
then assigns the overhead to products and
services by means of a cost driver.
c. assigns activity cost pools to products and
services, then allocates overhead back to
the activity cost pools.
d. allocates overhead directly to products and
services based on activity levels.
41.
Ordering materials, setting up machines,

assembling products, and inspecting products
are examples of
a. cost drivers.
b. overhead cost pools.
c. direct labor costs.
d. nonmanufacturing activities.
42.
An Ordering and Receiving Materials cost

pool would most likely have as a cost driver:
a. machine hours.
b. number of setups.
c. number of purchase orders.
d. number of inspection tests.
43.
Globe Company produces two products, A1

and B2. A1 is a high-volume item totaling
20,000 units annually. B2 is a low-volume item
totaling only 6,000 units per year. A1 requires
one hour of direct labor for completion, while
each unit of B2 requires 2 hours. Therefore,
total annual direct labor hours are 32,000
(20,000 + 12,000). Expected annual
manufacturing overhead costs are $640,000.
Globe uses a traditional costing system and
assigns overhead based on direct labor hours.
Each unit of B2 would be assigned overhead
of
a. $20.00.
b. $24.61.
c. $40.00.
d. need more information to compute.
(1) Direct labor constitutes a significant part

of total product cost.
(2) A high correlation exists between direct
labor and changes in the amount of
overhead costs.
a.
b.
c.
d.
39.
(1) only
(2) only
Either (1) or (2)
Both (1) and (2)
Advances in computerized systems,

technological innovation, global competition,
and automation have changed the
manufacturing environment drastically by
a. increasing direct labor costs and increasing
overhead costs.
b. increasing direct labor costs and
decreasing overhead costs.
c. decreasing direct labor costs and
decreasing overhead costs.
d. decreasing direct labor costs and
increasing overhead costs.
40. Activity-based-costing
Use the following information to answer questions 4446.
R-Ball Corporation manufactures deluxe and standard racquetball racquets. R-Balls total overhead costs consist of
assembly costs and inspection costs. The following information is available:
Cost
Assembly
Inspections
Deluxe
500 mach. hours
350
2,100 labor hours
Standard
500 mach. hours
150
1,900 labor hours
Total Cost
$30,000
$50,000
R-Ball is considering switching from one overhead rate based on labor hours to activity-based costing.
44.
Total overhead costs assigned to deluxe racquets, using a single overhead rate, are
a. $40,000.
b. $42,000.
c. $50,000.
d. $56,000.
45.
Using activity-based costing, how much assembly cost is assigned to deluxe racquets?
a. $10,500.
b. $15,000.
c. $15,750.
d. $21,000.
Using activity-based costing, how much inspections cost is assigned to deluxe racquets?
a. $15,000.
b. $23,750.
c. $25,000.
d. $35,000.
46.

Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at
100,000 for the year.
Activity Cost Pool
Ordering and Receiving
Machine Setup
Machining
Assembly
Inspection
Cost Driver
Orders
Setups
Machine hours
Parts
Inspections
Est. Overhead
$ 120,000
297,000
1,500,000
1,200,000
300,000
Cost Driver Activity

500 orders
450 setups
125,000 MH
1,000,000 parts
500 inspections
47.
If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is
a. $9.60.
b. $12.00.
c. $15.00.
d. $34.17.
48.
If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving
is
a. $1.20 per direct labor hour.
b. $240 per order.
c. $0.12 per part.
d. $6,834 per order.
49.
The last step in activity-based costing is to

a. assign manufacturing overhead costs for
each activity cost pool to products.
b. compute the activity-based overhead rate
per cost driver.
c. identify and classify the major activities
involved in the manufacture of specific
products.
d. identify the cost driver that has a strong
correlation to the activity cost pool.
50.
The first step in activity-based costing is to

a. assign manufacturing overhead costs for
each activity cost pool to products.
b. compute the activity-based overhead rate
per cost driver.
c. identify and classify the major activities
involved in the manufacture of specific
products.
d. identify the cost driver that has a strong

correlation to the activity cost pool.
51.
54.
A well-designed activity-based costing system

starts with
a. identifying the activity-cost pools.
b. computing the activity-based overhead
rate.
c. assigning manufacturing overhead costs
for each activity cost pool to products.
d. analyzing the activities performed to
manufacture a product.
52.
Which of the following is not an example of an

activity cost pool?
a. Setting up machines
b. Machining
c. Inspecting
d. Machine hours
53.
An example of an activity cost pool is

a. machine hours.
b. setting up machines.
c. number of setups.
d. number of inspections.
Estimated costs for activity cost pools and other item(s) are as follows:
Machining
Assembling
Advertising
Inspecting and testing
$500,000
200,000
450,000
175,000
Total estimated overhead is

a. $700,000.
b. $875,000.
c. $1,150,000.
d. $1,325,000.
55.
An example of a cost which would not be assigned to an overhead cost pool is

a. salaries.
b. freight-out.
c. depreciation.
d. supplies.
56.
One of Jetson Company's activity cost pools is inspecting, with estimated overhead of $100,000. Jetson
produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost
pool should be assigned to throw rugs?
a. $35,000.
b. $50,000.
c. $53,846.
d. $100,000.
57.
Which would be an appropriate cost driver for the machining activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections
58.
Which would be an appropriate cost driver for

the purchasing activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections
59. An activity-based overhead rate is computed
as follows:
a. actual overhead divided by actual use of

cost drivers.
b. estimated overhead divided by actual use
of cost drivers.
c. actual overhead divided by estimated use
of cost drivers.
d. estimated overhead divided by estimated
use of cost drivers.
60.
Use of activity-based costing will result in the

development of
a. one overhead rate based on direct labor
hours.
b. one plant-wide activity-based overhead
rate.
c. multiple activity-based overhead rates.
d. no overhead rates; overhead rates are not
used in activity-based costing.
61.
To use activity-based costing, it is necessary to

know the
a. cost driver for each activity cost pool.
b. expected use of cost drivers per activity.
c. expected use of cost drivers per product.
d. all of the above.
62.
63.
64.
To assign overhead costs to each product, the

company
a. multiplies the activity-based overhead rates
per cost driver by the number of cost
drivers expected to be used per product.
b. multiplies the overhead rate by the number
of direct labor hours used on each product.
c. assigns the cost of each activity cost pool
in total to one product line.
d. multiplies the rate of cost drivers per
estimated cost for the cost pool by the
estimated cost for each cost pool.
As compared to a low-volume product, a highvolume product
a. usually requires less special handling.
b. is usually responsible for more overhead
costs per unit.
c. requires relatively more machine setups.
d. requires use of direct labor hours as the
primary cost driver to ensure proper
allocation of overhead.
Assigning overhead using ABC will usually
a. decrease the cost per unit for low volume

products as compared to a traditional
overhead allocation.
b. increase the cost per unit for low volume
products as compared to a traditional
overhead allocation.
c. provide less accurate cost per unit for low
volume products than will traditional
costing.
d. result in the same cost per unit for low
volume products as does traditional
costing.
65.
Companies that switch to ABC often find they

have
a. been overpricing some products.
b. possibly losing market share to
competitors.
c. been sacrificing profitability by underpricing
some products.
66.
Comparing the U.S. to Japan,

a. activity-based costing is used less than in
the U.S.
b. U.S. companies show a stronger preference
to volume measures such as direct labor
hours to assign overhead costs.
c. labor cost reduction is less of a priority in
the U.S.
d. developing more accurate product costs is
less of a priority in the U.S.
For its inspecting cost pool, Hose Company
expected overhead cost of $200,000 and
4,000 inspections. The actual overhead cost
for that cost pool was $240,000 for 5,000
inspections. The activity-based overhead rate
used to assign the costs of the inspecting cost
pool to products is
a. $40 per inspection.
b. $48 per inspection.
c. $50 per inspection.
d. $60 per inspection.
67.

