Managerial Accounting ACC 231

Pre & Post Test

***** RECORD ALL ANSWERS ON THE SEPARATE ANSWER SHEET ONLY! *****

The “flow” of manufacturing costs through the ledger of Able Mfg. Co. during April is
summarized in the following T accounts. Certain amounts have been omitted and are
represented by question marks.

Materials Inventory Work in Process Inventory

Beg. Bal. 32,000 Beg. Bal. 3,000
35,000 33,000 ? 72,000
End. Bal. ? End. Bal. 5,000
Direct Labor Finished Goods Inventory
Beg. Bal. 0 Beg. Bal. 47,000
13,000 ? 72,000 ?
End. Bal. 1,000 End. Bal. 39,000
Manufacturing Overhead Cost of Goods Sold
27,000 27,000 ?

Answer the following questions. If you select answer d, indicate the correct amount.

1. Refer to the above data. The total amount of inventory that should appear in the
company’s balance sheet at April 30 is:
a $39,000. c $73,000.
b $82,000. d Some other amount. $____________

2. Refer to the above data. The amount of wages paid to direct workers during April
amounted to:
a $14,000. c $13,000.
b $12,000. d Some other amount. $____________

3. The Work in Process controlling account of a manufacturing firm shows a debit balance of
$5,000 at the end of an accounting period. The job cost sheet of the two
uncompleted jobs shows charges of $700 and $1,300 for materials used and
charges of $400 and $600 for direct labor used. From this information, it appears
that the company is using a predetermined factory overhead rate (as a percentage
of direct labor cost) of:
a 100%. b 200%. c 33%. d 50%.

4. The use of activity-based costing is most appropriate for:

a Firms that manufacture multiple product lines.
b Firms that have very low manufacturing overhead costs relative to other
costs of production.
c Firms with high levels of production activity.
d Firms that account separately for product and period costs.
 WoW Chemical Company uses a process costing system with two departments: (a) a
Mixing Department, and (b) a Packing Department. During May, its first month of
operations, the company generated $180,000 in revenue by manufacturing and selling
800 cases of chemicals. Related manufactured costs are as follows:

Mixing Packing
Department Department
Direct materials............................................... $26,000 $ 1,000
Direct labor...................................................... $8,000 $14,000
Manufacturing overhead.................................. $12,000 $8,000

5. Refer to the above data. The unit cost of a case processed in the Mixing Department in
May was:
a $230.
b $57.50.
c $73.50.
d Some other amount.

6. Refer to the above data. The unit cost of a case incurred by the Packing Department in
May was:
a $73.50.
b $57.50.
c $28.75
d Some other amount.

7. Examples of value-added activities include all of the following except:

a Product design.
b Material movement.
c Assembly activities.
d Establish an effective distribution network.

8. Of the following components of total quality cost, which is most damaging to a company
attempting to achieve a reputation as a world-class manufacturer?
a Prevention costs.
b Appraisal costs.
c Internal failure costs.
d External failure costs

Information regarding a product manufactured and sold by Schiffman is shown below:

Maximum capacity with existing facilities 4,000 units
Total fixed costs per month........................................................... $50,000
Variable cost per unit.................................................................... $42.00
Sales price per unit....................................................................... $56.00

9. Refer to the above data. The contribution margin ratio for this product is:
a 20%. c 30%.
b 25%. d 40%.
10. Refer to the above data. The number of units Schiffman must sell to break even is:
(rounded)
a 3,927. c 4,823.
b 3572. d 5,140.

11. Refer to the above data. The dollar sales volume necessary to produce monthly operating
income of $12,000 before taxes is:
a $188,000. c $288,000.
b $186,000. d $248,000.

12. Which of the following would be least relevant in deciding whether to further process a joint
product past the split-off point?
a Incremental revenue earned from additional processing.
b Incremental costs incurred as a result of additional processing.
c Joint costs allocated to the joint product at the split-off point.
d Customer demand for the product that emerges from additional processing.

13. Johnson produces 7,000 skateboards each month, which it sells for $60 each. Variable
costs are $25 per unit, and fixed costs are $95,000 per month. A Canadian
company has offered to buy an additional 1,000 skateboards for $30 per unit.
Assuming that normal sales volume and fixed costs remain unchanged, filling this
special order will cause Johnson’s operating income to:
a Decrease by $30,000.
b Decrease by $6,250.
c Decrease by $5,000.
d Increase by $5,000.

14. The Sports Arena location of Burgerheaven reports monthly sales of $140,000, variable costs
of $63,000, and traceable fixed costs of $54,000. The contribution margin ratio of
this business unit is:
a 70%.
b 45%.
c 55%.
d 30%.

15. From a long-term perspective, when evaluating the contribution of a particular profit center to
the overall profitability of the company, management should be most interested in
the center’s:
a Traceable fixed costs.
b Income from operations.
c Contribution margin.
d Responsibility margin.

16. Which of the following is not considered a benefit from budgeting?

a Limited managerial perspectives.
b Advance warning of problems.
c Better coordination among activities.
d A measure of performance evaluation.
 17. Which of the following is not normally considered an element of a master budget?
a The production schedule.
b The employee turnover budget.
c The operating expense budget.
d The cash budget.

18. Which budget typically serves as a starting point in developing a master budget?
a The sales budget.
b The cost of goods sold budget.
c The employee turnover budget.
d The manufacturing cost budget.

19. Under standard cost procedures, any differences between actual costs and standard costs
are:
a Ignored until the end of the fiscal period, when they are shown in footnotes to
the income statement.
b Allowed to accumulate in the variance accounts from month to month.
c Added to or subtracted from the standard cost amount immediately.
d Treated as extraordinary production gains or losses.

20. When standard costs are used in a cost accounting system, the transfer of units from the
Finished Goods Inventory to the Cost of Goods Sold account involves:
a A debit to the Cost of Goods Sold account for the actual cost of units
transferred.
b A credit to the Finished Goods Inventory account for the standard cost of units
transferred.
c Recording a cost variance for the difference between the actual and standard
cost of units transferred.
d The elimination of any cost variances relating to units sold.