Donkey Company manufactures two products, Standard and DeLuxe. Donkeys overhead costs consist of machining,
$2,000,000; and assembling, $1,000,000. Information on the two products is:
Standard
DeLuxe
Direct labor hours
10,000
15,000
Machine hours
10,000
30,000
Number of parts
90,000
160,000
68.
Overhead applied to Standard using traditional costing using direct labor hours is
a. $860,000.
b. $1,200,000.
c. $1,800,000.
d. $2,140,000.
69.
Overhead applied to DeLuxe using traditional costing using direct labor hours is
a. $860,000.
b. $1,200,000.
c. $1,800,000.
d. $2,140,000.
70.
Overhead applied to Standard using activity-based costing is

a. $860,000.
b. $1,200,000.
c. $1,800,000.
d. $2,140,000.
71.
Overhead applied to DeLuxe using activity-based costing is

a. $860,000.
b. $1,200,000.
c. $1,800,000.
d. $2,140,000.
72.
Calvin Co. produces 3 products: A1, B2, and

C3. A1 requires 400 purchase orders, B2
requires 600 purchase orders, and C3 requires
1,000 purchase orders. Calvin has identified
an ordering and receiving activity cost pool
with allocated overhead of $120,000 for which
the cost driver is purchase orders. Direct labor
hours used on each product are 50,000 for A1,
40,000 for B2, and 110,000 for C3. How much
ordering and receiving overhead is assigned to
each product?
A1
B2
C3
a. $40,000
$40,000
$40,000
b. $30,000
$24,000
$66,000
c. $24,000
$36,000
$60,000
d. $27,000
$30,000
$63,000
73. OldMaid Inc. computed an overhead rate for
machining costs ($1,000,000) of $10 per
machine hour. Machining costs are driven by
machine hours. If computed based on direct
labor hours, the overhead rate for machining
costs would be $20 per direct labor hour. The
company produces two products, Gert and
Mill. Gert requires 60,000 machine hours and
20,000 direct labor hours, while Mill requires
40,000 machine hours and 30,000 direct labor
hours. Using activity-based costing, machining
costs assigned to each product is
Gert
Mill
a.
$400,000
$600,000
b.
$500,000
$500,000
c.
$533,333
$466,667
d.
$600,000
$400,000
Use the following information to answer questions 7677:
74.
Gee-Tar Company manufactures two models

of its guitar, the Beginner and the Pro. The
Beginner model requires 10,000 direct labor
hours and the Pro requires 30,000 direct labor
hours. The company produces 3,400 units of
the Beginner model and 600 units of the Pro
model each year. The company inspects one
Beginner for every 100 produced, and inspects
one Pro for every 10 produced. The company
expects to incur $56,400 of total inspecting
costs this year. How much of the inspecting
costs should be allocated to the Beginner
model using ABC costing?
a. $14,100
b. $20,400
c. $28,200
d. $47,940
75.
Sasse Inc. manufactures 2 products, hammers

and screwdrivers. The company has estimated
its overhead in the assembling department to
be $165,000. The company produces 300,000
hammers and 600,000 screwdrivers each year.
Each hammer uses 2 parts, and each
screwdriver uses 3 parts. How much of the
assembly overhead should be allocated to
hammers?
a. $41,250.
b. $55,000.
c. $66,000
d. $70,714.
Zones Co. incurs $350,000 of overhead costs each year in its three main departments, machining ($200,000),
inspections ($100,000) and packing ($50,000). The machining department works 4,000 hours per year, there are
500 inspections per year, and the packing department packs 500 orders per year. Information about Zoness two
products is as follows:
Machining hours
Inspections
Orders packed
Direct labor hours
76.
77.
78.
Product A
1,000
100
350
1,700
Product B
3,000
500
650
1,800
If traditional costing based on direct labor hours is used, how much overhead is assigned to Product A this
year?
a. $84,167
b. $121,154
c. $170,000
d. $175,000
Using ABC, how much overhead is assigned to Product A this year?
a. $84,167
b. $121,154
c. $170,000
d. $175,000
A company incurs $1,350,000 of overhead each year in three departments: Ordering and Receiving, Mixing,
and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs
1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data
are available:
Department
Mixing
Testing
Expected use of Driver

2,000
50,000
1,500
Cost
$400,000
500,000
450,000
Production information for Goo is as follows:

Department
Mixing
Testing

400
20,000
500
Compute the amount of overhead assigned to Goo.

a. $337,500
b. $430,000
c. $527,382
d. $675,000
79.
A company incurs $1,350,000 of overhead each year in three departments: Ordering and Receiving, Mixing,
and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500
tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are
available:
Department
Mixing
Testing

2,000
50,000
1,500
Cost
$400,000
500,000
450,000
Production information for Slime is as follows:

Department
Mixing
Testing

1,600
30,000
1,000
Compute the amount of overhead assigned to Slime.

a. $675,000
b. $822,617
c. $920,000
d. $1,012,500
80.
One of Astro Company's activity cost pools is

machine setups, with estimated overhead of
$180,000. Astro produces sparklers (400
setups) and lighters (600 setups). How much
of the machine setup cost pool should be
assigned to sparklers?
a. $180,000
b. $72,000
c. $90,000
d. $108,000
81.
Which would be an appropriate cost driver for

the ordering and receiving activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections
82.
As compared to a high-volume product, a lowvolume product

a. usually requires less special handling.
b. is usually responsible for more overhead
costs per unit.
c. requires relatively fewer machine setups.
d. requires use of direct labor hours as the
primary cost driver to ensure proper
allocation of overhead.
83.
In Japan,
a. activity-based costing is used more than in
the U.S.
b. companies prefer volume measures such as
direct labor hours to assign overhead costs.
c. labor cost reduction is less of a priority.
d. developing more accurate product costs is
more of a priority.

Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up
machines, $1,200,000; machining, $2,700,000; and inspecting, $900,000. Information on the two products is:
Mini A
Maxi B
Direct labor hours
15,000
25,000
Machine setups
600
400
Machine hours
24,000
26,000
Inspections
800
700
84.
Overhead applied to Mini A using traditional costing using direct labor hours is
a. $1,800,000.
b. $2,304,000.
c. $2,505,000.
d. $2,880,000.
85.
Overhead applied to Maxi B using traditional costing using direct labor hours is
a. $1,920,000.
b. $2,304,000.
c. $2,505,000.
d. $3,000,000.
Overhead applied to Mini A using activity-based costing is
a. $1,800,000.
b. $2,304,000.
86.
c. $2,496,000.
d. $2,880,000.
87.
Overhead applied to Maxi B using activity-based costing is

a. $1,920,000.
b. $2,304,000.
c. $2,496,000.
d. $3,000,000.
88.
Veronica Co. produces three products: Rain, Snow and Wind. Rain requires 80 machine setups, Snow
requires 60 setups, and Wind requires 180 setups. Veronica has identified an activity cost pool with
allocated overhead of $480,000 for which the cost driver is machine setups. How much overhead is
assigned to each product?
a.
b.
c.
d.
Rain
$160,000
$100,000
$120,000
$90,000
Snow
$160,000
$75,000
$90,000
$160,000
Wind
$160,000
$225,000
$270,000
$230,000
89.
Hammock Company manufactures two models

of its hammock, the Superior and the Deluxe.
The Superior model requires 10,000 direct
labor hours and the Deluxe model requires
40,000 direct labor hours. The company
produces 4,000 units of the Superior model
and 1,000 units of the Deluxe model each
year. The company produces the Superior
model in batch sizes of 200, while it produces
the Deluxe model in batch sizes of 100. The
company expects to incur $180,000 of total
setup costs this year. How much of the setup
costs are allocated to the Superior model using
ABC costing?
a. $120,000
b. $90,000
c. $36,000
d. $150,000
90.
Jaime Inc. manufactures two products,

sweaters and jackets. The company has
estimated its overhead in the order-processing
department to be $240,000. The company
produces 50,000 sweaters and 80,000 jackets
each year. Sweater production requires 25,000
machine hours, jacket production requires
50,000 machine hours. The company places
raw materials orders 10 times per month, 2
times for raw materials for sweaters and the
remainder for raw materials for jackets. How
much of the order processing overhead should
be allocated to jackets?
a. $120,000
b. $160,000
c. $147,693
d. $192,000
Canterra Co, incurs $240,000 overhead costs each year in its three main departments, setup ($15,000), machining
($165,000), and packing ($60,000). The setup department performs 40 setups per year, the machining department
works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Canterras
two products is as follows:
Number of setups
Machining hours
Orders packed
Number of products manufactured
91.
Product One
20
1,000
150
600
Product Two
20
4,000
350
400
If machining hours are used as a base, how much overhead is assigned to Product One each year?
a. $48,000
b. $120,000
c. $82,500
d. $72,000
92.
Using ABC, how much overhead is assigned to Product One each year?
a. $120,000
b. $181,500
c. $48,000
d. $58,500
93.
Using ABC, how much overhead is assigned to Product Two each year?
a. $120,000
b. $96,000
c. $181,500
d. $192,000

A company incurs $1,800,000 of overhead each year in three departments: Processing, Packaging, and Testing.
The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in
producing 400,000 drums of oil and 600,000 drums of sludge. The following data are available:
Department
Processing
Packaging
Testing
Expected Use of Driver

800
200,000
2,000
Cost
$750,000
750,000
300,000
Production information for the two products is as follows:
94.
Oil
Department
Processing
300
Packaging
120,000
Testing
1,600
The amount of overhead assigned to oil is
a. $900,000.
b. $971,250.
c. $828,750.
d. $690,000.
95.
The amount of overhead assigned to sludge is

a. $900,000.
b. $828,750.
c. $971,250.
d. $690,000.
96.
Sleep-Tight manufactures mattresses for the

hotel industry. It has two products, Downy and
Firm, and total overhead is $790,000. The
company plans to manufacture 400 Downy
mattresses and 100 Firm mattresses his year.
In manufacturing the mattresses, the company
must perform 600 material moves for the
Downy and 400 for the Firm; it processes 900
purchase orders for the Downy and 700 for the
Firm; and the companys employees work
1,400 direct labor hours on the Downy product
and 3,400 on the Firm. Sleep-Tights total
material handling costs are $500,000 and its
Sludge
500
80,000
400
total processing costs are $290,000. Using

ABC, how much overhead would be assigned
to the Downy product?
a. $395,000
b. $463,125
c. $326,875
d. $559,583
97.
Which of the following is a limitation of activitybased costing?

a. More cost pools
b. Less control over overhead costs
c. Poorer management decisions
d. Some arbitrary allocations continue

98.
99.
100.
Which of the following factors would suggest a

switch to activity-based costing?
a. Product lines similar in volume and
manufacturing complexity.
b. Overhead costs constitute a significant
portion of total costs.
c. The manufacturing process has been
stable.
d. Production managers use data provided by
the existing system.
Which of the following is true of activity-based
costing?
a. More cost pools
b. Same base as traditional costing
c. Less costly to use
d. Eliminates arbitrary allocations
103.
104.
105.
Which of the following is true about activitybased costing?

a. Less cost pools
b. Same base as traditional costing
c. More costly to use
d. Eliminates arbitrary allocations
106.
Each of the following is a limitation of activitybased costing except that

a. it can be expensive to use.
b. it decreases control over overhead costs
c. it is complex and can be difficult to
understand
d. some arbitrary allocations continue.
107.
The presence of any of the following factors

would suggest a switch to ABC except when
a. product lines differ greatly in volume.
b. overhead costs constitute a major portion
of total costs.
c. the manufacturing process has changed
significantly.
d. production managers are using data
provided by the existing system
108.
Activity-based costing uses

a. one plantwide pool and a single cost driver.
b. departmental pools and a single cost
driver.
c. numerous cost pools and numerous cost
drivers.
d. one plantwide pool and numerous cost
drivers
109.
Which of the following statements is false?

a. ABC can weaken control over overhead
costs.
b. Under ABC, companies can trace many
overhead costs directly to activities.
c. ABC allows some indirect costs to be
identified as direct costs.
d. managers become more aware of their
responsibility to control the activities that
generate costs.
110.
Which of the following is a value-added

activity?
a. Inventory storage
b. Machining
c. Building maintenance
d. Bookkeeping
111.

activity?
The primary benefit of ABC is it provides

a. better management decisions.
b. enhanced control over overhead costs.
c. more cost pools.
d. more accurate product costing.
101.
Which of the following is not a benefit of
activity-based costing?
a. More accurate product costing
b. Enhanced control over overhead costs
c. Better management decisions
d. Less costly to use
102.
d. Poorer management decisions
Each of the following is a limitation of activitybased costing except that

a. it can be expensive to use.
b. it is more complex than traditional costing.
c. more cost pools are used.
d. some arbitrary allocations continue.
The presence of any of the following factors
would suggest a switch to ABC except when
a. product lines differ greatly in volume.
b. overhead costs constitute a minor portion
of total costs.
c. the manufacturing process has changed
significantly.
d. production managers are ignoring data
provided by the existing system.
Which of the following is a limitation of activitybased costing?
a. More cost pools
b. Less control over overhead costs
c. ABC can be expensive to use
a.
b.
c.
d.
112.
113.
114.
Inventory control
Inspections
Packaging
Repair of machines
119.
Which of the following is a non-value-added

activity?
a. Inventory control
b. Machining
c. Assembly
d. Painting

activity?
a. Engineering design
b. Machining
c. Inspection
d. Packaging
120.

activity?
a. Painting
b. Finishing
c. Packaging
d. Building maintenance
A non-value-added activity in a service

enterprise is
a. taking appointments.
b. traveling.
c. advertising.
d. all of these.
121.
Value-added activities
a. should be reduced or eliminated.
b. involve resource usage customers are
willing to pay for.
c. add cost to a product without affecting
selling price.
d. cannot be differentiated from non-valueadded activities.
122.
All of the following are examples of a valueadded activity in a service company except
a. delivering packages by a delivery service.
b. ordering supplies.
c. performing surgery.
d. providing legal research for legal services.
123.
Which of the following is not a facility-level

activity?
a. Plant management
b. Product design
c. Personnel administration
d. Training
124.
Which of the following is not a product-level

activity?
a. Product design
b. Engineering changes
c. Inventory management
d. Equipment setups
125.
Which of the following is not a batch-level

activity?
a. Engineering changes
b. Equipment setups
c. Inspection
d. Materials handling
126.
Which of the following is not a unit-level

activity?
a. Purchase ordering
b. Assembling
c. Painting
A non-value-added activity in a service

enterprise is
a. providing legal research.
b. delivering packages.
c. consulting.
d. bookkeeping.
115.
A value-added activity in a service enterprise is

a. performing landscaping services.
b. reception.
c. billing.
d. ordering supplies.
116.
Non-value-added activities
a. should be reduced or eliminated.
b. involve resource usage customers are
willing to pay for.
c. increase both the cost and market value of
a product.
d. cannot be differentiated from value-added
activities.
117.
118.
Value-added activities
a. increase the worth of a product or service
to customers.
b. involve resource usage and related costs
that customers are willing to pay for.
c. are the activities of actually manufacturing
a product or performing a service.
activity?
a. Engineering design
b. Machinery repair
c. Inventory storage
d. Inspections
127.
128.
d. Sewing
Which of the following is a batch-level activity?
a. Plant management
b. Product design
c. Equipment setups
d. Assembling
Which of the following is not a facility-level
activity?
a. Plant depreciation
b. Property taxes
c. Engineering changes
d. Utilities
129.
Which of the following is not a product-level

activity?
a. Product design
b. Engineering changes
c. Material handling
d. Inventory management
130.
Which of the following is not a batch-level

activity?
a. Purchase ordering
b. Equipment setups
c. Inspection
d. Assembling
131.
132.
Which of the following is not a unit-level

activity?
a. Drilling
b. Cutting
c. Sanding
d. Inspecting
133.
Which of the following is a batch-level activity?

a. Assembling
b. Product design
c. Engineering changes
d. Purchase ordering
134.
Which of the following is a product-level

activity?
a. Equipment setups
b. Product design
c. Property taxes
d. Utilities
135.
Which of the following is a facility-level

activity?
a. Engineering changes
b. Product design
c. Property taxes
d. Inspection
136. Activities required to support or sustain an
entire production process are called
a. unit-level activities.
b. batch-level activities.
c. product-level activities.
d. facility-level activities.
137. Which would be a cost driver for a facility-level
activity?
a. Number of setups
b. Number of product designs
c. Square footage
d. Number of purchase orders
138.
Which of the following is a unit-level activity?

a. Painting
b. Purchase ordering
c. Inspection
d. Material handling
139.
Activity-based costing is used in
a.
b.
c.
d.
140.
Service industries Manufacturing industries

Yes
No
Yes
Yes
No
Yes
No
No
In service industries
a. activities cannot be labeled as value-added
or non-value-added..
Activity-based costing has been found to be

useful in each of the following service
industries except
a. airlines.
b. railroads.
c. hotels.
d. ABC has been useful in all of these
industries.
b. the overall objective of ABC is different

than in manufacturing industries.
c. a larger proportion of overhead costs are
company-wide costs.
d. activity cost pools cannot be identified..
141.
Activity-based costing is used by

a. accounting firms.
b. law firms.
c. consulting firms.
142.
Ben and Jakes Accounting Services estimates for next year revenues of $1,000,000, direct labor of
$200,000, and overhead of $350,000. Under traditional costing, overhead is applied to audit jobs using the
rate of
a. 35% of revenues.
b. 20% of revenues.
c. 56% of direct labor.
d. 175% of direct labor.
JC Accounting performs two types of services, Tax and Consulting. JCs overhead costs consist of computer
support, $200,000; and legal support, $100,000. Information on the two services is:
Direct labor cost
CPU minutes
Legal hours used
Tax
$50,000
40,000
200
Consulting
$100,000
10,000
800
143.
Overhead applied to tax services using traditional costing is

a. $100,000.
b. $120,000.
c. $180,000.
d. $200,000.
144.
Overhead applied to consulting services using traditional costing is

a. $100,000.
b. $120,000.
c. $180,000.
d. $200,000.
145.
Overhead applied to tax services using activity-based costing is

a. $100,000.
b. $120,000.
c. $180,000.
d. $200,000.
146.
Overhead applied to consulting services using activity-based costing is

a. $100,000.
b. $120,000.
c. $180,000.
d. $200,000.
147.
JC Accounting performs tax services for Vince

Morelli. Direct labor cost is $1,200; 600 CPU
minutes were used; and 1 legal hour was
used. What is the total cost of the Morelli job?
a. $2,400
b. $2,500
c. $3,600
d. $3,700
148.
Activity-based costing has been found to be

useful in each of the following service
industries except
a. banks.
b. hospitals.
c. telephone companies.
d. ABC has been useful in any of these

industries.
149.
What sometimes makes implementation of
activity-based costing difficult in service industries is
a. the labeling of activities as value-added.
b. identifying activities, activity cost plus, and
cost drivers.
c. that a larger proportion of overhead costs
are company-wide costs.
d. attempting to reduce or eliminate nonvalue-added activities.
150.
All of the following statements are correct

except that
a. activity-based costing has been widely

adopted in service industries.
b. the objective of installing ABC in service
firms is different than it is in a
manufacturing firm.
c. a larger proportion of overhead costs are
company-wide costs in service industries.
d. the general approach to identifying
activities and activity cost pools is the
same in a service company as in a
manufacturing company.
151.
The use of activity-based costing in service

industries
a. has the same objective as in
manufacturing.
b. results in improved costing of services
provided.
c. uses cost pools to assign overhead.
d. all of these.
152. Just-in-time processing

a. is based on a just-in-case philosophy.
b. results in a push approach.
c. minimizes inventory storage and waiting
time.
d. all of these.
153. An element of just-in-time processing is

a. dependable suppliers who are willing to
deliver on short notice.
b. a multi-skilled workforce.
c. a total quality control system.
d. all of these.
154. Which of the following is not a benefit of justin-time processing?

a. Control of significant inventory balances
b. Enhanced product quality
c. Reduction of rework costs
d. Production cost savings
155. Which account is used in just-in-time

processing?
a. Raw materials inventory
b. Work-in-process inventory
c. Merchandise inventory
d. Raw and In-Process inventory
156. Under just-in-time processing, all of the

following are received or completed just in
time except
a. finished goods.
b. raw materials.
c. subassembly parts.
d. supplies.
a
157.
Just-in-time processing
a. is based on a just-in-case philosophy.
b. results in higher inventory amounts.
c. eliminates the push approach.
158.
Just-in-time processing
a. results in the opposite of a just-in-case philosophy.

b. results in a pull approach.
c. minimizes inventory storage and waiting
time.
d. None of the above

a
161. Which account is not used in just-in-time

processing?
a. Accounts payable
b. Work-in-process inventory
c. Finished goods inventory
d. Raw and In-Process inventory
159. An important element of just-in-time

processing is
a. dependable suppliers who are willing to
deliver on short notice.
b. a specialized workforce.
Item
Ans.
Item
Ans.
Item
Ans.
Item
31.
d
50.
C
69.
c
88.
32.
a
51.
D
70.
a
89.
33.
a
52.
D
71.
d
90.
34.
c
53.
b
72.
c
91.
35.
a
54.
b
73.
d
92.
36.
c
55.
b
74.
b
93.
37.
a
56.
a
75.
a
94.
38.
d
57.
c
76.
c
95.
39.
d
58.
b
77.
a
96.
40.
a
59.
d
78.
b
97.
41.
b
60.
c
79.
c
98.
42.
c
61.
d
80.
b
99.
43.
c
62.
a
81.
b
100.
44.
b
63.
a
82.
b
101.
45.
b
64.
b
83.
b
102.
46.
d
65.
d
84.
a
103.
47.
d
66.
c
85.
d
104.
48.
b
67.
c
86.
c
105.
49.
a
68.
b
87.
b
106.
c. less emphasis on a quality control system.
162.
Ans.
Item
C
A
D
A
D
C
B
B
B
D
B
A
D
D
C
B
C
C
B
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
160. Which of the following is a limitation of just-intime processing?

a. Significant reduction of manufacturing
inventories
b. Less emphasis on product quality
c. Higher production costs
32.
The CVP income statement classifies costs
Item
Ans.
Item
Ans.
a. as variable or fixed and computes

contribution margin.
b. by function and computes a contribution
margin.
c. as variable or fixed and computes gross
margin.
d. by function and computes a gross margin.

Cost-volume-profit analysis is the study of the
effects of
a. changes in costs and volume on a
companys profit.
b. cost, volume, and profit on the cash
budget.
c. cost, volume, and profit on various ratios.
d. changes in costs and volume on a
companys profitability ratios.
Ans.
d
126. a
145. c
c
127. c
146. b
a
128. c
147. d
b
129. c
148. d
c
130. d
149. c
a
131. d
150. b
d
132. a
151. d
d
133. d
152. c
a
134. b
153. D
a
135. c
154. a
d
136. d
155. d
a
137. c
156. d
c
138. d
157. c
d
139. b
158. d
b
140. c
159. a
b
141. d
160. d
b
142. d
161. b
d
143. a
162. c
a
144. d
stored just in case they are needed later in
the manufacturing process.
b. Finished goods are completed and stored
just in case unexpected and rush customer
orders are received.
c. the manufacturing process begins with a
customer placing an order.
d.
None of the above.
31.
In the pull approach

a. subassembly parts are manufactured and
33.
Contribution margin is the amount of revenue

remaining after deducting
b. fixed costs.
c. variable costs.
d. contra-revenue.
40.
34.
Buerhrles CVP income statement included

sales of 2,000 units, a selling price of $100,
variable expenses of $60 per unit, and fixed
expenses of $44,000. Contribution margin is
a. $200,000.
b. $120,000.
c. $80,000.
d. $36,000.
35.
Buerhrles CVP income statement included

variable expenses of $60 per unit, and fixed
expenses of $44,000. Net income is
a. $200,000.
b. $80,000.
c. $76,000.
d. $36,000.
36.
For Dye Company, at a sales level of 5,000

units, sales is $75,000, variable expenses total
$40,000, and fixed expenses are $21,000.
What is the contribution margin per unit?
a. $2.80
b. $7.00
c. $8.00
d. $15.00
37.
If contribution margin is $200,000, sales is

$300,000, and net income is $30,000, then
variable and fixed expenses are
a.
b.
c.
d.
Variable
Fixed
$100,000
$100,000
$170,000
$500,000
$270,000
$170,000
$100,000
$270,000
38. In a CVP income statement, cost of goods sold

is generally
a. completely a variable cost.
b. completely a fixed cost.
c. neither a variable cost nor a fixed cost.
d. partly a variable cost and partly a fixed
cost.
39. In a CVP income statement, a selling expense
is generally
a. completely a variable cost.
b. completely a fixed cost.
c. neither a variable cost nor a fixed cost.
d. partly a variable cost and partly a fixed
cost.
Vazquez Companys cost of goods sold is

$350,000 variable and $200,000 fixed. The
companys selling and administrative expenses
are $250,000 variable and $300,000 fixed. If
the companys sales is $1,400,000, what is its
contribution margin?
a. $300,000
b. $800,000
c. $850,000
d. $900,000
41. Vazquez Companys cost of goods sold is

$350,000 variable and $200,000 fixed. The
companys selling and administrative expenses
are $250,000 variable and $300,000 fixed. If
the companys sales is $1,400,000, what is its
net income?
a. $300,000
b. $800,000
c. $850,000
d. $900,000
42.
Garlands CVP income statement included

variable expenses of $60 per unit, and net
income of $50,000. Fixed expenses are
a. $70,000.
b. $120,000.
c. $180,000.
d. $300,000.
43.
The contribution margin ratio is

a. sales divided by contribution margin.
b. sales divided by fixed expenses.
c. sales divided by variable expenses.
d. contribution margin divided by sales.
44.
For Danks Company, sales is $500,000,

variable expenses are $310,000, and fixed
expenses are $140,000. Danks contribution
margin ratio is
a. 10%.
b. 28%.
c. 38%.
d. 62%.
45. For Contreras Company, sales is $1,000,000,
fixed expenses are $300,000, and the contribution
margin per unit is $72. What is the break-even point?
a. $1,388,889 sales dollars
b. $416,667 sales dollars
c. 13,889 units
d. 4,167 units
46.
For Garland Company, sales is $1,000,000,

fixed expenses are $300,000, and the
contribution margin ratio is 36%. What is net

income?
a. $60,000
b. $108,000
c. $252,000
d. $360,000
47.
48.
49.
50.
51.
For Garland Company, sales is $1,000,000,

fixed expenses are $300,000, and the
contribution margin ratio is 36%. What are the
total variable expenses?
a. $192,000
b. $360,000
c. $640,000
d. $1,000,000
In 2008, Masset sold 3,000 units at $500 each.
Variable expenses were $350 per unit, and
fixed expenses were $200,000. What was
Massets 2008 net income?
a. $250,000
b. $450,000
c. $1,050,000
d. $1,500,000
fixed expenses were $200,000. The same
selling price, variable expenses, and fixed
expenses are expected for 2009. What is
Massets break-even point in sales dollars for
2009?
a. $666,667
b. $1,333,333
c. $1,500,000
d. $2,142,857
fixed expenses were $200,000. The same
selling price, variable expenses, and fixed
expenses are expected for 2009. What is
Massets break-even point in units for 2009?
a. 1,333
b. 3,000
c. 4,285
d. 6,667
The required sales in units to achieve a target
net income is
a. (sales + target net income) divided by
contribution margin per unit.
b. (sales + target net income) divided by
contribution margin ratio.
c. (fixed cost + target net income) divided by

contribution margin per unit.
d. (fixed cost + target net income) divided by
contribution margin ratio.
52. For Jon Company, sales is $1,000,000, fixed
expenses are $300,000, and the contribution margin
ratio is 36%. What is required sales in dollars to earn
a target net income of $200,000?
a. $555,556
b. $833,333
c. $1,388,889
d. $2,777,778
53.
Jenks
Corporation
reported
sales
of
$2,000,000 last year (100,000 units at $20
each), when the break-even point was 80,000
units. Jenks margin of safety ratio is
a. 20%.
b. 25%.
c. 80%.
d. 120%.
54.
For Bobby Company, sales is $1,000,000

(5,000 units), fixed expenses are $300,000,
and the contribution margin per unit is $80.
What is the margin of safety in dollars?
a. $50,000
b. $250,000
c. $450,000
d. $700,000
55.
Margin of safety in dollars is

a. expected sales divided by break-even
sales.
b. expected sales less break-even sales.
c. actual sales less expected sales.
d. expected sales less actual sales.
56.
The margin of safety ratio is

a. expected sales divided by break-even
sales.
b. expected sales less break-even sales.
c. margin of safety in dollars divided by
expected sales.
d. margin of safety in dollars divided by
break-even sales.
57.
In 2008, McDougal sold 3,000 units at $500

each. Variable expenses were $350 per unit,
and fixed expenses were $195,000. The same
variable expenses per unit and fixed expenses
are expected for 2009. If McDougal cuts selling
price by 4%, what is McDougals break-even
point in units for 2009?
a. 1,300
b. 1,354
c. 1,440
d. 1,500
58.
59.
In 2008, Thornton sold 3,000 units at $500

each. Variable expenses were $250 per unit,
and fixed expenses were $150,000. The same
selling price is expected for 2009. Thornton is
tentatively planning to invest in equipment that
would increase fixed costs by 20%, while
decreasing variable costs per unit by 20%.
What is Thorntons break-even point in units
for 2009?
a. 600
b. 720
c. 750
d. 900
In 2008, Logan sold 1,000 units at $500 each,
and earned net income of $40,000. Variable
expenses were $300 per unit, and fixed
expenses were $160,000. The same selling
price is expected for 2009. Logans variable
cost per unit will rise by 10% in 2009 due to
increasing material costs, so they are
tentatively planning to cut fixed costs by
$10,000. How many units must Logan sell in
2009 to maintain the same income level as
2008?
a. 882
b. 1,000
c. 1,056
d. 1,118
60.
Sales mix is
a. the relative percentage in which a
company sells its multiple products.
b. the trend of sales over recent periods.
c. the mix of variable and fixed expenses in
relation to sales.
d. a measure of leverage used by the
company.
61.
In a sales mix situation, at any level of units

sold, net income will be higher if
a. more higher contribution margin units are
sold than lower contribution margin units.
b. more lower contribution margin units are
sold than higher contribution margin units.
c. more fixed expenses are incurred.
d. weighted-average unit contribution margin
decreases.
62.
Konerko Company sells two types of computer

chips. The sales mix is 30% (Q-Chip) and 70%
(Q-Chip Plus). Q-Chip has variable costs per
unit of $30 and a selling price of $50. Q-Chip

Plus has variable costs per unit of $35 and a
selling price of $65. The weighted-average unit
contribution margin for Konerko is
a. $23.
b. $25.
c. $27.
d. $50.
63.
Iguchi Company sells 2,000 units of Product A

annually, and 3,000 units of Product B
annually. The sales mix for Product A is
a. 40%.
b. 60%.
c. 67%.
d. cannot determine from information given.
64.
Konerko Company sells two types of computer

chips. The sales mix is 30% (Q-Chip) and 70%
(Q-Chip Plus). Q-Chip has variable costs per
unit of $30 and a selling price of $50. Q-Chip
Plus has variable costs per unit of $35 and a
selling price of $65. Konerkos fixed costs are
$540,000. How many units of Q-Chip would be
sold at the break-even point?
a. 6,000
b. 7,043
c. 10,000
d. 14,000
Use the following information for questions 65 and 66.

Uribe Company has a weighted-average unit
contribution margin of $30 for its two products,
Standard and Supreme. Expected sales for Uribe are
40,000 Standard and 60,000 Supreme. Fixed
expenses are $1,800,000.
d. 50%.
68.
The break-even point in dollars is

a. $821,400.
b. $5,162,791.
c. $5,550,000.
d. $6,000,000.
65.
How many Standards would Uribe sell at the

break-even point?
a. 24,000
b. 36,000
c. 40,000
d. 60,000
69.
What will sales be for the Sporting Goods

Division at the break-even point?
a. $1,800,000
b. $2,100,000
c. $3,355,814
d. $3,900,000
66.
At the expected sales level, Uribes net income

will be
a. $(300,000).
b. $ - 0 -.
c. $1,200,000.
d. $3,000,000.
70.
What will be the total contribution margin at the

break-even point?
a. $1,910,233
b. $2,220,000
c. $2,400,000
d. $2,580,000
71.
Fields Corporation has two divisions; Sporting Goods

and Sports Gear. The sales mix is 65% for Sporting
Goods and 35% for Sports Gear. Fields incurs
$2,220,000 in fixed costs. The contribution margin
ratio for Sporting Goods is 30%, while for Sports Gear
it is 50%.
72.
A shift from low-margin sales to high-margin

sales
a. may increase net income, even though
there is a decline in total units sold.
b. will always increase net income.
c. will always decrease net income.
d. will always decrease units sold.
A shift from high-margin sales to low-margin
sales
a. may decrease net income, even though
there is an increase in total units sold.
b. will always decrease net income.
c. will always increase net income.
d. will always increase units sold.
67.
The weighted-average contribution margin

ratio is
a. 37%.
b. 40%.
c. 43%.

Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs
and disc golf products. The following information is available:
Sales
Variable costs
Contribution margin
Total fixed costs
Standard Division
$400,000
280,000
$120,000
Premium Division
$600,000
360,000
$240,000
73.
What is the weighted-average contribution margin ratio?

a. 34%
b. 35%
c. 36%
d. 50%
74.
What is the break-even point in dollars?

a. $108,000
b. $833,333
Total
$1,000,000
$300,000
c. $857,143
d. $882,353
75.The sales mix percentages for Guillens Chicago
and Charlotte Divisions are 70% and 30%. The
contribution margin ratios are: Chicago (40%)
and Charlotte (30%). Fixed costs are
$555,000. What is Guillens break-even point
in dollars?
a. $194,250
b. $1,500,000
c. $1,585,714
d. $1681,818
76. A company can sell all the units it can produce
of either Product A or Product B but not both.
Product A has a unit contribution margin of $16
and takes two machine hours to make and
Product B has a unit contribution margin of $30
and takes three machine hours to make. If there
are 1,000 machine hours available to
manufacture a product, income will be
a. $2,000 more if Product A is made.
b. $2,000 less if Product B is made.
c. $2,000 less if Product A is made.
d. the same if either product is made.
79.
77.
78.
Dye Company can sell all the units it can

produce of either Plain or Fancy but not both.
Plain has a unit contribution margin of $96 and
takes two machine hours to make and Fancy
has a unit contribution margin of $120 and
takes three machine hours to make. There are
2,400 machine hours available to manufacture
a product. What should Dye do?
a. Make Fancy which creates $24 more profit
per unit than Plain does.
b. Make Plain which creates $8 more profit
per machine hour than Fancy does.
c. Make Plain because more units can be
made and sold than Fancy.
d. The same total profits exist regardless of
which product is made.
What is the key factor in determining sales mix
if a company has limited resources?
a. Contribution margin per unit of limited
resource
b. The amount of fixed costs per unit
c. Total contribution margin
d. The cost of limited resources
Jermaines Vittles can produce and sell only one of the following two products:
Oven
Hours Required
Crackers
0.2
Bread sticks
0.3
Contribution
Margin Per Unit
$3
$4
The company has oven capacity of 600 hours. How much will contribution margin be if it produces only the
most profitable product?
a. $6,000
b. $8,000
c. $9,000
d. $12,000
80.
81.
S-Pods contribution margin is $10 per unit for

Product A and $12 for Product B. Product A
requires 2 machine hours and Product B
requires 4 machine hours. How much is the
contribution margin per unit of limited resource
for each product?
A
B
a. $5.00
$3.00
b. $5.00
$3.33
c. $4.00
$3.00
d. $4.00
$3.33
Cost structure
a. refers to the relative proportion of fixed

versus variable costs that a company
incurs.
b. generally has little impact on profitability.
c. cannot be significantly changed by
companies.
d. refers to the relative proportion of operating
versus nonoperating costs that a company
incurs.
82.
Outsourcing production will

a. reduce fixed costs and increase variable
costs.
b. reduce variable costs and increase fixed

costs.
c. have no effect on the relative proportion of
fixed and variable costs.
d. make the company more susceptible to
economic swings.
83.
84.
of
c. .33.
d. .75.
87.
Which of the following statements is not true?

a. Operating leverage refers to the extent to
which a companys net income reacts to a
given change in sales.
b. Companies that have higher fixed costs
relative to variable costs have higher
operating leverage.
c. When a companys sales revenue is
increasing, high operating leverage is good
because it means that profits will increase
rapidly.
d. When a companys sales revenue is
decreasing, high operating leverage is
good because it means that profits will
decrease at a slower pace than revenues
decrease.
88.
Scottie Companys degree of operating

leverage is 1.5. Erstadt Corporations degree
of operating leverage is 4.5. Erstadts earnings
would go up (or down) by ________ as much
as Scotties with an equal increase (or
decrease) in sales.
a. 1/3
b. 2 times
c. 3 times
d. 6 times
89.
The margin of safety ratio

a. is computed as actual sales divided by
break-even sales.
b. indicates what percent decline in sales
could be sustained before the company
would operate at a loss.
c. measures the ratio of fixed costs to
variable costs.
d. is used to determine the break-even point.
Reducing reliance on human workers and

instead investing heavily in computers and
online technology will
a. reduce fixed costs and increase variable
costs.
b. reduce variable costs and increase fixed
costs.
c. have no effect on the relative proportion of
fixed and variable costs.
d. make the company less susceptible to
economic swings.
Cost structure refers to the relative proportion
a. selling expenses versus administrative
expenses.
b. selling and administrative expenses versus
cost of goods sold.
c. contribution margin versus sales.
d. none of the above.

Small Fry Company has sales of $1,000,000, variable
costs of $400,000, and fixed costs of $450,000.
85.
Small Frys degree of operating leverage is

a. .80.
b. 1.50.
c. 1.67
d. 4.00.
86.
Small Frys margin of safety ratio is

a. .18.
b. .25.
90.A cost structure which relies more heavily on fixed

costs makes the company
a. more sensitive to changes in sales
revenue.
b. less sensitive to changes in sales revenue.
c. either more or less sensitive to changes in
sales revenue, depending on other factors.
d. have a lower break-even point.
91.
A company with a higher contribution margin

ratio is
a. more sensitive to changes in sales
revenue.
b. less sensitive to changes in sales revenue.

c. either more or less sensitive to changes in
sales revenue, depending on other factors.
d. likely to have a lower breakeven point.
92.
The degree of operating leverage

a. does not provide a reliable measure of a
companys earnings volatility.
b. cannot be used to compare companies.
c. is computed by dividing total contribution
margin by net income.
d. measures how much of each sales dollar is
available to cover fixed expenses.
93.
94.
95.
96.
Only direct materials, direct labor, and variable

manufacturing overhead costs are considered
product costs when using
a. full costing.
b. absorption costing.
c. variable costing.
d. product costing.
When a company assigns the costs of direct
materials, direct labor, and both variable and
fixed manufacturing overhead to products, that
company is using
a. operations costing.
c. variable costing.
d. product costing.
Companies recognize fixed manufacturing
overhead costs as period costs (expenses)
when incurred when using
a. full costing.
c. product costing.
d. variable costing.
Under absorption costing and variable costing,
how are fixed manufacturing costs treated?
a.
b.
c.
d.
Absorption
Product Cost
Product Cost
Period Cost
Period Cost
Variable
Product Cost
Period Cost
Product Cost
Period Cost
97. Under absorption costing and variable costing,

how are variable manufacturing costs treated?
a.
b.
c.
d.
a
98.
99.
Variable
Product Cost
Period Cost
Product Cost
Period Cost
Under absorption costing and variable costing,

how are direct labor costs treated?
a.
b.
c.
d.
Absorption
Product Cost
Product Cost
Period Cost
Period Cost
Absorption
Product Cost
Product Cost
Period Cost
Period Cost
Variable
Product Cost
Period Cost
Product Cost
Period Cost
Fixed selling expenses are period costs

a. under both absorption and variable costing.
b. under neither absorption nor variable
costing.
c. under absorption costing, but not under

variable costing.
d. under variable costing, but not under
absorption costing.
a
100. Which cost is not charged to the product under

variable costing?
a. Direct materials
b. Direct labor
c. Variable manufacturing overhead
d. Fixed manufacturing overhead
101. Which cost is charged to the product under

variable costing?
a. Variable manufacturing overhead
b. Fixed manufacturing overhead
c. Variable administrative expenses
d. Fixed administrative expenses
102. Variable costing

a. is used for external reporting purposes.
b. is required under GAAP.
c. treats fixed manufacturing overhead as a
period cost.
d. is also known as full costing.

Briscoe Company sells its product for $40 per unit.
During 2008, it produced 60,000 units and sold 50,000
units (there was no beginning inventory). Costs per
unit are: direct materials $10, direct labor $6, and
variable overhead $2. Fixed costs are: $480,000
manufacturing overhead, and $60,000 selling and
administrative expenses.
a
103. The per unit manufacturing cost under

absorption costing is
a. $16.
b. $18.
c. $26.
d. $27.
a
104. The per unit manufacturing cost under variable
costing is
a. $16.
b. $18.
c. $26.
d. $27.
a
105. Cost of goods sold under absorption costing is

a. $900,000.
b. $1,080,000.
c. $1,300,000.
d. $1,560,000.
106. Ending inventory under variable costing is

a. $180,000.
b. $260,000.
c. $400,000.
d. $900,000.
107.
Under absorption costing, what amount of

fixed overhead is deferred to a future period?
a. $20,000
b. $80,000
c. $100,000
d. $480,000
108.
Net income under absorption costing is gross

profit less
b. fixed manufacturing overhead and fixed
selling and administrative expenses.
c. fixed manufacturing overhead and variable
manufacturing overhead.
d. variable
selling
and
administrative
expenses
and
fixed
selling
and
109.
110.
Net income under variable costing is

contribution margin less
b. fixed manufacturing overhead and fixed
selling and administrative expenses.
c. fixed manufacturing overhead and variable
manufacturing overhead.
d. variable
selling
and
administrative
expenses
and
fixed
selling
and
The manufacturing cost per unit for absorption
costing is
a. usually, but not always, higher than
manufacturing cost per unit for variable
costing.
b. usually, but not always, lower than
manufacturing cost per unit for variable
costing.
c. always higher than manufacturing cost per
unit for variable costing.
d. always lower than manufacturing cost per
unit for variable costing.
c. variable costing, companies charge the

variable manufacturing overhead as an
expense in the current period.
d. absorption costing, companies charge the
variable manufacturing overhead as an
a
112. Net income under absorption costing is higher
than net income under variable costing
a. when units produced exceed units sold.
b. when units produced equal units sold.
c. when units produced are less than units
sold.
d. regardless of the relationship between
units produced and units sold.
a

Jack Company sells its product for $11,000 per unit.
Variable costs per unit are: manufacturing, $6,000,
and selling and administrative, $125. Fixed costs are:
$30,000 manufacturing overhead, and $40,000 selling
and administrative. There was no beginning inventory
at 1/1/07. Production was 20 units per year in 2007
2009. Sales was 20 units in 2007, 16 units in 2008,
and 24 units in 2009.
a
114. Income under absorption costing for 2008 is

a. $8,000.
b. $14,000.
c. $16,000.
d. $22,000.
115. Income under absorption costing for 2009 is

a. $33,000.
b. $39,000
c. $41,000
d. $47,000.
116. Income under variable costing for 2008 is

a. $8,000.
b. $14,000
c. $16,000
d. $22,000.
Income under variable costing for 2009 is

a. $33,000.
b. $39,000.
111. The one primary difference between variable

and absorption costing is that under
a. variable costing, companies charge the
fixed manufacturing overhead as an
b. absorption costing, companies charge the
fixed manufacturing overhead as an
113. Some fixed manufacturing overhead costs of

the current period are deferred to future
periods under
a. absorption costing.
b. variable costing.
c. both absorption and variable costing.
d. neither absorption nor variable costing.
117.
c. $41,000.
d. $47,000.
a
118. For the three years 20072009,

a. absorption costing income exceeds
variable costing income by $6,000.
b. absorption costing income equals variable
costing income.
c. variable
costing
income
exceeds
absorption costing income by $6,000.
d. absorption costing income may be greater
than, equal to, or less than variable costing
income, depending on the situation.
119. When production exceeds sales,

a. some fixed manufacturing overhead costs
are deferred until a future period under
absorption costing.
b. some fixed manufacturing overhead costs
are deferred until a future period under
variable costing.
c. variable and fixed manufacturing overhead
costs are deferred until a future period
under absorption costing.
b. variable and fixed manufacturing overhead
costs are deferred until a future period
under variable costing.
120.
c. absorption costing, in order to increase net

income.
d. absorption costing, in order to decrease
net income.
When production exceeds sales,

a. ending inventory under variable costing will
exceed ending inventory under absorption
costing.
b. ending inventory under absorption costing
will exceed ending inventory under variable
costing.
c. ending inventory under absorption costing
will be equal to ending inventory under
variable costing.
d. ending inventory under absorption costing
may exceed, be equal to, or be less than
ending inventory under variable costing.
122. If a division managers compensation is based

upon the divisions net income, the manager
may decide to meet the net income targets by
increasing production when using
a. variable costing, in order to increase net
income.
b. variable costing, in order to decrease net
income.
c. absorption costing, in order to increase net
income.
d. absorption costing, in order to decrease
net income.
a
123. Expected sales for next year for the Huxtable

Division is 150,000 units. Bill Cosby, manager
of the Huxtable Division, is under pressure to
improve the performance of the Division. As he
plans for next year, he has to decide whether
to produce 150,000 units or 180,000 units. The
Huxtable Division will have higher net income if
Bill Cosby decides to produce
a. 180,000 units if income is measured under
absorption costing.
b. 180,000 units if income is measured under
variable costing.
c. 150,000 units if income is measured under
absorption costing.
d. 150,000 units if income is measured under
variable costing.
124. Which of the following is a potential advantage

of variable costing relative to absorption
costing?
a. Net income is affected by changes in
production levels.
b. The use of variable costing is consistent
with cost-volume-profit analysis.
c. Net income computed under variable
costing is not closely tied to changes in
sales levels.
d. More than one of the above.
121. Management may be tempted to overproduce

when using
a. variable costing, in order to increase net
income.
b. variable costing, in order to decrease net
income.
a
125. Companies that use just-in-time processing techniques will
a. have greater differences between absorption and variable costing net income.
b. have smaller differences between absorption and variable costing net income.
c. not be able to use absorption costing.
d. not be able to use variable costing.

Item
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
Ans
.
a
a
c
c
d
b
b
d
d
b
a
a
d
c
Item
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
Ans
.
d
a
c
a
a
a
c
c
a
b
b
c
d
a
Item
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
Ans
.
d
a
a
c
a
a
a
c
a
d
d
b
a
a
Item
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
Ans
.
C
B
B
C
B
A
C
A
A
A
B
d
d
B
Item
87.
88.
89.
90.
91.
92.
a
93.
a
94.
a
95.
a
96.
a
97.
a
98.
a
99.
a
100.
Ans
.
d
c
b
a
a
c
c
b
d
b
a
a
a
d
Item
a
101.
102.
a
103.
a
104.
a
105.
a
106.
a
107.
a
108.
a
109.
a
110.
a
111.
a
112.
a
113.
a
114.
a
Ans.
a
c
c
b
c
a
b
d
b
c
a
a
a
b
Item
a
115.
116.
a
117.
a
118.
a
119.
a
120.
a
121.
a
122.
a
123.
a
124.
a
125.
a
Ans.
c
a
d
b
a
b
c
c
a
b
b

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MULTIPLE CHOICE QUESTIONS

d. includes performance evaluation by

physically associated with raw materials

d. component of the raw materials inventory on

a. Beginning WIP + direct materials used + direct

Use the following information for questions 107109.

Neeley Manufacturing Company's cost of goods manufactured for the year is

Use the following information for questions 117118.

Beginning work in process

Beginning work in process

d. The number of defects found on each

c. It permits line workers to perform

a. have the same primary users.

The sum of the direct materials costs, direct

The inventory accounts that show the cost of

applicable to production that is only partially

MULTIPLE CHOICE QUESTIONS

Which of the following is one of the

job order and job accumulation systems.

A process cost system would most likely be

Which of the following would be accounted for

Process costing is used when

a. Finished Goods Inventory

Work In Process Inventory

The Raw Materials Inventory account is

Records of individual items of raw materials

Cost of raw materials is debited to Raw

Raw Materials Inventory records are also

After all postings have been completed, the

b. cost of materials charged to Work in

Factory labor costs

Factory Labor is a(n)

56. Kline Manufacturing has the following labor

Factory labor costs

Manufacturing Overhead would not have a

60. The entry to record the acquisition of raw

Which one of the following best describes a job

62. Job cost sheets constitute the subsidiary

Which of the following is not a control account?

Raw Materials Inventory..............................................

Under an effective system of internal control,

A copy of the materials requisition slip

Materials requisition slips are costed

Which of the following shows entries only to

A time ticket does not indicate the

Which one of the following is a source

Time tickets should be approved by

If the entry to assign factory labor showed only

The principal accounting record used in

The following information is available for

As of December 31, 2008, Nilsen Industries

process for 2008 are $4,000 and $5,000,

A company expected its annual overhead

Vektek, Inc. thinks machine hours is the best

30,000 labor hours

What is the total manufacturing cost for Job No. 978?

What is the total manufacturing cost for Job No. 953?

60,000 labor hours

Manufacturing overhead is applied to each job

If annual overhead costs are expected to be

Overhead application is recorded with a

Manufacturing overhead applied is added to

At the beginning of the year, Monroe Company

Cost of goods sold is obtained from